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A research paper that examines the issues of internal control and fraud prevention in the Nigerian banking industry. The study uses both primary and secondary data to test the effectiveness of internal control against fraud and the determinants of fraud prevention. The results show that internal control is effective against fraud but not all staff are committed to it, while technology, staff qualifications, and education play significant roles in fraud prevention. The paper recommends the continuation of the cashless policy and improvement in staff engagement to reduce fraud in the banking system.
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International Journal of Economics and Financial Issues, 2016, 6(3), 1172-1179.
This paper examines the issues of internal control viz., fraud prevention in the banking industry, adopting both primary and secondary data. Primary data was used to test internal control while secondary data were employed to test fraud prevention. The main primary variables were separation of duties, monitoring, and staff qualifications while the main secondary variables are bank profit, regulation, technology and M2. In both cases regression techniques were adopted. The results show that internal control on its own is effective against fraud, but not all staff are committed to it, while the secondary data is quite supportive of the primary data but more exemplifying in that M2 , staff qualifications and technology were significant throughout the various dependent variables. It is also clear from the regressions that technological based fraud is significant. The paper recommends the continuation of the cashless policy of the Central Bank to reduce available cash and improvement in educated staff engagement to reduce fraud in the banking system. Keywords: Deposit Money Banks, Internal Control, Fraud Prevention, Regulation, Cashless Policy JEL Classifications: G21, G
2. CONCEPTUAL FRAMEWORK AND LITERATURE REVIEW
4. RESULTS AND DISCUSSIONS 4.1. Primary Data Results
Status Measuring group Frequency (%) Gender Male 55 (62) Female 34 (38) Age bracket (years) <30 10 (11) 30<40 63 (71) 40<50 13 (15)
50 3 (3) Academic qualification OND 3 (3.4) HND 13 (14.6) B.Sc. 69 (77.5) Post-graduate 4 (4.5) Professional qualifications ACA 41 (46) ACCA 19 (21) ACIB 5 (5.6) None 24 (27) Experience (years) 1<5 9 (10.1)
5<15 71 (80) 15<25 8 (9)
25 1 (1.1) Source: Field study on Fraud (2015)
Headword Statistic Bias Standard error Lower Upper T Significant (two‑tailed) Weakness 18.4526 −2.29 3.9091 6.38748 21.637 2.424 0. Effectiveness 25.3179 −3.78 7.1555 0.89442 30.318 1.766 0. Efficiency 23.0542 −3.59 6.9500 2.88097 28.987 1.94 0. Duties 27.4317 −4.38 8.5370 1.64316 34.14 1.63 0. Fraud 25.1694 −3.44 6.6800 2.04939 29.953 1.777 0. Responsibility 28.4605 −5.21 10.488 2.44949 36.523 1.571 0. Review 34.0661 −6.93 14.013 0.44721 43.270 1.313 0. Awareness 21.1660 −2.80 4.9399 2.94957 22.456 2.113 0. Remuneration 12.8646 −1.88 3.8016 1.78885 18.005 3.476 0. Objectives 24.7285 −3.31 5.9665 2.07364 25.928 1.808 0. Fraud 29.3683 −4.66 9.0508 0 35.601 1.523 0. Capital 24.99 −3.56 6.5533 2.05240 29.580 1.79 0. Monitoring 25.3179 −3.43 6.4020 0.89442 27.933 1.766 0. Audit 22.4165 −3.34 6.9179 3.93700 28.621 1.995 0. Regulatory 20.8446 −2.71 4.8568 2.86787 23.543 2.145 0. Profitability 29.6900 −5.05 10.035 0.4472 37.064 1.506 0. Adequacy 24.6779 −3.36 6.1377 1.34164 25.195 1.812 0. Qualification 16.0156 −2.55 5.3761 1.2247 22.113 2.792 0. Technology 16.2941 −2.19 4.1899 5.47722 20.731 2.745 0. Performance 25.5734 −3.51 6.5138 0.44721 26.290 1.749 0. Source: Variables from the responses of respondents (significant issues in bold) Figure 1: The relationship between the loss variables Source: Loss variables adopted from Various NDIC Reports (2015)
4.2. Secondary Data Results
Variables Actloss Bprofit Qualification etrans Renumetn M2 Regulatory Wloss Mean 17.0125 24194.54 0.6765 16.4285 1270.714 23.8287 −1.631977 11. Median 12.5585 17278.25 0.6788 11.5000 1065.000 18.0807 −1.408451 10. Maxim 56.0479 62087.50 0.7180 48.0000 2970.000 56.1844 39.83740 26. Minim 6.8146 −2510.000 0.6430 0.0000 310.0000 9.1030 −71.42857 2. Standard deviated 13.3982 21457.20 0.0214 15.673 886.9955 14.014 24.04698 7. Skewss 1.9775 0.7717 0.1100 0.6322 0.7684 0.9707 −1.477130 0. Kurtosis 6.2288 2.2647 2.3603 2.1422 2.2903 3.0603 6.668244 2. J Bera 15.2064 1.7050 0.2669 1.3620 1.6717 2.2007 12.94047 1. P 0.0004 0.4263 0.8750 0.5061 0.4334 0.3327 0.001549 0. Sum 238.175 338,723.5 9.4711 230.00 17,790.00 333.6027 −22.84768 160. SS deviation 2333.654 5.99E+09 0.0059 3193.429 10,2278 2553.100 7517.341 657. Observation 14 14 14 14 14 14 14 14 Source: Outputs of the variables, SS: Sum of squares
Model R R^2 Adjusted R^2 SE estimate F stat Sig. 1 0.836a^ 0.698 0.680 0.22100 38.449 0.000a Model 1 predictors: (Constant), Constant changes effective internal control separation of duties monitoring staff qualification. aP=0.05. SE: Standard error
Model Unstandardized coefficients Standardized coefficients t Significant Β SE Beta Β SE 1 (Constant) 0.468 0.313 1.494 0. Constant changes 0.421 0.078 0.384 5.400 0.000*** Effective internal control 0.092 0.039 0.154 2.344 0.021** Separation of duties 0.168 0.037 0.297 4.567 0.000*** Monitoring 0.140 0.042 0.238 3.331 0.001*** Staff qualification 0.066 0.027 0.176 2.419 0.018** Source: Regression outputs of respondents responses, ,*P=0.
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Variables Wloss Wloss Actloss Actloss Incrloss Incrloss Constant 298.1691 747.2342 707.7916 896.1152 −409.6225 −150. (1.4341) (4.0048) (1.8724) (2.2446) (−1.1299) (−0.3356) Bprofit −7.92E- 05 2.54E- 05 −0.0002 7.71E- 05 0.0001 9.85E- 06 (−0.6575) (0.1745) (−1.2181) (0.1940) (0.8930) (0.0276) Qualification −428.28 −1136.044 −1073.922 −1385.185 645.6405 248. (−1.3457) (−3.940)*** (−1.8559)* (4.8816)*** (1.1634) (0.3596) etrans 1.7191 2.3887 2.4701 3.0291 −0.7510 −0. (3.4068)*** (8.3659)*** (2.6923)** (4.881)*** (−0.853) (−0.868) Remuneration −0.0227 −0.0153 −0.0159 −0.0141 −0.0068 −0. (−2.4684)** (−2.5892)** (−0.950) (−1.1189) (−0.4242) (−0.0792) M2 0.2322 0.5232 0.9058 0.9998 −0.6735 −0. (1.7874) (5.1903)*** (3.833)*** (4.7399)*** (−2.97)*** (−2.023)** Regulatory −0.0704 −0.3554 −0.1696 −0.5218 0.0992 0. (−0.8263) (−2.3492)** (−1.0951) (−1.3719) (0.6680) (0.3227) Ar (1) - −0.7351 - −0.7998 - −0.
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