Internal Audit Efficiency and Fraud Prevention: Empirical Study of Listed Manufacturing Companies in Nigeria
Downloads
Fraud has been a major factor to financial distress and poor operating performance of many organisations, this cut across all sectors, races, religious faiths and cultures. The recent increase in fraudulent activities as reported in many organisations worldwide are perceived to have adversely affected organisational going concern, dividend payout and stakeholders’ confidence, this calls for internal audit efficiency. Researches have been conducted on fraud, but not many studied the influence of Internal Audit Efficiency (IAE) on fraud prevention. Therefore, this study examined the probable influence of IAE on fraud prevention in Nigerian Listed Manufacturing Companies (NLMC). The study employed survey research design with a study population of 19,443 workers in ten selected companies in manufacturing sector. Sample size of 392 was determined with a response rate of 86%. Data were collected with a validated questionnaire, these were analysed by making used of descriptive and inferential statistics at 5% level of significance. The study revealed that IAE positively influenced fraud prevention (Adj.R2=0.349, F(3, 337)=59.502, p=.000). The study concluded that IAE influenced and has significant impact on fraud prevention in NLMC. The study further recommends that management should ensure good policies to guarantee independence of internal audit, establish a robust internal control mechanism to limit risk of fraud, and employ experience and professional staff into audit unit/department.
Adams, M. B. (1994). Agency theory and internal audit. Managerial Auditing Journal, 9(8), 8-12.
Adekoya, A. A., Agbetunde, L. A., & Lawal, A. B. (2022). Trust relationship and tax compliance in developing countries - Informal sector perspectives. International Journal of Economics, Commerce and Management, 10(6), 309-332.
Adekoya, A. A., Oyebamiji, T. A., & Lawal, A. B. (2020). Forensic accounting, tax fraud and tax evasion in Nigeria- Review of literature and matters for policy consideration. International Journal of Emerging Trends in Social Sciences., 9(1), 21-28.
Adeniji, A. A. (2012). Auditing and assurance services. Lagos, Nigeria: Value Analysis Consult.
Adetoro, J. A., Oladejo, K. S., & Akesinro, A. S. (2013). Effectiveness of internal auditor in controlling fraud and other financial irregularities in private universities in South-West, Nigeria. Research Journal of Finance and Accounting, 4(13), 106-110.
Agwor, T. C. (2017). Fraud prevention and business performance in qouted manufacturing companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 5(9), 71-80.
Ahmed, B. O. (2018). The effect of internal audit on organisational performance: An empirical exploration of selected Jordanian Banks. Research Journal of Finance and Accounting, 9(14), 137-144.
Albrecht, W. S., Albrecht, C. C., Albrecht, C. O., & Zimbelman, M. F. (2009). Fraud examination. Natorp Boulevard, United States of America: South-Western Cengage Learning.
Albrecht, W. S., Hill, N. C., & Albrecht, C. C. (2006). Forum: Ethics, credibility, and governance. The ethics development model applied to declinining ethics in accounting. Australian Accounting Review, 16(1), 30-40.
Alleyne. P., & Howard, M. (2005). An exploratory study of auditors' responsibility for fraud detection in Barbados. Managerial Auditing Journal, 20(3), 284-303.
Al-Twaijry, A., Brierley, I., & Gwilliam, D. (2018). The development of internal audit in Saudi Arabia: An international theory perspectives. Critical perspectives on Accounting, 14(5), 507-531.
Arum, E. D., & Wahyudi, I. (2020). Audit quality and fraud detection: Evidence of internal auditor of Jambi province. Advances in Economics, Business and Management Research, 179, 8-14.
Association of Certified Fraud Examiners (ACFE). (2020). Report to the nation 2020. Global study on operational fraud and abuse. Association of Certified Fraud Examiners.
Azim, M. I., & Azam, S. (2016). Bernard Madoff's ponzi scheme fraudulent behaviour and the role of auditors. Accountancy Business and the Public interest, 15(1), 122-137.
Bolarinwa, O. A. (2015). Principles and methods of validity and reliability testing of questionnaire uses in social and health science. Nigeria Postgraduate Medical Journal, 22(4), 195-201.
Butcher, K., Harrison, G., & Ross, P. (2013). Perception of audit service quality and auditor retention. International Journal of Auditing, 17, 54-74.
Cheng, Q., Goh, W., & Kim, J. B. (2018). Internal control and operational efficiency. Contemporary Accounting Research, 35(2), 1102-1139.
Clark, M., Gibbs, T., & Schroeder, R. (2003). CPA's judge internal audit department obejectivity. Mnagement Accounting, 62(8), 40-43.
Cressey, D. R. (1953). Other people's money. Montclair, NJ: Patterson Smith.
Demirovic, L., Isakovic-Kaplan, S., & Proho, M. (2021). Internal audit risk assessment in the function of fraud detection. Journal of Forensic Accounting Profession, 1(1), 35-49.
Denman, D. S. (2019). Machiavelli and the Fortress city. Political Theory, 47(2), 203-229.
Drogalas, G., Pazarskis, M., Anagnostopoulou, E., & Papachristou, A. (2017). The effect of internal audit effectiveness, auditor responsibility and training in fraud detection. Accounting and Management Information Systems, 16(4), 434-454.
Ezejiofor, R. A., & Okolocha, C. B. (2020). Effect of internal audit function on financial performance of commercial banks in Nigeria. International Journal of Advanced Academic Research (Social and Management Sciences), 6(7), 44-56.
Farouk, M. A., & Hassan, S. U. (2014). Impact of audit quality and financial performance of qouted cement firms in Nigeria. International Journal of Accounting and Taxation, 1-22.
Huang, S. Y., Lin, C. C., Chiu, A. A., & Yen, D. C. (2017). Fraud detection using fraud triangle risk factors. Information Systems Frontiers, 19(6), 1343-1356.
Jensen, M. C., & Meckling, W. (1976). Theory of firm: Managerial behaviour, agency costs, and ownership structure. Journal of Financial Economics, 4(3), 305-360.
Khan, N., Rafay, A., & Shakeel, A. (2020). Attribute of internal audit and prevention, detection and assessment of fraud in Pakistan. The Lahore Journal of Business, 9(1), 33-58.
Kolawole, P. E., Dairo, J., Jacob, P. A., & Aregbesola, O. D. (2020). Internal audit and financial performance of selected manufacturing industries in the consumer goods sector listed on the Nigeria Stock Exchange. IOSR Journal of Business and Management, 22(9), 1-10.
Lawal, B. A. (2015). The impact of auditing in controlling fraud and other financial irregularities. International Journal of Empirical Finance, 4(3), 147-164.
Lawal, B. O., Yinusa, S. O., Lawal, B. A., Oyetunji, O. T., & Adekoya, A. A. (2020). Forensic accounting and fraud detection: Evidence from manufacturing industry in Nigeria. KIU Interdisciplinary Journal of Humanities and Social Sciences, 1(2), 242-264.
Mahrani, M., & Soewarno, N. (2018). The effect of good corporate governance mechanism and corporate social responsibility on financial performamce with earrnngs management as mediating variable. Asian Journal of Accounting Research, 3(1), 41-60.
Nwaobia, A. W., Omotayo, I. I., & Ajibade, A. (2021). Internal audit and fraud detection in selected banks listed in Nigeria. IOSR Journal of economics and Finance, 12(1), 51-65.
Olaoye, C. O., & Dada, R. A. (2017). The roles of auditors in fraud detection and prevention in Nigeria money deposit banks: Evidence from South-West. European Scientific Journal, 13(31), 290-306.
Othman, R., Aris, N. A., Mardziyah, A., Zainan, N., & Amin, N. M. (2015). Fraud detection and prevention methods in the Malaysian public sector: Accountants and Internal Auditor's perceptions. Journal of Procedia Economics and Finance, 28, 59-67.
Ozigbo, S. A. (2015). Internal control and fraud prevention in Nigeria business organisation: A study of some selected companies in Warri metropolis. Journal of Policy and Development Studies, 9(3), 185-188.
Petrascu, D., & Tieanu, A. (2014). The role of internal audit in fraud prevention and detection. Procedia Economics and Finance, 16, 489-497.
Power, M. (1999). The audit society: Rituals of verification. United Kingdom: Oxford University Press.
Radu, M. (2012). Corporate governance, internal audit and enviromental audit: The performamce tools in Romanian companies. Accounting and Management information Systems, 11(1), 112-130.
Riney, F. A. (2018). Two step fraud defence system: Prevention and detection. Journal of Corporate Accounting and Finance, 29(2), 74-86.
Soltani, B. (2014). The anatony of corporate fraud: A comparative analysis of high profile American and European corporate scandals. Journal of Business Ethics, 120(2), 251-274.
Sow, A. N. G., Basiruddin, R., Mohammad, T., & Rasid, S. Z. A. (2018). Fraud prevention in Malaysian Small and Medium Enterprises (SMES). Journal of Financial Crime, 25(2), 499-517.
Tavakol, M., & Dennick, R. (2011). Making sense of Crobach’s alpha. International Journal of Medical Education, 2(1), 53-55. doi:10.5116/ijme.4dfb.8dfd
Yamane, T. (1967). Statistics, An Introductory Analysis (2nd ed.). New York, United States of America: Harper and Row.
Zaidan, A. M., & Neamah, I. S. (2022). The effect of the quality of internal audit function to improve the operational efficiency of companies: All empirical study. Webology, 19(1), 6990-7019.
Ziniyel, D., Otoo, I. C., & Andzie, T. A. (2018). Effect of internal audit practices on financial mangement. European Journal of Business, Economics and Accountancy, 6(3), 2056-2118.
