PREVENTION AND DETECTION OF FRAUD BY AUDITORS CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Fraud as “the action or an instance of deceiving somebody in order to make money or obtain goods illegally. Fraud is a deliberate distortion and misrepresentation of fact in preparations of financial information, for the purpose of personal benefit or gain. The International Auditing Guideline (IAG) defines fraud as a particular types of irregularity, this refers to irregularities involving the use of decent to obtain illegal or unjust advantage and may involve the following: manipulation, falsification, or alternation surprising or moiling transaction without substance, international and deceitful, which ever perspective fraud is looked at, an intentional distortion of financial statement, the misappropriation of asset, whether or not accompanied by distortion of financial statement. This issue of fraud has becomes a cankerworm that issue has eastern deep into the fabric of many corporate bodies in recent times. As a result, more time is being spent on board meeting in an attempt to find solution to the persistent fraudulent practices among management and non-management staffs.
Section 334 of the companies and allied matter acts (CAMA) 1990 states that in the case of every company, the directors shall in respect of every company prepare financial statement for the year (in form of annual reports and accounts) financial statement are means of communicating economic measurement obligations and information about the resources and performance of the reporting entity or enterprise those having reasonable right to such information i.e. Inventors, lenders, supplier, trade creditors, customers, banks, government, employees insurance companies etc. Moreover, for the users as stated to have confidence in the report and also according to section 375 of CAMA 1990 which states that “each company shall appoint an auditor at each annual general meeting (AGM) to audit the financial statement of the company” the financial statement are being audited by such appointed auditors who act from the conclusion of the (AGM). In which they were appointed to the conclusion of the next AGM. This audit of financial statement give true and fair views (or equivalent) of the entity’s affair at the period and of it’s profit and loss (or income and expenditure for the period ended and have been properly prepared in accordance with the applicable reporting framework, (for example relevant legislation and applicable accounting standards) or where statutory or other specific requirements prescribe the term “present fails”.
However, there are some common misconceptions about this purpose even among financially enlightened people many of the recent development in auditing involve attempts to bridge this “expectations gap” the difference between what people thing auditors should be and what auditor really do in practice. Auditing standards produced by the International Auditing Practicing Committee (IAPC) attempt to ease the problem and in particular the standard, which tackless sensitive issues like fraud and laws. Many people think that auditors should act like a police, fighting for truth, order and justice, when impact auditors, responsibilities powers and duties are very restricted by statute, ethics and by auditing standards. This misconceptions goes to the extent at which users of the financial statement relies on the account in decision making, whenever an auditor issues unqualified opinion, such opinion is usually as absence of fraud, error and irregularities, evidence that, the auditor is responsible of the completeness of the financial statement, evidence that, the company will not have future financial problem or operating problems, evidence that, the asset and liabilities are stated on the balance sheet date is a continuance statement of occurrence, which is they will continue to remain so fair the reporting date
Evidence of management quality and product. The audit expectation gap has implications both for the audit profession and for users of audit reports some of the consequences includes: high rate of litigation on perceive negligence of auditors, increased mutual benefit between the auditing profession and the user public, incorrect decision on wrong premises, counter accusations leading to distraction from the more fundamental questions of what role of the profession should be going forward. Dispersion on the future of audit will better address the expectation of user and the fear of the audit profession of accepting an “Impossible role”. Therefore this research work will hopefully bridge the gap of expectations as explained earlier in relation to the role of auditors in detection and prevention of fraud in companies and also evaluate the efficiency and effectiveness of such role in organization.
1.2 STATEMENT OF THE PROBLEM
The development of auditing in Nigeria has led to a number of problems many of which have not yet been solved completely, and they serve as long in the will of success of the auditors. The following problems among others can be identified.
1. Lack of cooperation from the management of the company.
2. Problem of getting audit recommendations implemented in time at all.
3. Low relationship between the auditor and staff of the organization
Pertinent of these problems or that even aggregates the problem is the misconception of the role of the auditors in the organization and these problems serves as a threat to the fraud success of the audit work to audit profession itself and also to the correct usage of audit report.
1.3 PURPOSE OF THE STUDY
The aim of this research work is to evaluate the role of auditors in detection and prevention of fraud in Access Bank Plc. The objective of this research study is as listed below to:
1. Determine the extent of the responsibility of the parties to the contract of auditing that is responsibility of the auditor to management and shareholders in relation to provision of the statutory law.
2. Established liability and condition under which an auditor can be awarded damages for fraud through negligence.
3. Considered various means and method by which auditors can avoid being negligent
4. Review various cases where the auditor was neglect in relation to fraud
1.4 RESEARCH QUESTIONS
The research questions for its study are stated thus,
1. Did auditors perform a significant role in detection and prevention of fraud in an organization?
2. Is fraud mostly peculiar to the banking organization?
3. Can fraud be totally eradicated?
1.5 RESEARCH HYPOTHESIS
H01:The auditors do not perform a significant role in detection and prevention of fraud in an organization.
H02: Fraud is not mostly peculiar to the banking organization.
H03: Fraud cannot be totally eradicated.
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