THE RESPONSIBILITIES OF INTERNAL AUDITORS IN CONTROLLING FRAUD AND WASTAGES IN CORPORATE ORGANIZATION A CASE STUDY OF INNOSON TECHNICAL COMPANY EMENE, ENUGU

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In our society where the business culture has been overridden in recent times with fraudulent practice penetrate by management and employee, the detection was often led to unjustifiable criticisms of his role. Auditors are known to be competent, honest and independent professionals who express unbiased opinion on the truth and fairness of the financial statement as presented by management to members of the company. The accounting profession has over the year built a reputation, which encourages others to rely upon the opinions auditors express. If these opinions are unclear or even unreliable serious consequences may and indeed have resulted. The auditors duty is to examine the financial records of the company and to take reasonable care to ascertain that the financial records shows the company’s true position. The auditor is expected to prepare a detailed report to the company members and report shall state the matters set out in schedule six to this act. The auditor is also to consider whether the information given in the director’s report for the year for which the accounts are prepared is consistent with those accounts; and if they are of opinion that it is not, they shall state that fact in their report. If the subsiding company and its auditors fail to provides this information, every other officer who is in default shall be guilty of an offence and liable to fine. That an auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing and has been one of the most frequently debated areas amongst auditors, politicians, media, regulators and public (Gay et al, 2007). This debate has been especially highlighted by the collapse of both small and big corporations across the globe. The auditing profession in Nigeria has caught the media’s attention following financial scandals in some of the Nigerian banks such as Intercontinental Bank, Oceanic Bank, Afribank, as bank PHB among others. There seem presently to be a misconception that auditors duties are largely the preventing detecting and reporting of fraud, for example, (Idris, 2009). Financial report user’s perceptions of the extent of fraud in Nigeria, and to determine their perceptions of the auditor’s responsibilities in detecting fraud and the performance of related audit procedures.

The paper also aims to ascertain whether the report user’s perceptions of auditors’ responsibilities on fraud are consistent with those of the auditing profession as expressed in auditing standard in Nigeria. Fraud, according to Adeniji (2004) and ICAN (2006), is intentional act by one or more individuals among management employees or third parties, which result in a misrepresentation of financial statements. Omission of the truth for the purpose of deception/manipulation to the financial detriment of an individual or an organization which also includes embezzlement which also includes embezzlement, the or any attempt to steal or unlawfully obtain, misuse or harm the asset of the organization, (Adeduro, 1998 and Bostley and Drover, 1972). Fraud has increased considerably over the recent years and professionals believe this tend is likely to continue. According to Brink and Witt (1982), fraud is an ever-present threat to important concern of management. ISA 240 “the auditor’s responsibilities to consider fraud in an audit of financial statement (Revised)” refers to fraud as an “an intentional act by one or more individuals among management, those charged with governance, employees or third parties, involving the use of deception to obtain an unjust or illegal advantage”. Aderibigbe and Dada (2007), defined fraud as a deliberate deceit planned and executive with the intent to deprive another person of his property or rights directly or indirectly, regardless of whether the perpetuator benefits from his/her actions. Weirich and Reinstein (2000 Cited in Allyne and Howard, 2005), defined frauds as intentional deception cheating and stealing some common types of fraud include creating fictitious creditors, “ghosts” on the payroll, falsifying cash sales, underclared stock, making unauthorized “write-os”, and claiming excessive or never incurred expenses. Pollick (2006) regards fraud as a “deliberate misrepresentation, which causes one to suffer damages, usually monetary losses”. Albrecht et al (1995 cited in Allyno and Howard 2005) classified fraud into employee embezzlement, management fraud. Fraud also involves complicated financial transactions conducted by white-collar criminals, business professional with specialized knowledge and criminal intent (Pollick, 2006).