FRAUD MANAGEMENT AND PERFORMANCE OF FINANCIAL INSTITUTION IN NIGERIA

CHAPTER ONE

1.0  INTRODUCTION

1.1  BACKGROUND OF THE STUDY

The term irregularities are used to refer to intentional distortion of financial statements, for whatever purpose and to misappropriations of assets, whether or not accompanied by distortions of financial statements. Fraud is one type of irregularity. In auditing guideline, the word fraud is used to refer to irregularities involving the use of criminal deception to obtain an unjust or illegal advantage. Fraud may entail that proper accounting record have not been maintained, it may also indicate that some internal controls are not effective and that the auditor cannot rely on these internal controls. Existence of Fraud in financial statements could jeopardize the statements from showing true and fair view and complying with the companies and Allied Matter Acts (CAMA) 1990. Therefore, fraud in banks must be looked at generally as “acts that involve the loss of assets by banks through deceitful and dishonest means. The intention of the fraudster is to dishonestly benefit himself to detriment of the bank or bank staff or bank customer or any other member of the public via banking operations. Fraud can be committed by bank customer, bank customer, bank staff and customers or a third party that is non-customers. (Eze, 2004).

1.2  STATEMENT OF THE PROBLEM

Fraud in Nigeria financial institutions has remained an unavoidable problem and has also resisted all practicable treatment. The incidence has not only become incessant but also been on the increase in the recent past. Although, it has assumed global dimension, the rate of growth in Nigeria has been outstanding in sophistication from N1542.91 million in 1996, the amount involved in commercial banks alone rose to N3590.31 million in 1997. Where as the actual/expected loss went from N371.08 million to N224.54 million (NDIC). This has aected the financial institutions profitability in no small measure. The general confidence reposed in the banking institutions has become eroded since the new concepts of distress, bank failures and closures of 1990’s. From available records, out of about 115 financial institutions operating in the country as at 1996, surprisingly 52 were distressed while 6 were acquired. With the frequent of fraud, people are no longer at ease keeping their monies in the commercial banks but prefer to keep them in their houses or concretizes them in wares (an uncivilized practice for underdeveloped economy). The internal control measures in the financial institutions seem to have faults. Such that, it has aided the perpetration of fraud. As a result, the industry shares 90% of all cases of malpractices, forgeries and frauds. (Wiki pedia 2007).