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Auditing And Fraud Controlling In Government Sector
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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.
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ABSRACT - [ Total Page(s): 1 ]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 t ... Continue reading---
