ABSTRACT
This research
looks at the role of fraud management in the profitability of Nigerian banks (A
study of first bank Nigeria plc). The objectives of this study include to
ascertain the role of fraud detection and the contribution of fraud
investigation in the profitability of Nigerian banks. Ex-post factor research
design was adopted for this study because secondary data was used. Data was
collected from the bank’s annual report and fact books covering from the period
2006 –2015 However regression was ran and hypothesis tested using a T-test.
Findings were based on the result of the regression and one of the findings of
this study is that Fraud detection plays a significant role in the
profitability of Nigerian banks. One of the recommendations says that the
management should employ the service of an investigator once fraud is suspected
so as to detect fraud in the banking system which enhances the profitability of
the system.
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
The failure of banks to
adequately fulfill their role arises from the several risks that they are
exposed to; many of which are not properly managed. One of such risks which is
increasingly becoming a source of worry is, the banking risk associated with
incessant frauds and accounting scandals. The major problems confronting the
financial institution today is “fraud”, which has sent many of them out of
business and is making the industry customers to lose confidence in them since
they have not been able to curb the ugly event called “fraud”.
Fraud, which literarily means a conscious and deliberate
action by a person or group of persons with the intention of altering the truth
or fact for selfish personal gain, is now by far the single most veritable
threat to the entire banking industry. It is indeed worrisome that while banks
are constantly trying to grapple with the demands of monetary authorities to
recapitalize up to the stipulated minimum standards, fraudsters are always at
work threatening and decimating their financial base. Also more worrying is the
rise in the number of employees who are involved in the act as well as the ease
with which many escape detection thus encouraging many others to join in
perpetuating fraud (Onibudo, 2007).
Idolor (2010) stressed
that the spate of fraud in the banking industry has lately become an
embarrassment to the nation as apparent in the seeming inability of the law
enforcement agents to successfully track down culprits. Whereas the activities
of armed robbers are given widespread reviews in the pages of newspapers,
especially during major thefts, it is an irony that what they cart away from
banks is only a slice of what fraudsters remove from bank tills. Corroborating
the view of Idolor, Oseni (2006), stated that the incessant frauds in the
banking industry are getting to a level at which many stakeholders in the
industry are losing their trust and confidence in the industry .Fraud may take
the form of; theft of inventory assets, misuse of expense account, secret
commission and bribery, false invoicing, electronic and telecommunication
fraud, unauthorized use of information, cheque forgery, cheque clone, false
financial statements, and so on, but whichever form it takes, the fundamental
point is that the banking industry falls victim to fraudulent acts suffers and
bears the brunt.
Statistics the
activities of fraudsters in the industry have been both amazing and
confounding. In 2001, 943 fraud cases involving 11.2 billion were recorded.
Ogbu (2000)stated that frauds in Nigerian banks continued to rise in2002 with
77 banks of the 90 in operation, recording cases involving the sum of N12.9
billion. Onyeogocha (2001) attributed it to insider abuses and even board
tussles. The NDIC 1996/7 Annual report and Statement of Accounts that the
number of frauds reached a magnitude of N1,006 million in 127 cases reported in
commercial banks and 587 cases involving N1,543 million. Also the number of
insiders (staff) who connive with outsiders to perpetuate the act is alarming.
Equally worrisome is the rise in the number of top management staff that have
either been indicted or accused of engaging in bank fraud.
As a result of the involvement of staffs and top management
staffs in fraudulent activities in the banking industry, Fraud control is
becoming an issue that the regulators and top banking executives who are in
saddle when fraudulent activities takes place or more succinctly when someone
commit an act of fraud in the financial institutions under their management.
Owing to the fact that fraud affects the profitability and reputations of
banking institutions, to minimize or control the alarming rate of fraud in the
banking industry, there ought to be need for the players in the industry to set
up and implement an effective and efficient control system that will adequately
monitor the daily activities of the industry without leaving any gap,
(Anyanwu,1993). Consequently, appropriate personnel policies and practices
should be put in place since fraud is committed by people of moral decadence.
Therefore, qualified auditors should be employed to ensure effective and
efficient detection and prevention of fraud and financial reporting in Nigerian
Commercial banks. Against these backgrounds, the main purpose of this study is
to thus, ascertain the role of fraud management in the profitability of Nigeria
banking system.
1.2
Statement of Problem
The larger society
expects greater accountability, fairness, transparency and effective
intermediation from banks, ensuring that they carry out their responsibilities
with sincerity of purpose and unquestionable integrity with respect to their
operations as a means towards earning public trust and goodwill. The banking
business has become more complex with the development in the field of
Information and Communication Technology (ICT) which has changed the nature of
bank fraud and fraudulent practices. Berney(2008) observes that customers rely
heavily on the web for their banking business which leads to an increase in the
number of online transactions. Gates, Jacob and Malphrus(2009) assert that the
internet provides fraudsters with more opportunities to attack customers who
are not physically present on the web to authenticate transactions. In Nigeria,
in spite of the banking regulation and bank examination by the Central Bank of
Nigeria (CBN), the supervisory role of the Nigeria Deposit Insurance
Corporation (NDIC), and The Chartered Institute of Bankers of Nigeria (CIBN),
there is still a growing concern about fraud and other unethical practices in
the banking industry. Evidence from the NDIC Report (2008) revealed that the
report of the examinations and special investigations from the banks were still
bedeviled with problems of fraud, weak board and management oversight;
inaccurate financial reporting; poor book-keeping practices; non-performing
insider-related credits; declining asset quality and attendant large
provisioning requirements; inadequate debt recovery; non-compliance with
banking laws, rules and regulations;
and significant
exposure to the capital market through share and margin loans. This is a
problem which makes the activities of the fraud management difficult or
impossible and affects the profitability of the banking system and the economy
at large.
1.3
Objectives of Study
The broad objective of
the study is to conduct an empirical study into the role of fraud management in
the profitability of Nigeria banks with special reference to First Bank of
Nigeria Plc.
The specific objectives
of this study are:
1.
To ascertain the role of fraud detection
in the profitability of Nigerian Banks;
2.
To determine contribution of fraud
investigation in the profitability of Nigerian Banks.
1.4
Research Questions
To guide the conduct of
this research, the following questions are raised:
1. What is the role of fraud detection in the
profitability of Nigerian Banks?
2. What is the contribution of fraud investigation
to the profitability of Nigerian Banks?
1.5
Research Hypotheses
1.
H0: Fraud detection does not
play a significant role in profitability of Nigerian banks.
H1:
Fraud detection plays a significant role in profitability of Nigerian banks.
2.
H0: Fraud investigation does
not contribute significantly to the profitability of Nigerian banks
H1:
Fraud investigation contributes significantly to the profitability of Nigerian
banks.
1.5
Significance of the Study
The study will be of
invaluable benefits and useful to all categories of bank managers, financial
information users such as existing and potential shareholders, they are the
direct beneficiary of companies and they will get bonuses if the companies
operate successfully. The use of fraud management will reduce the risk of fraud
and increase the bank’s profit which will reflect on the dividends of the
shareholders.
Also, creditors and fund providers will also benefit from
the presence of fraud management system in the Nigeria banking system as the
will guaranteed of the safety of the funds.
Besides, researchers and students in the field of
accounting, banking and finance who want to know more about frauds, its causes
and possible ways of preventing it. They will also find the study beneficial as
it will add to the existing stock of knowledge for students and serve as a
reference point for subsequent researchers.
The findings of this study will be of great importance to
the policy makers especially the Central bank of Nigeria in their efforts to
deter, prevent and at worst detect fraud timely, as the threat of fraud in
Nigeria can be contained by taking the right steps.
1.6
Scope of the Study
The study is aimed at
ascertaining the role of fraud management in fraud control, fraud prevention,
fraud detection, fraud remediation and their effects on the Profitability of
Nigerian banks with special reference to First Bank of Nigeria Plc.
1.7
Limitations of the Study
The progress of this
study has been hinder by certain constraints during its course, some of which
includes: technical factors such as power supply which have limited the speed
of the researcher in concluding this research work and have subjected the
researcher to sourcing power from substitute power supplies such as generator
sets and power banks.
Furthermore, financial constraints which have restricted
the researcher from getting a wide range of materials for the study as the
researcher have had to narrow down its respondents in a bid to reduce the cost
at which the questionnaires are printed, also, resulting from financial
constraints, the researcher have been restricted from visiting other branches
of the financial institution of concern to get concrete information which will
be beneficial to the progress of this study. However, the researcher was able
to solve the financial constraint by resulting to borrowings from friends and
family members to further the research work.
1.8
Operational Definition of Terms
1. Fraud management- This involves the use of various management
techniques to control and prevent fraud.
2. Financial fraud- This involves the financial account transaction
such as bank account including a consumer lone or credit card account.
3. Fraud prevention- This involves taking steps that best protect
against identity theft and other external treats targeting company .
4. Fraud ring - A group of individuals who scheme together to
execute fraudulently activities.
================================================================
Item Type: Project Material | Attribute: 47 pages | Chapters: 1-5
Format: MS Word | Price: N3,000 | Delivery: Within 30Mins.
================================================================
No comments:
Post a Comment