The Effect of Internal Audit Practices on Fraud Prevention in Sterling Bank Plc, Kogi State
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Background of the Study
Internal auditing is an essential part of corporate governance and risk management in organizations. It involves an independent, objective assessment of the effectiveness of a company's internal controls, risk management processes, and compliance with policies and regulations (Makanjuola & Lawal, 2023). In the banking sector, internal audits are crucial in detecting and preventing fraud, which is a significant concern for financial institutions, especially in developing economies like Nigeria. Sterling Bank Plc, one of Nigeria's commercial banks, operates in Kogi State and faces similar challenges related to fraud, which can have serious financial and reputational consequences.
The increasing prevalence of financial fraud in Nigerian banks has underscored the importance of internal audit practices in identifying and mitigating potential fraudulent activities (Ayodeji & Alabi, 2024). Internal audit departments are tasked with evaluating and improving the effectiveness of the bank’s internal controls, including those related to financial reporting, asset protection, and compliance with regulations. In a state like Kogi, where banking activities are essential to local economic development, the ability of Sterling Bank to prevent fraud through effective internal audit practices is critical to maintaining stakeholder confidence and financial stability.
Despite the recognition of the importance of internal audits in fraud prevention, there is limited research on the specific impact of internal audit practices on fraud prevention in Nigerian banks, particularly in Kogi State. This study aims to investigate the relationship between internal audit practices and the prevention of fraud in Sterling Bank Plc, with the goal of providing recommendations for improving the effectiveness of internal audit functions in the Nigerian banking sector.
Statement of the Problem
Fraud remains a significant challenge for banks in Nigeria, including Sterling Bank Plc in Kogi State. While internal audit functions are designed to identify, prevent, and address fraud, concerns persist regarding the adequacy and effectiveness of these practices. Inadequate internal control systems, insufficient audit coverage, and lack of proper audit follow-up mechanisms have been identified as factors contributing to the failure of internal audits to prevent fraud (Adewale & Balogun, 2023). Although Sterling Bank has established internal audit systems, the extent to which these practices effectively mitigate fraud in the bank’s operations in Kogi State is not well understood.
This study seeks to explore how internal audit practices in Sterling Bank Plc impact the prevention of fraud, with the aim of identifying any gaps in the current audit framework and offering recommendations for improvement. The problem of fraud prevention in Nigerian banks is critical, especially as the banking sector continues to grow and expand in regions like Kogi State.
Objectives of the Study
1. To assess the effectiveness of internal audit practices in preventing fraud in Sterling Bank Plc, Kogi State.
2. To examine the relationship between internal audit practices and fraud detection in Sterling Bank Plc, Kogi State.
3. To identify the challenges faced by Sterling Bank Plc in implementing effective internal audit practices for fraud prevention in Kogi State.
Research Questions
1. How effective are internal audit practices in preventing fraud in Sterling Bank Plc, Kogi State?
2. What is the relationship between internal audit practices and fraud detection in Sterling Bank Plc, Kogi State?
3. What challenges does Sterling Bank Plc face in implementing effective internal audit practices for fraud prevention in Kogi State?
Research Hypotheses
1. Internal audit practices have a significant effect on preventing fraud in Sterling Bank Plc, Kogi State.
2. There is a significant relationship between internal audit practices and fraud detection in Sterling Bank Plc, Kogi State.
3. Sterling Bank Plc faces significant challenges in implementing effective internal audit practices for fraud prevention in Kogi State.
Scope and Limitations of the Study
The study will focus on the internal audit practices of Sterling Bank Plc in Kogi State, specifically examining how these practices contribute to fraud prevention. Limitations include the potential lack of access to sensitive internal audit reports and data, as well as the challenge of generalizing findings from one bank to the broader banking sector.
Definitions of Terms
• Internal Audit Practices: The processes and activities carried out by internal auditors to assess the effectiveness of an organization's internal controls and risk management.
• Fraud Prevention: Measures taken by an organization to detect, prevent, and address fraudulent activities.
• Internal Controls: Procedures and policies implemented by an organization to safeguard its assets and ensure the accuracy of financial reporting.
• Fraud Detection: The process of identifying fraudulent activities within an organization.
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