PROBLEMS OF FRAUD AND THEIR SOLUTIONS IN FINANCIAL INSTITUTION

By

EFFIONG JACK ROSE

Presented To

Department of Accountancy

ABSTRACT

There appears to be little doubt about the fact that frauds in banks are a matter of the greatest concern to accountant, the monetary/political authorities and the generality of Nigerians today. It is so for many reasons. The methods acquire sophistication by the day. The size increases in geometric progression. The people involved hitherto are among the respectable members of the church, the mosque, and the community. Also, the results of the incidence are damaging. Frauds lead to unwarranted losses for the banks and put the management of each institution on its toes whilst expending hard earned resources and energies on fraud prevention and detection. Equally, importantly, every incidence of bank fraud literally chips off a bit of the publics confidence in the orthodox financial institution that banks are and delay or slow down the full development of banking habits in Nigerians.

In view of these, fraud is a number one enemy to all concerned with the growth and development of our financial institutions. Any effort to fight this enemy is thereby most desirable.

TABLE OF CONTENTS

Title Page ii

Approval Page iii

Dedication iv

Abstract v

Acknowledgement vi

Table Of Content vii

Chapter One

1.0 Introduction 1

1.1 Background Of Study 1

1.2 Statement Of Problem 1

1.3 Objectives Of Study 2

1.4 Purpose Of Study 2

1.5 Research Questions 2

1.6 Significance Of Study 3

1.7 Scope And Limitations 4

1.8 Definition Of Terms 4

Reference 5

Chapter Two

2.0 Literature Review 6

2.1 Meaning Of Fraud 6

2.2 Natures And Types Of Fraud 7

2.3 Causes Of Fraud 11

2.4 Effects Of Fraud 14

2.5 Procedures Through Which Fraud Might Be Detected 15

2.6 Solution And Minimization Of Fraud 16

Chapter Three

3.0 Summary, Recommendation And Conclusion 20

3.1 Summary Of Findings 20

3.2 Recommendation 21

3.3 Conclusion 23

Bibliography 25

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Irrespective of the depth of knowledge available in the banking industry, there still exist cases of collapse, frauds and inefficiencies. Many banks are distressed or clear that fraud is one of the major cause of banks being distressed. This study is carried out to know what prompt people to perpetrate fraud and why it still exists irrespective of the anti-fraud cultures that have been introduced in the financial institutions.

1.2 STATEMENT OF PROBLEM

This research project is desired to investigate fraud in financial institutions. To determine the types, causes, effects and how to minimize fraud in financial institutions.

In spite of the efforts being made to deter fraud, our financial institutions are experiencing frauds or irregularities which has put many of them in distress. Here we will see how fraud has contributed to decrease in economic growth, the major causes and possible ways of minimizing it.

1.3 OBJECTIVES OF STUDY

(i) This study is being done to determine the extent fraud has gone in distressing our financial institutions.

(ii) To identify the causes and effects of fraud.

(iii) To make suggestions and recommendations as how to minimize and give solutions to the problems of fraud in financial and other institutions.

(iv) To reveal the relationship between bank fraud and economic growth.

1.4 PURPOSE OF STUDY

This study is carried out in partial fulfillment of the award of national diploma (ND) certificate in accountancy.

1.5 RESEARCH QUESTIONS

(i) To what extent has fraud contributed to the distress of our banks?

(ii) What are the causes and effects of frauds?

(iii) What are the suggestions and recommendations on how to minimize fraud?

(iv) Is there any relationship between bank fraud and economic growth?

1.6 SIGNIFICANCE OF STUDY

This study will help as many as are interested in banking industry and other financial institutions and those that are banking. In addition, the study will help us know the forms of fraud that may be discovered, the procedures through which fraud might be detected and prevented.

This project write-up will be of benefit to the following:

(i) Investors: to help them know that fraud occurs in financial institutions. Being aware of that, they will be careful not to make their investments in banks where fraud is rampant.

(ii) Accounting students: it will serve as a source of secondary data for students in accountancy department by helping to widen their scope of research.

(iii) Government: it will help the government or the public to know and equally see why banks are getting distressed and will help them bring up solution in order to come to the aid of most banks that are about to be distressed, for a better tomorrow.

1.7 SCOPE AND LIMITATIONS OF THE STUDY

This study covers the forms; degree, causes, effects and solutions to fraudulent acts in financial institutions which is limited to banks especially in Enugu metropolis.

The research is carried out with the available literature review materials in the course of the research, there is in adequate literature review, materials, time and space for the collection of data.

1.8 DEFINITION OF TERMS

(i) Fraud: this refers to irregularities involving the use of criminal deception to obtain an unjust or illegal advantage.

(ii) Financial institutions: these are institutions that issue financial obligations in order to obtain funds from the public, example, and banks.

(iii) Distressed banks: these are banks with problems relating to liquidity, poor earnings and non-performing assets. The climax of it could be a condition of insolvency, which implies inability to pay debts or meet maturing obligations as they become due.

REFERENCE

Notes

Orji John (Dr), Elements of Banking, (Enugu: rock communication 1998) page 10.

Anibueze Chukwuemeka Ben, Banking practice, volume two (Enugu: Glanic ventures press 1998) page 53.