Effectiveness of the Internal Control Method as a Tool for Preventing Bank Frauds in Nigeria (A Case Study of Five Commercial Banks)

Abstract

The thrust of the study is on the Effectiveness of the internal Control Method as a tool for Preventing Bank Frauds in Nigeria . This paper was written after a careful research and review on Internal Control Methods and their effectiveness to detecting frauds in Banks. The researcher was inspired by the preponderance of bank frauds in Nigeria leading to bank distress. Fraud is universally acknowledged as a hidden threat to Financial Institution's especially banks in the country. An effective Internal Control system in Commercial Banks is such that will ensure that lapses do not exist to those willing to perpetrate frauds. However, the increase in method and types of frauds in commercial banks in Nigeria brings to question the effectiveness of the internal control system of these banks. This study therefore reviewed the internal control system of the commercial banks to evaluate its appropriateness and effectiveness as a tool for checking frauds and also ascertain the degree of comp liance of the banks staff with the internal control measures.. For thorough coverage of the topic under discussion a survey of 5 Commercial Banks was conducted. Data, both Primary & Secondary were collected and analyzed. Questionnaires, face to face interactions with the employees of the five selected commercial banks helped in collecting information for the study. Complementary sources of data from text books, Journals , NDIC reports, financial reports , Annual reports were also employed. It was discovered that commercial banks in Nigeria adopt various measures to detect frauds . However these measures are not effective enough to prevent the incidence of frauds in these banks., On completion of this study it was recommended among other things for banks to change their policies - especially those that centered on personal management Practices of these banks . Moreover, honest & competent staff should be recruited , the staff strength of these banks should be increased to prevent work overload and additional equipment should be provided in these banks. However commercial banks in Nigeria are advised to continue to use the various internal control measures as the incidence of frauds in banks would have been higher if these methods were not employed.