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.
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 SIGNIFICANCE 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.