CHAPTER ONE
1.0 GENERAL
INTRODUCTION
How extensive should a company’s internal control system be? In
today’s environment, this is a difficult question to answer. The reason being
that some current business, legal, and social trends suggest that companies
need to increase their emphasis on internal control, while other trends
indicate just the opposite. Bank failures and widespread losses over the past
two decades have elevated the importance of effective internal control within
the formal financial sector worldwide. In the United States for example, bank
failures rose over 200 percent in the 1980s partly due to fraud and mismanagement.
Internationally, the collapse of Barings Bank and Yamaichi Securities further focused
the financial sector’s attention on internal control.
The Basle Committee analyzed the problems related to these losses
and concluded that they probably could have been avoided had the banks
maintained effective internal control systems (banking, a regulatory and
auditing guide). In addition, a review of traditional banks affirmed that the
implementation of effective internal control systems played an important role
in reducing bank failures.
Internal control, the strength of every organisation, has become
of paramount importance today in Nigeria banks. The reasons being that the
control systems in any organization are a pillar for an efficient accounting
system as well as achievement of organizational goals.
1.02 HISTORICAL BACKGROUND
OF FIDELITY BANK PLC, ABA, (7 FACTORY ROAD)
Fidelity Bank Plc Aba is a branch of Fidelity bank plc which is
located at no 7 factory Aba, Abia State Nigeria. The headquarters is in Lagos
Nigeria. The name of it’s general manager is Nnamdi Okonkwo.
The bank has a team of high caliber staff with diverse skills and
experience. The CEO said that they continue o invest heavily in technology and
training to ensure that they are at per unit the best in the industry.
Fidelity bank plc was founded in 1988 and since then have been
increased immensely. They provide services like loans, credit cards, savings,
investment, mortgages. In 2011, the bank was ranked the most capitalized bank
on the African continent and the 567th most capitalization bank in
the world. As of December, 2013, fidelity bank plc, was a large financial
services provider in Nigeria with total assets estimated at over US$6.318
billion (NGN 1 + trillion).
Fidelity bank plc is also known as fidelity bank Nigeria. The
industries attributes is financial services. The bank or company operates
through retail banking, corporate banking, investment banking, and public
sector segments.
Fidelity bank Aba, branch has a skilled staff of light integrity.
The number of staff in this bank is about 50 and above. Comprising of customer
care attendants, marketing department, cash deposit and cash withdrawal
attendants, securities, cleaner and other numerous activities that is been
ordered by a staff. The bank has automated teller machines which is available
every 24 hours to help the customers withdraw fast.
The bank has a big business environment which accommodates all
activities that is carried out by the customers and staffs. It has other
technologies which enable it’s services to be effective and efficiencies. The
security of the customers and their business objectives, also their savings is
guaranteed. Which means that it’s security is strong. The bank put their
customer’s interest at heart. That is they makes sure that they attend to their
customer when due without any problem arising. In Fidelity bank, their rules
and policies concerning business are kept or adhered to. That is to say that
the bank is trustworthy to be banking with.
1.03 STATEMENT OF THE
PROBLEM
The regularity of fraud and misappropriation of funds is creating
fear, anxiety, and a loss of confidence in the minds of bank customers. Also, poor
internal control system leads to increase in bank losses. Management is
required to set up an internal control system but this system varies significantly
from one organization to the next, depending on such factors as their size,
nature of operations, and objectives. Since internal controls operate in an
environment which influences its operations, proper care must be exerted into
the implementation of these systems in other to achieve the utmost aim of the
bank.
This heightened interest in internal controls is, in part, a
result of significant losses incurred by several banking organizations. An
analysis of the problems related to these losses indicates that they could
probably have been avoided had the banks maintained effective internal control systems.
Such systems would have prevented or enabled earlier detection of the problems
that led to the losses, thereby limiting damage to the banking organization or
industry.
1.04 PURPOSE OF THE STUDY
1. To
find out the impact of internal control system, on the overall management of
Fidelity Bank Plc Aba branch.
2. To
find out the employees knowledge base on the concept of fraud in the banking
sector.
3. To
find out effective internal control systems influence on prevention and
detection of fraud.
4. To find out the
problem of fraud and how to curb it.
1.05 RELEVANT RESEARCH QUESTIONS
1. Does
Fidelity bank have an internal control system? If yes, how effective is it?
2. What
kind of relationship exists between prevention of fraud and internal control
system?
3. Is
lack of good internal control system a major cause of fraud in banks? And what
other major causes exist?
4. Can
banks with effective internal control system prevent the menace of fraud?
1.06 DELIMITATION (SCOPE)
OF THE STUDY
The content of this research should not be seen as being totally
exhaustive of all possibly situations available in the Nigerian banking sector
or industry on the theme of this study. This is due to the vast size of the banking
sector and the boundless nature of the study under review.
Therefore, the scope of this research is limited to the study
carried out on fidelity Bank in Aba, Nigeria.
1.07 ASSUMPTION
It was assumed that the management of Fidelity Bank, Aba, would give
the researcher the necessary information and explanation relevant to the study.
It is also assumed that the findings and recommendations in this work will be
available to banking industry or sector. It was equally consumed that the
supervisor would give the researcher the necessary advice for the completion of
the study.
1.08 THE SIGNFICANCE OF THE STUDY
The findings of the study would help the management of the bank to
maintain an enhanced controlled environment by helping management and employees
to establish and maintain an environment throughout the bank that sets a
positive and supportive altitude towards internal control, reliable management,
operating personnel for effecting internal control and internal audit for
evaluating whether appropriate controls have been implemented and whether the
internal controls are functioning as intended. Other significance of the study includes:
Help the bank in reducing fraudulent activities that occur in the
organisation.
Requirement for the award of a Master’s degree. Reference for
other research topics.
1.09 DEFINITION OF
UNFAMILIAR TERM
INTERNAL CONTROL: Internal control is a process for assuring achievement of an
organisation’s objectives in operational
effectiveness and efficiency, reliable financial reporting, and compliance with
laws, regulations and policies. A broad concept, internal control involves
everything that controls risks to an organisation.
EFFECTIVENESS: Within this context of the study it means measure of
productivity in utilizing an entity’s resources.
EFFICIENCY: it means measure of cost control in performing recurring function
within an entity Fraud - intentional deception made for personal gain or to
damage another individual.
FRAUD: Intentional
deception made for personal gain or to damage another individual.
PREVENTION: Prevention
means the act of stopping or protecting bad from happening.
DETECT: This is the process of
finding or detecting came or fact.
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