AN ASSESSMENT OF THE ROLE OF AUDITING IN THE PREVENTION OF FRAUDS IN THE NIGERIAN PUBLIC SECTOR
1.1 BACKGROUND OF THE STUDY
The term fraud is commonly used to describe a wide variety of dishonest behaviors such as deception, bribery, corruption, forgery, false representation, collusion and concealment of material facts. It is usually to describe the act of depriving a person or something by decent, which may involve the misuse of funds or other resources, or the supply of false information. Actual gain, benefits or loss to another does not occur for an act to be fraudulent but these does have to be intent to make a gain or cause a loss.
Over the years, audited financial statements have established an impressive record of reliability. All business entities whether private or public, irrespective of size, nature or scope of operation have expert or written policies and definitely keep records.
Such records to be kept constitute valuation information and thus, subject to some form of independent verification in order to confer reasonable credibility on them. The task of the independent verification constitutes in providence of auditing and the person who perform this task is referred to as the auditor.
Auditing has been defined by Glyne (1981) as the independent examination and investigation of the book, accounts and voucher of a business with view to enabling the auditors to report whether the balance sheet and profit and loss account are properly drawn up so as to present true and fair view of the state of the affairs of the business according to the best of the auditors.
In the course of this study, it is significant to differentiate between the public and private sector. The public sector whose wealth is owned collectively by the public, it consists of ministries departments, public corporation, the parastatals and the three tiers of government (Federal, state and local government) of which the sole aim is to provide useful services to all the citizens irrespective of their status in the society.
The legal basis in the public sector constitute, Audit Act 1958, Finance Regulations, Treasury Circular, Appropriation Act of the year in question, and all form of the legal basis.
The public sector accounting is the composite activities of recording, analyzing, summarizing, reporting and interpreting financial fiscal transactions of the government and its agencies.
It reflects all levels of transactions involving the receipts, custody and disbursement of fund and the users of public sector account. While the private sector consists of ownership and shareholders and the report of their transaction is to the owners, shareholders and the outsiders.
The cash basis system of accounting is used in the public sectors while the accrual basis is used in the private sector. In addition, the equity or share interest of the public sector cannot be owned, bought or sold and profit making does not contribute to its survival unlike the private sector where profit making is the main stay and driving force.
The private sector on the other hand has its bulk of wealth owned collectively by individuals or groups of individuals. The sole motive of the sector is for profit making. The legal basis in the private sector is formed by the companies and Allied Matter Act 1990, the partnership Law, etc.
1.2 STATEMENT OF PROBLEMS
The cash basis system employed in the public sector accounting has been identified to have serious effects through its simple application. Some of the effects are as follows:
Problem of compliance with application law and regulation.
Problem of effectiveness in achieving the program result.
Problem of efficiency economy of operation.
Problem of time constraints.
1.3 OBJECTIVE OF THE STUDY
The primary objective of the research work is to evaluate the effect of auditing in the prevention of fraud in the Nigeria public sector.
1.4 RESEARCH QUESTIONS
This research work will provide answer to the following questions:
How best can fraud in the public sector be prevented?
What role does proper accounts records play in the effective execution of public sector audit?
What are the factors that hinder or promote the proper auditing of the public sector?
How best are the auditors to carry out public sector audit?
How best can the current problems faced by the auditors in auditing public sector or solves?
1.5 STATEMENT OF HYPOTHESIS
H0: There is no relationship between auditing and fraud prevention.
HI There is a relationship between auditing and fraud prevention.
1.6 SIGNIFICANCE OF THE STUDY
The research will be beneficial to many sectors of economy due to it’s importance in the sense that it will assist in knowing whether all the legal basis of government accounting are strictly followed by the official in the preparation of financial statement in the public sector.
It will point out and proffer to the sectors of economy the solutions, such ways and such areas that could help in the prevention of fraud in any organization especially in the public sectors. The research will also draw clear lines of distinctions between public sector and private sector accounting that profit is not the main drive of the public sector, unlike private sector where profit is the main drive.
1.7 SCOPE OF THE STUDY
This project is restricted to the impact of auditing in prevention of fraud in the Nigerian public sector, a case study of National Judicial Council Abuja. Attention will be given specifically to the Audit Unit and Accounting Department respectively.
1.8 DEFINITION OF TERMS
Auditing: This is a systematic process of objectively obtaining and evaluating evidence / regarding assertion that economic action and events are ascertain and communicate the results to interested parties.
Auditor: Auditor is a statutory professional body that is concerned with giving the independent opinion of the financial statement. Auditor can be internal or external.
Internal Auditor: These are auditors that are concerned with the internal review of the financial statements within the organization. They are employees of the organization and they are involved in the day to day checks of account in an organization.
External Auditors: External Auditors are members of the public accounting firms or government agencies and serve as independent reviewers of the accounting system of clients or regulated firms.
Financial Statement: This is the record that an auditor provide information on. It includes profit and loss, the balance sheet and assets of the business.
Fraud: Fraud has been referred to as irregularities in the financial statement and they are deliberate actions that are taken by the management or employee of an organization. Fraud could through manipulation of account by the managers or outright theft of the company’s assets which involves defalcation.
Errors: The word errors is used to refer to unitentional mistake in financial statements whether of mathematical nature or electronically or whether due to over sight or misinterpretation of the relevant facts.
Independent: It is the state of characterized by objectively and integrity by an auditor.
True and Fair: This auditor’s statement that the information received and the treatment and presentation of such information are in agreement with the accounting records and returns true. By true, it means that financial statement are:
It is free from material misstatements.
Base on verification evidence fair. “By fair” it means that the financial statements are:
Free from management bias
Relevant to the needs of the users.
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Pay #3000 (10 Dollars) for material
Pay #5000 (30 Dollars) for complete project.
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