ABSTRACT
The banking sector plays a crucial role in economic development by facilitating financial transactions, capital allocation, and monetary stability. However, financial fraud remains a persistent challenge, threatening the integrity and stability of the banking industry. This study examines the effect of internal audit features—competency, transparency, independence, and work environment—on fraud detection in Nigerian banks. The research adopts a cross-sectional survey design, targeting employees in tier 1 banks operating in Benin City, Edo State. Primary data was collected through structured questionnaires and analyzed using descriptive and inferential statistical methods, including regression analysis.
The findings reveal that internal audit competency significantly enhances fraud detection by ensuring auditors possess the technical expertise to identify financial irregularities. Transparency within the audit process strengthens fraud detection mechanisms by promoting openness, accountability, and timely reporting. Internal audit independence is found to be a critical factor, as it allows auditors to conduct unbiased evaluations free from managerial influence, thereby improving fraud detection outcomes. Additionally, a conducive work environment facilitates effective audit practices, enabling auditors to execute their responsibilities without constraints, ultimately strengthening fraud mitigation strategies.
The study highlights the importance of strengthening internal audit structures within banks to enhance their fraud detection capabilities. The findings provide valuable insights for bank management, regulatory bodies, and policymakers, advocating for improved governance frameworks that emphasize audit independence, competency development, and technological integration in fraud detection. The research contributes to the growing body of knowledge on internal auditing and financial crime prevention, serving as a reference point for future studies in corporate governance and financial risk management.
