EFFECTIVENESS OF INTERNAL CONTROL SYSTEM AS A MEANS OF REDUCING THE INCIDENCE OF FRAUD IN AN ORGANIZATION

ABSTRACT

In the course of this study, the importance and effect of an effective internal control system in an organization was analyzed with particular reference to KEYSTONE BANK LIMITED. The study showed that for an organization to survive, it must have a very strong internal system control on its assets.

The study reveals that the main perpetrators of frauds in most of the organizations are cashiers, the production managers and the purchasing managers.

It was found that despite various measures put in safeguarding the stocks and assets against theft by restricted access, incidence of fraud could not be avoided totally, hence the need for a good internal control system that will comprise the following: adequate staff training, proper authorization procedure; creation of internal audit department and managerial discipline.

Adequate internal control is defined as means of all types of checks and balances both operational and financial, put in place by management to ensure a safeguard of the organization’s assets. 

There should be check and balance in place. Management should pay particular attention on cash, and also adequate records must be kept to show and explain the company’s transaction.

TABLE OF CONTENTS

Title page                                                                                 i

Certification                                                                              ii

Dedication                                                                                iii

Acknowledgement                                                                    iv

Abstraction                                                                               v

Table of contents                                                                      vi

 

CHAPTER ONE    

1.0     Introduction                                                                  1

1.1     Objective of the study                                                     2

1.2     Statement of problem                                                     3

1.3     Significance of the study                                                 3

1.4     Scope of the study                                                          4

1.5     Limitation of the study                                                    4

1.6     Formation of hypothesis                                                  4

1.7     Definition of terms                                                          5

1.8     Essential characteristics of good internal control system      7


CHAPTER TWO

Literature review                                                                      9

2.0     Introduction                                                                    9

2.1     Types of internal control                                                  10

2.2     Brief history of my case study                                          14

2.3     The meaning of fraud                                                      15

2.4     Types of fraud perpetrated in Nigeria                               17

2.5     Causes of fraud                                                              20

2.6     Control of fraud                                                              25

2.7     Definition of internal control                                            25

2.8     Functions of internal control system                                26

2.9     Efficiency of operation                                                    27

2.10   The accounting structure                                                28

2.11   Internal control over computer                                        28

2.12   Internal control over petty cash                                       29

2.13   Internal control over plant and equipment                       30

2.14   Internal control over salaries                                           30

2.15   Internal control over transaction                                     30

2.16   Independence of in departments                                     31

 

CHAPTER THREE

3.0     Research methodology                                                    32

3.1     Method of data collection                                                 32

3.2     Personal interview                                                           32

3.3     Survey procedure                                                            33

3.4     Samples and sampling                                                     33

3.5     Desk Research      `                                                        34

3.6     Design of questionnaire                                                   34

3.7     Relevant hypothesis formulation                                       34

3.8     Response rate                                                                 35     

3.9     Degree of freedom                                                          37

3.10   Level of significance                                                        37

3.11   Decision rule using x2                                                     37

 

 

CHAPTER FOUR

4.0     Data Analysis and Interpretation                                       38

4.1     Introduction                                                                    38

4.2     Test of hypothesis                                                           46

4.3     Discussion of result                                                         50

 

CHAPTER FIVE

Summary, conclusion and recommendation                               52

5.0     Summary                                                                       52

5.1     Conclusion                                                                      53

5.2     Recommendation                                                            54

5.3     Suggestion for further research                                       56

          Questionnaire                                                                 57

Bibliography                                                                    60


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