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Internal Control As An Effective Tool For Checking Fraud In Banking Industry (A Case Study Of Wema Bank Of Nigeria, Ogui Enugu)




 The focus of this research work is on the Internal Control as an effective tool for checking of fraud in the banking industry. The increased occurrence of fraud in the banking industry in Nigeria brings to question the effectiveness of the internal control for checking of fraud in the banking industry in Nigeria. This study therefore, reviewed the degree of compliance of bank staff with internal control measures, examined relevant details or loopholes (if any) in the system and also examined the appropriateness of the presently adopted measure in preventing fraud. A survey of Wema Bank Nigeria Limited in Enugu were conducted to facilitate the study. The questionnaire returned were subjected to simple statistical treatment using the percentage formulae. Empirical generalization was made of all the other commercial banks based on the result obtained from the Wema Bank Nigeria visited.  Findings from the study show that the banking industry in Nigeria adopts various measures to detect and prevent fraud.  These measures include: proper control over the custody of the banks result by at least two bank officials so that a transaction is not started and completed by one person, effective periodic check by inspectorate department; periodic rotation of bank staff; regular classification of formant account; limit to amount of loans and overdraft granted and proper authorization of such; effective periodic check by inspectorate department. We also examine the possible problems faced by the banks in implementing fully these problems faced by the banks in implementing fully these control measures.  The result of dishonestly of some bank staff; shortage of the time due to large volume of work and personal problems.  Finally, we recommend that the staff strength of the banking industry should be increased especially professional in the field of banking and more sophisticated equipment’s should be adequately provided in the banks; provision of adequate supervision and assistance should be given to the bank staff in solving some of their personal problems.




This project is aimed at looking into internal control as an effective tool for checking fraud in the banking industry.  Fraud is used when it refers to irregularities involving the criminal deception to obtain an illegal or unjust advantage.  It is also an act by which a person intends to gain dishonest advantage over another person.  In other words, fraud is “a trickery or breach of confidence or a deceit used (by one person) to gain unfair and dishonest advantage (over another)”

The basic elements of fraud are:

  • There must be trickery breach of confidence and a deceit.
  • There must be unfair and dishonest advantage, based on the concept of one man’s gain in another man’s loss. Fraud is banks, therefore are acts that involves the loss of assets by banks through deceitful and dishonest means.  It also involves intentional distortion of the financial statements to secure particular advantage such as the misappropriation of assets.  This implies that the fraudster, if not caught gains through the dishonesty, while the bank, customer and staff who is defrauded or cheated loses.
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It is feared that the inability of management to ensure effective enforcement of rules and regulations have rendered the operation of internal control system in the banking industry open at about.  The net effect could be that everyone carries out his schedule of duties in a manner his likes which consequently gives those wishing to commit fraud their long expected golden opportunity.

In this study, the introduction of modern procedures and advancement in information technology, such as those in communication system, automatic electronics gadgets and computers into the banking industry coupled with the various precautionary measures taken by the bank agents, fraud have rather taken nuclear desertions and the size of sum involved, increased at a geometric rate.

Aricpitan (1986), a banker of repute maintained that; discoveries during investigation show that banks now take extra precaution before clearing a Cheque because of rampart incidence of fraud and forgery which a bank loss placed on the average of N1m per working day of the year in Nigeria.

Ashimi (1987, 6) maintained that; Fraud has become sophisticated as to make a forged signature on a cheque leaf look good enough to rightful owner to think that it was its signature.

But situation, as being experienced now, where incessant cases of bank fraud are being reported, could if not immediately checked by the internal or external auditor will erode depositor’s confidence in the nation’s banking industry foreign investors from the country.

The nature of the business of the banking industry requires a proper measures to be taken to evade fraud. This is because they are entrusted with public. Ojoa .T. (1982) emphasized that; As an open secret, banking industry do not have very large resources of their own in relation to the total resources at their disposal.  They depend in the main on other people’s fund which have been entrusted to them because of the confidence the people have on them as models of responsible and safety.

Ughamadu, N. in his article on celebrating “Bank fraud” in the Business Times of 29th July, 1991, observed that; logic for establishing a viable and enabling environment for any country will be meaningless if its banking sector is very porous to fraud.

Consequently, the continued existence of banking industry rest delicately on the maintenance of public confidence. This calls for establishment of an effective system of internal control, which among other things will help to ensure that the organizations accounting activities are in accordance with the laid down procedures, standards and statutory requirements.

To establish a sound and effective internal control, various organization adopt various devices and methods based on their operations.

Internal control: Effective tool for checking of fraud in banking industry, requires a continuous check and re-checking of day-to-day activities of the business in order to ensure the correctness and fairness of the accounting records, and to detect and expose, any deviation when it has occurred.  Most banking industry loseconfidence of the people not only through some fraudulent practices and syndication of some dishonest staff facilitated by defects in the bank’s internal control.  Therefore, there is a great need to eliminate or reduce to the barest minimum the defects or loopholes and make the internal control effective tool for checking fraud in our banks and operational to guard against the occurrence and re-occurrence of frauds in our banking industry.


The aim of every banking industry is to achieve her objectives, which is to progress and meet up with their banking policy and Central Bank of Nigeria (C.B.N) liquidity ratio.  Therefore any gap to meet these objectives or any improper co-ordination of the management could lead into bank distress or fraud.

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The internal control are faced with “teething” problem some of which involves;

  • Inadequate internal control system: When there is improper control over the system, it hampers effective auditing. This is because there are no proper checks and balances established to curb the excesses of the management and staff of the organization.
  • Human-Cleverness: It is one of the problems that faces the system of internal control. This is because, no matter how secure the computer code is designed to prevent access, there is always hacker who act in.
  • Changes in environment make control inadequate as well: When a requirement that the cost of internal control is not disproportionate to the potential loss which may result from its absence.
  • Fraud: Fraud is also a problem which the system of internal control faces which can occur internally or externally to both. The possibility of circumvention of controls either alone or through collusion with parties outside or inside the enterprise.

However, the inherent problems of internal control are the reason why auditors are required to always perform some substantive test of material items as well as relying on internal control.  These are problems (among many others) that the researcher can mention.  These and other similar problems cannot be solved without a research of this mid.


This research work concentrates essentially on the commercial banks with special emphasis on Wema Bank Nigeria Limited Enugu.  Therefore, the main objectives of this study is to examine internal control system in the branch operation of this bank and evaluate the appropriateness and effectiveness of the system as a tool for fraud prevention.

This study is designed to achieve the following objective:

  • To ascertain the degree of compliance of the bank’s staff with the internal control measures.
  • To examine the relevant defects or loopholes (if any) in the system.
  • To examine the relevance and appropriateness of the presently adopted control measures in preventing fraud and offer useful recommendation based on the findings on how best to prevent the occurrence of fraud through an effective internal control.


In pursuance of this research work, the following research questions will be answered.

  • Does inadequate supervision of staff constitute frauds?
  • What are the factors that cause fraud in Banks?
  • Do you think that keeping one staff for too long in a position can be a problem to the banking industry system?
  • Does inadequate training of staff affect the internal control system of the bank?


It is hoped that this study when completed would be of importance to the researchers, the firm, the employees, the government and to the bank customers.

  • To the researchers: It will help those who may be interested to carry out further study on internal control system as it relates to fraud productivity in commercial banks in Nigeria.
  • To the Firm: Banks in Nigeria will derive greater assistance from this research work in decting fraud in their banks and improving the effectiveness of their internal control system and subsequently preventing and minimizing fraud.
  • To the Employees: They can achieve this by adopting and implementing the various suggestions and recommendations made in this study in their control system an effective too for checking of fraud.
  • To the Government: If banks are able to reduce the incidence of fraud in their operation to the least level, they will be able to operate on a more profitable ground to help the government achieve their aims and objectives concerning this country.
  • To the customers: customers deteriorating confidence on the banking industry will once more be released and thereby help in building up good banking in Nigeria.
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This study concentrate solely on the commercial banks and focuses on Enugu main branch of Wema Bank, Empirical generalization will be made of other commercial banks in Nigeria.

The study covers various areas of internal control as an effective tool for checking fraud in Banking industry.  Both the introduction of fraud, meaning of fraud, cases of fraud in Banks, types of fraud, prevention of fraud, consequences of fraud and conclusion.


During the course of writing this project work, the researcher encountered many human and material constraints, which generated a set back to him in the course of this study.  Some of the difficulties are: Insufficient funds, Time, Data collection.

  • Time: Enough time was required for collection of data and other relevant facts. The researcher as a final year student had to use already limited time partly for this study and partly to read other courses in preparation for his final examinations.
  • Finance: Finance or money is the basis of any plan and due to the present economic hardship facing our country, the researcher has limited funds and this affected the extensive search and collection of data needed.
  • Data Collection: The researcher found it difficult to collect information from people. Also during the course of oral interview, the researcher had to call on the interviewer’s offices several times before meeting them.  Therefore, this affected the research work.


Accounting:     It is defined as the process of identifying, measuring and communicating economic information to permit informed judgment and decisions by the users of the information.

Internal Control:  It is the whole system of control, financial or otherwise, established by the management, in order to secure as far as possible, the accuracy and reliability of the records, run the business in an orderly manner and safeguard the company’s assets, its objective being the prevention or early detection of fraud or errors.

Sophistication:  Having a lot of experiences of the world and knowing about culture and other things that people think are socially important.

Empirical:  It is relying on experiments or experiences or observation as the basis for your ideas, that it, rather than ideas or theories.

Prevention:  This is the act of stopping something bad from happening.

Procedure:  It is a way or order of doing something, especially the usual or correct way.

Perpetrate:  It involves committing a crime or error.

Fraud: It is the crime of deceiving somebody in order to get money or goods illegally that is criminal deception.

Pages:  73

Category: Project

Format:  Word & PDF               

Chapters: 1-5                                          

Source: Imsuinfo

Material contains Table of Content, Abstract and References.


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