Accounting Project Topics

Internal Control System as a Factor of Fraud Prevention in Nigeria Financial Institutions

Internal Control System as a Factor of Fraud Prevention in Nigeria Financial Institutions

Internal Control System as a Factor of Fraud Prevention in Nigeria Financial Institutions

Chapter One


The main objective of the study is to examine Internal control system as a factor of fraud prevention in Nigeria Financial institution while the specific objectives are

  1. To overview and examine Internal control system as a factor of fraud prevention in Nigeria Financial institution
  2. To examine if management control have contributed to the breakdown in the internal audit systems of the selected commercial banks
  3. To find out if fraud control and fraud prevention affects the performance of commercial banks in Nigeria.




Theoretical Framework.

The following theoretical framework will guide this study. We discussed systems theory relating to internal controls as well as fraud triangle theory and fraud diamond theory relating to fraud.

Systems Theory

A system is considered to be a set of interrelating or codependent constituent parts making a complex or intricate entire intended to achieve a set goal. An organization is a multifaceted system divided into numerous departments which needs a system of control over those subdivisions for its efficiency as well as survival.  Harvey and Brown, (1998), assert that an operational internal control structure needs to be an incorporated system with interconnected constituents as well as supporting values. They further identified controlled situation, accounting classification besides control actions forming key components of internal controls. An internal control 10 structure accessible for a company consist of ; administration oversight as well as control philosophy, control activities, hazard assessment and recognition, information and communication, monitoring actions and adjusting insufficiencies (Grievess,2000).

This paper adopted COSOs 1992 integrated internal control structure for internal controls. The committee of sponsoring organization (COCO) was custom-built in 1980s by the State Commission of Falsified Monetary Reporting (The Treadway Commission) to recognize as well as evaluate the aspects that instigated deceitful company monetary reports as well as make commendations and has since established to become a thought frontrunner in business risk administration (ERM), internal control, and deception discouragement (Amudo & Inanga, 2009).

Control Environment

The control environment helps to set the organization’s tone, affecting the control Realization of its persons. It is the basis for all other elements of interior control, offering discipline as well as structure. Control atmosphere aspects comprise of reliability, moral standards as well as ability of the entity’s individuals; administration’s viewpoint and working style; the way organization allocates power as well as duty, arranges and progresses its persons; and the attention as well as direction offered by the board of managements (COSO, 2011).

Risk Assessment

Risk assessment is considered to be the identification as well as examination of applicable hazards which can damage the accomplishment of purposes, creating a base for determining how the hazards must be managed. Fraud as an inherent risk needs to be assessed and anti-fraud programs generated as key to an effective internal control culture. Risks are evaluated to determine the probability of an occasion happening, the effect, as well as hazard patience (IIA,1999). To determine if hazard administration are operational, pertinent hazard information must be taken and conversed in efficiently across the organization, permitting management to do their tasks. (IIA, 1999).

Control Activities

Control activities are considered to be the procedures as well as actions that help to ensure that administration directives are done. They ensure that needed activities are taken to deal with hazards that hinder accomplishment of the entity’s aims (COSO, 2011). Control actions, if automatic or manual, have numerous aims as well as functional at numerous administrative and practical levels. Usually control actions that may be pertinent to an examination may be characterized as plans and processes that relate to performance evaluation, information handling, physical control and separation of obligations.

Information and Communication

Information as well as communication is considered to be necessary to implementation of control. Information about an administration’s idea, control atmosphere, peril control actions as well as performance should be conversed up, down, and across an organization. Relevant information should be recognized, seized and communicated in the time frame that enables persons to do their tasks. Information classifications offer reports comprising working, monetary as well as compliance associated information that makes it likely to run and control industry.




Research design

The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals as the study sought to examine the internal control system as a factor of fraud prevention in Nigeria.

Sources of data collection

Data were collected from two main sources namely:

(i)Primary source and

(ii)Secondary source

Primary source:

These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.

Secondary source:

These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.

Population of the study

Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information for the internal control system as a factor of fraud prevention in Nigeria. 200 staffs were selected randomly by the researcher as the population of the study.




Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey.  This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.




It is important to ascertain that the objective of this study was to examine the internal control system as a factor of fraud prevention in Nigeria financial institution.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of teachers perception on the internal control system as a factor of fraud prevention in Nigeria financial institution.


This study was undertaken to examine the internal control system as a factor of fraud prevention in Nigeria financial institution. The study opened with chapter one where the statement of the problem was clearly defined. The study objectives and research hypotheses were defined and formulated respectively. The study reviewed related and relevant literatures. The chapter two gave the conceptual framework, empirical and theoretical studies. The third chapter described the methodology employed by the researcher in collecting both the primary and the secondary data. The research method employed here is the descriptive survey method. The study analyzed and presented the data collected in tables and the hypotheses were tested using the chi square to test hypothesis. While the fifth chapter gives the study summary and conclusion.

Conclusion and Recommendations

One of the reasons for the use and continuous revision of internal control systems in the bank is to ensure that losses occasioned by fraudulent activities are minimal if they occur, and attempts are discovered very early before losses can occur. The triumvirate of fraud prevention, fraud control and detection are coalesced into the effective internal control system that the bank employs.

From our research it is concluded that the present internal control system in first bank of Nigeria PLC is effective and that fraud control and fraud prevention affects the performance of commercial banks in Nigeria

Based on the findings of this study, the following recommendations are made:

Staffs should be involved in the formulation of control policies. Employees must be made a natural element of how entities work and so must be involved in some aspect of policy formulation. This will ensure commitment and they will have a clear view of what is expected of them for the achievement of set targets.

The Banks should conduct regular control system reviews. This can be done at least semi-annually. Conducting regular control system review will enable the Bank to determine if the control systems are working effectively and efficiently. The company can learn from the outcome and improve on the policies.

The Bank should put in place adequate physical control measures and procedures over the Bank‘s assets to protect these assets against theft and unauthorised access.

The Bank should investigate all control failures to determine the cause(s) of the failure for proper explanation to staff. The company should put in place measures to recruit or train more internal control staff and equip them properly to carry out their functions efficiently. Employees must be competent to discharge control policies, access risks and ensure controls make it easier to deal with these risks.


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