AUDITING AND FRAUD CONTROLLING IN GOVERNMENT SECTOR
ABSTRACT
In recent years the importance of good corporate governance has received significant public and regulatory attention. A crucial part of an entity’s corporate governance is its internal audit function. At the same time, there has been significant public concern about the level of fraud within organizations. The purpose of this study is to assess whether organizations with an internal audit function are more likely to detect fraud than those without.the technique to be employed in testing the hypotheses is the chi-square (X2) distribution, data analysis is done with technical precision so as to avoid erroneous inferences which could affect the objective of the study. The main objective is to determine the views of the respondents on the questions contained in the questionnaires.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Financial audits may be performed for Government sectors, registered charities, some governmental and
public entities certain forms of Government sectors are required to have an external audit. Government sectors
typically request financial audits year after year because lenders may have required an audit or owned may want to
have external unbiased eyes look at the financial statements to determine if the company is complying with all the
required accounting principles charities would require a financial audit to show the financial status of the organization
to potential donors. Private businesses are required to be audited by status to determine if all the money budgeted
has been properly spent. Government financial reports are not always audited by outside auditor, but Government
sectors are. It is the duty of the auditor to examine the financial statement and consequently form an opinion of their
fairness in conformity with generally accepted accounting principles. As a secondary function, it is also his duty to
uncover any act of omission, which in view is fraudulent in nature. It is alarming to state here that private liability
companies have become a target of the fraudsters who take advantage of the irregularities and professionalism of the
Government sectors to perpetrate their nefarious deeds. There is a long list of Government sectors with publicized
fraud cases in various degrees which are hundreds of millions, they include uni-petrol and Agip Company now known
as Oando Company, Total company Swallowed ELF, Oceanic bank and intercontinental bank e.t.c. Even the
government ministries and parastals are not spared. Auditing has over the years gone considerably to a
commendable length to expose various fraudulent practices both in private and public sector. One of the primary
reasons for an independent audit is the inherent potential conflict between an entity’s management and users of its
financial statements. Management has an incentive to the information presented in financial statements since it is the
means used to evaluate management’s performance. Management exercises a great deal of discretion in preparing
financial statements and in using resources entrusted in it’s operating the entity. An audit provides reasonable
assurance that management’s representations on these activities are liable. Thus, audit has value because
management’s representatives on its performance and stewardship are examined and reported or by expert outside
management’s control. The purpose of audit therefore, is to provide assurance to the shareholders’, bankers,
creditors, government agencies and authorities, investors, and the public at large. These people need confidence that
the picture of the company as given by the directors to obtain a second opinion from an expert (the auditor). Other
than exposing errors and fraud and testing the reliability of a firm’s controls financial audits can alert management to
weaknesses in the firm’s control as well as suggest operational improvements that could be undertaken. These are
highlighted in the management letter from the auditors. Strategic systems auditors provide a top down approach to
auditing by first examining a firm’s business strategy and keys to competitive advantage.
It has become inevitably necessary to critically evaluate the role of auditors in fraud prevention particularly in
the Government sectors. It is not misleading to categorically say here that the cause of the companies’ woes and
problem has its roots from the numerous fraudulent activities perpetuated by so many of the shareholders and
mangers. These managers accounted for the unimaginable amount of money running into billions of naira
squandered and stored away in foreign bank accounts. The most vocal of such recent cases of fraudulent acts by
banks is that of five (5) bank CEO’S operated without identified values and they are Mrs. Cecilia Ibru of oceanic bank accrued 278.20 billion, Mr. Erastus Akingbola of intercontinental bank with N210.9 billion, Mr. Sebastian Adigwe of
Afri bank owes N141.86 billion, Barth Ebong of Union bank owes N73.58 billion and Mr. OkeyNwosu of Fin bank
recorded N42.45 billion, who had to face the music for their appropriating temporarily bank funds.
Since 357 of the companies and Allied matter Decree of 1990 (CAMD) requires that out registered limited liability companies both private and public must have their financial records audited annually by external auditors so appointed. It is the duty of the auditors in the cause of their work to uncover any fraudulent practice either by omission or commission.
1.2 STATEMENT OF THE PROBLEM
Since the early 80’s the country has been experiencing increase fraudulent practices in Government sectors
despite the fact that these companies are annually subjected to audit. The bureaucratic nature of Government sectors
causes a lot of unnecessary delays, which allows enough space and time for fraud to be conceived and perpetrated.
Some of the fraudsters take advantages of this set back to explore all avenues that will help them succeed in their
shameful acts. Inefficiency of company staff results in improper book- keeping system and in cases where they refuse
to co-operate fully with the auditor’s, vital information may elude him and consequently he is left cross road.
One cannot also ignore the great threat posed to be the auditor by the manipulation of money as a form of “settlement”. Nigeria’s banking sector was rocked in August, when the regulatory bank initially injected over N400 to bail out five (5) banks considered distressed. Unfortunately, IMO STATE UNIVERSITY OWERRI convocation and bank managements are generally unwilling to release details of fraud that may have been perpetrated for fear of losing their corporate image.
AUDITING AND FRAUD CONTROLLING IN GOVERNMENT SECTOR