Analysis of Cash Internal Control Weaknesses in Perpetuating Fraud in Commercial Banks in Buea
No of Pages: 63
Project Code: ACC11
References: Yes
Cost: 5,000XAF Cameroonian
: $15 for International students
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The
issue of fraud in the Banking Industry in Cameroon in particular and the world
in general is receiving more attention now than ever before. This is due to its
effects in eroding customer's confidence.
Also,
it is because of the frequency and the amount involved which have a serious
impact on the profitability of banks in question. Indeed, fraud which has been
a feature of Cameroon society today is endemic to the business system in
general.
Commercial
banks being part of the financial system which is the fulcrum on which any
economy revolves need to be given adequate attention in terms of identifying
and curbing fraud. The trend of commercial bank fraud started on a small scale
and has since increased in geometric progression.
Generally,
fraud is practiced in every organization in the country coupled with a lot of
bribery and corruption but however, there is nowhere in the national order
where these socio-economic symptoms are more pronounced and all-pervading than
in the banking sector, a sector that was initially considered as the palladium
of the “new lease of life".
This
hydra-headed phenomenon -fraud, is of infinite variety and the definitions are
as well many. According to the Oxford English Dictionary, Fraud is criminal
deception; the using of false representation to obtain an unjust advantage or
to injure the rights and interests of another.
From
legal perspective, Fraud is defined as “an intentional perversion of truth for
the purpose of inducing another in reliance upon it to part with some valuable
thing belonging to him or to surrender a legal right.
There
must be deceit or deception directed to the detriment of another; A false
representation has been made knowingly without belief in its truth or
recklessly careless whether it is true or false.
It has to be noted that a fraudulent act without damage or damage without a fraudulent act is not actionable. But fraud is actionable if it leads to any form of damage, which entails one gaining at the expense of another.
Given the above scenario, it is the desire of the Government, regulatory authorities, stakeholders, management, and other operators in the economy to see that fraud is checked if not totally curbed from the banking system.
It
can be seen that, a well designed, meticulously installed and resolutely
operated management control system (or internal control system) will inevitably
check, if not eliminate the occurrence of fraud from our commercial banking
system.
According
to the Auditing Standards and Guidelines, internal control system is the whole
system of controls, financial and otherwise, established by the management in
order to carry on the business of the enterprise in an orderly and efficient
manner, ensure adherence to management policies, safeguard the assets and
secure as far as possible, the completeness and accuracy of the records.
The
individual components of an internal control system are known as 'controls' or
'internal controls'. These controls include; establishment of dual systems,
limit of authority and monitoring activities in certain areas among others.
However
there are several weaknesses of the internal control system which include;
inefficient entering of payroll time data, division of payroll processes, and
lack of payroll preview and lack of systematic internal audits. The continued
existence of commercial banks rests delicately on the maintenance of public
confidence.
This
calls for the establishment of an effective system of internal control, which
among other things, will help to ensure that the organization’s accounting
activities are in accordance with the laid down procedures, standards and
statutory requirements.
In
conclusion, therefore, fraud as a common phenomenon in our commercial banking
system has perpetrated an agonizing influence resulting in bad faith, loss of
confidence and trust in our commercial banks by customers. It should be noted
that banks as custodians of public/people's funds should be built on trust and
not on fraud.
1.2 Statement of the
Problem
There
are many statutory laws dealing with frauds and financial malpractices in
banks. It is within the limits of these statutory laws and other policy
measures that banks have operated, and frauds ought to be checked, or curbed
from the banking system.
But
the big question that arises is, "how effective and to what extent have
these myriad of legislation, of other prevention and detection measures gone in
checking the incidence of fraud in commercial banks?" In this regard, various
views have been expressed by different interest groups and individuals.
These
include lack of will power on the part of the Government to effectively
implement the various laws and policy measures, poor supervision by the
regulatory Authorities occasioned by ill-equipped and inadequate man power
resulting in prolonged process of litigation;
none
complacent attitude on the part of the police and other law enforcement
agencies to undertake quick, in-depth and adequate investigation due to lack of
motivation, equipment and to some degree, expertise.
The
afore mentioned could be seen as control weaknesses and it can be seen that due
to these weaknesses, the above stated statutory laws and policy measures cannot
be said to have absolutely eliminated frauds in the commercial banks in Buea.
Fraud
therefore is obviously not good for any commercial bank. It has several causes
but this study intends to show how weaknesses in the cash and payroll internal
control system can perpetuate fraud in these commercial banks
1.3 Research Questions
- What are the internal control weaknesses in cash management in commercial banks in Buea
- What How do such weaknesses perpetuate bank fraud
1.4 Objectives of the
Study
- The main objective of this study is to analyze how internal control weaknesses can perpetuate fraud in commercial banks in Buea.
The
specific objectives are;
- To analyze internal control weaknesses in cash management
- To examine how such weaknesses perpetuate fraud
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