CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Every sector of the
economy both the private and the public sector has its own objectives and goals
to achieve. For the public sector of the economy, their goal is to satisfy the
social needs of the citizens and in the effort to achieve these purposes, auditing
more often, play a vital role.
The size and
scope of these sectors have sometimes made it clear for the executor to
exercise personal and first hand supervision of operation. It is in this light
that value for money audit established by management is initiated, for any
organization to carry out its business efficiently and effectively, there must
be some factors that must be put in place for the smooth running of the
organization like materials, machines, human labor and money e. t. c.
Auditing is seen to play an intermediary
function in between management and the resources of the organization. It is
also fundamental to any business either the public or private sector, which
will help the business to keep its adequate financial records. These financial
records are kept in response to the demand by a system control which requires
that the business enterprise must be carried out in an orderly manner, ensure
adherence to management policies, safe guard the assets and secure possibly the
completeness and accuracy of the records. Irrespective of these facts of system
of control established by the management of the organization, fraud still
thrives.
In the early
1970s, the role of the state auditors began to change dramatically. Changes
began in USA, Canada, and in several European countries. The representative of
the people started demanding information on the efficiency and effectiveness of
public expenditure.
In Nigeria no
specific legislation has been put in place to empower auditors to carryout
value for money audit. However, the 1999 constitution section 88 (2) empowered
both the two federal house and the state house of assembly to conduct
investigation to expose corruption, inefficiency or waste on the execution or administration
of law within the legislative competence and in the disbursement or
administration of fraud appropriated by it.
Therefore,
fraud control has become increasingly important to managers of various
governments in an organization. In general, financial statements fraud has
always weakened investors’ confidence in both private and public sector
investment. This is because 1 fraud against an organization reduces the net
income by 1 and services to be provided to people in the case of public sector.
However,
value for money audit will be wildly concerned with the economy and efficiency
of an organization and the effectiveness of achieving its desired objective
thereby controlling fraud to evaluate the effectiveness of the internal control
system within the organization.
(BRIEF REVIEW OF THE FIRM, POWER
HOLDING COMPANY OF NIGERIA, P H C N)
The history of electricity in Nigeria
can be dated back to the end of the 19th century when the first
generating plant was installed in Lagos in 1898. From then until the 1950, the
platform of electricity development was in the form of individual electricity
power undertaking scattered all over the towns, some of the few undertaking
were federal government bodies under the public works department, some by the
native authorities and others by the municipal
authorities.
1.2 STATEMENT OF THE
PROBLEM
Fraud is a
complex phenomenon. It is rampant in both private and public sectors of
Nigerian economy. In the public sector, value for money audit reports are
mostly unqualified even in a glaring
situation or cases of corrupt practice by the managers that means that auditors
especially those in public establishment compromise their duties or their
duties are influenced and threatened in the performance of their statutory
functions.
Therefore
these studies tend to find out why there are:
Improper methods of
appointment of auditors
Inadequate internal control
Lack of independence of auditors
Untimely and unreliable financial statements
Lack of transparency and inadequate method of accountability
1.3OBJECTIVES
OF THE STUDY
This study tends to
find out some of the objectives which will include:
1.
To find out the effect of value for money audit in
fraud detection and control in the public sector.
2.
To find out the relationship between internal control
and fraud detection.
3.
To determine what extent is the value for money audit
relevant to the effectiveness and control of an organization.
4.
To find out why there is lack of transparency and
inadequate method of accountability.
5.
To find out why there is inadequate internal control
system.
1.4 RESEARCH QUESTION
1.
Is there any significant effect of value for money
audit in fraud detection and control in the public sector?
2.
Is there any alignment relationship between internal
control and fraud detection?
3.
To what extent is the value for money audit relevant to
the effectiveness and control of an organization?
4.
What are the causes of lack of transparency and
inadequate method of accountability?
1.5 RESEARCH HYPOTHESIS
The hypotheses are stated in null and
alternative forms.
Ho1: There is no significant effect of value for money audit in
fraud detection in the public sector.
HA1: There is a significant effect of value for money audit in
fraud detection in the public sector.
Ho2: There is no alignment between
internal control and fraud detection. HA2:
There is an alignment between internal control and fraud detection.
Ho3: The value for money audit does not institute financial
discipline in organization.
HA3: The value for money audit institute financial discipline in an
organization.
1.6 SCOPE OF THE STUDY
Basically, the scope of this research
work is on the value for money audit in the controlling of fraud, detection and
financial crime prevention in our present day public sector using “power
holding company of Nigeria” as a study. It focuses on the need for auditing and
the importance of auditing in detecting and preventing fraud in other for
organizations to ascertain their problems.
The population of study in
selected staff in four of the units or department of the power sector namely
the audit unit, finance, account and public relation department.
1.7LIMITATION OF THE STUDY
Virtually every research work
comprises of one limitation or the other. However during the course of carrying
out this research work, a lot of set locks were encountered which include:
1.
Time constant:
there was limited time so the topic could not be broadened.
2.
Non-challant
attitude of some respondent: the response gotten from some of the staff of
the power holding company poses another problem. Most of them due to lack of knowledge fear to
provide information and also to protect their job due to corruption, they could
only give information which concerns them most.
1.8 SIGNIFICANCE OF THE STUDY
1.There is need to inform the
management in the business organization on the value for money audit as regard
to fraud control , detection and prevention in order that the auditor would be
giving a maximum co-operation in the performance of his study.
2.
It will also encourage the interest groups in the
organization e. g potential investors, creditors’ e. t. c.
3.
It will enlighten the public on the topic and provide
further literature in the field of auditing and investigation.
Also the research work will be handy
and serve as reference for further researches concerning auditors and fraud
control, and it will add to our knowledge generally.
1.9 DEFINITION OF TERMS
Auditing: An independent examination of an expression of opinion on
the fundamental statement of an entity by an appointed auditor (Ihe and Umeaka
2006)
Economy:
An organized scientific study of the
problem by which scarce resources which have alternative uses are allocated
among competing wants with the objective of maximizing welfare (Nnamocha 2002)
Efficiency: Is the maximization of the ratio of output to input or
the relationship between resources consumed in the process of generating
effective output and output so produced (Norbert 1999)
Effectiveness: Refers to the degree to which the resulting output
satisfied predetermined organization objectives (Norbert 1999)
Internal control system: The whole system of control financial and
otherwise established by management in other to carry out the business of an
enterprise in an orderly and efficient manner (Chukwu 2005: 17)
Management: An applied discipline concerned with the achievement of
organizational objectives (Norbert 1999)
Public sector: The portion of an economy in which the activities
are under the control and direction of the state (Ihe and Umeaka 2006:1)
Private sector: that portion of the economy in which the activities
are under the control and direction of a non- governmental economic unit (Ihe and
Umeaka 2006:2)
Fraud: Refers
to intentional act by one or more individual among management, those charged
with governance, employees, or third parties involving the use of deception to
obtain an unjust or illegal advantage (Anesike
2009)