EFFECT OF INTERNAL CONTROL SYSTEMS ON FRAUD DETECTION AND PREVENTION IN COMMERCIAL BANKS IN MAIDUGURI, BORNO STATE, NIGERIA

Abstract

Literature has indicated that Internal Control Systems have a significant
effect on bank performance, productivity and fraud detection and prevention.
Other studies have also examined individual components of internal control
in relation to fraud detection and prevention in Commercial Banks.
However, since the effectiveness of internal control systems depend on the
synergy between all the various components, an assessment of all the
components will provide greater insight on how controls influence fraud
detection and preventionin commercial banks. This study examinedthe effect
of the five components of internal control (control environment, control
activities/procedures, risk assessment, information and communication and
monitoring) on fraud detection and prevention in commercial banks. A
survey research design was employed and data was collected from 115 bank
managers, accountants, risk officers and internal auditors of selected banks
in Maiduguri. Descriptive statistics was used to analyze the demographic
data of respondents while inferential statistics were used to analyze topical
data with the aid of statistical package for social sciences (SPSS) version 16.
The hypotheses were tested using Multiple Regression and Analysis of
Variance. The findings show that all the components of internal control have
significant influence on fraud detection and prevention in commercial banks.
In particular, risk assessment, information and communication and
monitoring has greater influence than the other components. The study’s
findings have implications to commercial banks, bank regulators and
researchers. The study therefore recommended that commercial banks
strengthen their controls by paying greater attention to risk assessment,
information and communication and monitoring