CHAPTER ONE
1.1
BACKGROUND OF THE STUDY
Every sector of the economy both
the private and the public sector has its own objectives and goals to achieve.
For the public sector of the economy, their goal is to satisfy the social needs
of the citizens and in the effort to achieve these purposes, auditing more often,
play a vital role.
The size and scope of these
sectors have sometimes made it clear for the executor to exercise personal and
first hand supervision of operation. It is in this light that value for money
audit established by management is initiated, for any organization to carry out
its business efficiently and effectively, there must be some factors that must
be put in place for the smooth running of the organization like materials,
machines, human labor and money e. t. c.
Auditing is seen to play an intermediary
function in between management and the resources of the organization. It is
also fundamental to any business either the public or private sector, which
will help the business to keep its adequate financial records. These financial
records are kept in response to the demand by a system control which requires
that the business enterprise must be carried out in an orderly
manner, ensure adherence to management policies, safe guard the assets and
secure possibly the completeness and accuracy of the records. Irrespective of
these facts of system of control established by the management of the
organization, fraud still thrives.
In the early 1970s, the role of
the state auditors began to change dramatically. Changes began in USA, Canada,
and in several European countries. The representative of the people started
demanding information on the efficiency and effectiveness of public
expenditure.
In Nigeria no specific
legislation has been put in place to empower auditors to carryout value for
money audit. However, the 1999 constitution section 88 (2) empowered both the
two federal house and the state house of assembly to conduct investigation to
expose corruption, inefficiency or waste on the execution or administration of
law within the legislative competence and in the disbursement or administration
of fraud appropriated by it.
Therefore, fraud control has
become increasingly important to managers of various governments in an
organization. In general, financial statements fraud has always weakened
investors’ confidence in both private and public sector
investment. This is because 1
fraud against an organization reduces the net income by 1 and services to be
provided to people in the case of public sector.
However, value for money audit
will be wildly concerned with the economy and efficiency of an organization and
the effectiveness of achieving its desired objective thereby controlling fraud
to evaluate the effectiveness of the internal control system within the
organization.
(BRIEF REVIEW OF THE FIRM, POWER HOLDING COMPANY
OF NIGERIA, P H C
N)
The history of electricity in
Nigeria can be dated back to the end of the 19th century
when the first generating plant was installed in Lagos in 1898. From then until
the 1950, the platform of electricity development was in the form of individual
electricity power undertaking scattered all over the towns, some of the few
undertaking were federal government bodies under the public works department,
some by the native authorities and others by the municipal authorities.
1.2
STATEMENT OF THE PROBLEM
Fraud is a complex phenomenon.
It is rampant in both private and public sectors of Nigerian economy. In the
public sector, value for money audit reports are mostly unqualified even in a
glaring situation or cases of corrupt practice by the managers that means that
auditors especially those in public establishment compromise their duties or
their duties are influenced and threatened in the performance of their statutory
functions.
Therefore these studies tend to find out
why there are:
Improper methods of appointment of auditors
Inadequate internal
control
Lack of independence of
auditors
Untimely and unreliable
financial statements
Lack of transparency and inadequate
method of accountability
1.3 OBJECTIVES OF THE STUDY
This study tends to find out some of the
objectives which will include:
1.
To find out the effect of value for money audit
in fraud detection and control in the public sector.
2.
To find out the relationship between internal
control and fraud detection.
3.
To determine what extent is the value for money
audit relevant to the effectiveness and control of an organization.
4.
To find out why there is lack of transparency and
inadequate method of accountability.
5.
To find out why there is inadequate internal
control system.
1.4 RESEARCH QUESTION
1.
Is there any significant effect of value for
money audit in fraud detection and control in the public sector?
2.
Is there any alignment relationship between
internal control and fraud detection?
3.
To what extent is the value for money audit
relevant to the effectiveness and control of an organization?
4.
What are the causes of lack of transparency and
inadequate method of accountability?
1.5 RESEARCH HYPOTHESIS
The hypotheses are stated
in null and alternative forms.
Ho1: There
is no significant effect of value for money audit in fraud detection in
the public sector.
HA1: There
is a significant effect of value for money audit in fraud detection in the
public sector.
Ho2: There
is no alignment between internal control and fraud detection.
HA2: There
is an alignment between internal control and fraud detection.
Ho3: The value for money
audit does not institute financial discipline in
organization.
HA3: The value for money
audit institute financial discipline in an organization.
1.6 SCOPE OF THE STUDY
Basically, the scope of this
research work is on the value for money audit in the controlling of fraud,
detection and financial crime prevention in our present day public sector using
“power holding company of Nigeria” as a study. It focuses on the need for
auditing and the importance of auditing in detecting and preventing fraud in
other for organizations to ascertain their problems.
The population of study in
selected staff in four of the units or department of the power sector namely
the audit unit, finance, account and public relation department.
1.7 LIMITATION
OF THE STUDY
Virtually every research work
comprises of one limitation or the other. However during the course of carrying
out this research work, a lot of set locks were encountered which include:
1. Time constant: there was limited time
so the topic could not be broadened.
2.
Non-challant attitude of some respondent: the
response gotten from some of the staff of the power holding company
poses another problem.
Most of them due to lack of knowledge fear to provide information and
also to protect their job due to corruption, they could only give information
which concerns them most.
1.8
SIGNIFICANCE OF THE STUDY
1.There is need to inform the management in the business organization
on the value for money audit as regard to fraud control , detection and
prevention in order
that the auditor would be giving a maximum co-operation in the
performance
of his study.
2. It will
also encourage the interest groups in the organization e. g potential
investors, creditors’ e. t. c.
3. It will
enlighten the public on the topic and provide further literature in the field
of auditing and investigation.
Also the research work will be
handy and serve as reference for further researches concerning auditors and
fraud control, and it will add to our knowledge generally.
1.9 DEFINITION OF TERMS
Auditing: An
independent examination of an expression of opinion on the fundamental
statement of an entity by an appointed auditor (Ihe and Umeaka 2006)
Economy: An
organized scientific study of the problem by which scarce resources
which have alternative uses are allocated among competing wants with the
objective of maximizing welfare (Nnamocha 2002)
Efficiency: Is the
maximization of the ratio of output to input or the relationship between
resources consumed in the process of generating effective output and output so
produced (Norbert 1999)
Effectiveness: Refers
to the degree to which the resulting output satisfied predetermined
organization objectives (Norbert 1999)
Internal control system: The
whole system of control financial and otherwise established by
management in other to carry out the business of an enterprise in an orderly
and efficient manner (Chukwu 2005: 17)
Management: An
applied discipline concerned with the achievement of organizational
objectives (Norbert 1999)
Public sector: The
portion of an economy in which the activities are under the control and
direction of the state (Ihe and Umeaka 2006:1)
Private sector: that
portion of the economy in which the activities are under the control and
direction of a non- governmental economic unit (Ihe and Umeaka 2006:2)
Fraud: Refers
to intentional act by one or more individual among management, those
charged with governance, employees, or third parties involving
the use of deception to obtain an unjust or illegal advantage (Anesike, 2009)
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