INTERNAL CONTROL SYSTEM AND FRAUD PREVENTION IN COMMERCIAL BANKS IN NIGERIA

ABSTRACT

The study examines the impact of effective internal control system on fraud prevention in commercial Banks. It is pertinent to assert that the early detection and prevention of fraud is largely dependent on the effort of the internal control system of commercial Banks in Nigeria. The study examines how effective internal control system can prevent fraud in commercial Banks in Nigeria. The study made use of descriptive survey design, while the population was all commercial banks in Oredo and Ikpoba Okha Local Governement Area of Edo State and the sample size was 150 using total enumerative sampling technique. Questionnaires were also administered to audit and control units of Guarantee Trust Bank (GTB), First Bank of Nigeria (FBN), Access Bank, Zenith Bank and United Bank of Africa (UBA) in Edo State. Analysis was done with descriptive statistics like frequency distribution and percentage points with the use of Scientific Package for Social Sciences (SPSS) software and three hypotheses were tested using chi-squared test for goodness of fit and test of sample proportion techniques. Finding shows that Internal Control System (ICS) has a significant impact on banks at least to a large extent of 84% as disclosed by the respondents. 90.4% of the respondents saw the need for effective internal control system which will reduce and curb fraud. 90.4% of the respondents saw the need that Board of Directors drafts policies and procedures in preventing fraud. The study recommends that the Board of Directors of these banks should establish a body within the banking system with the responsibility of monitoring banking operations on a regular basis and educational training program targeted at enhancing the knowledge of employees of the bank on the intensity of the punishment for fraud perpetrators in the bank and attractive pay packages should be doled out to employees of these commercial banks particularly management personnel.