ABSTRACT
In this paper we review the conventional analyses of management control systems, to conclude, first, that the “illusion of control” can mislead managers into believing that everything can be controlled and monitored, and, second, that no incentive system based only on extrinsic rewards can motivate dividuals properly. Then, we investigate the philosophical foundations of the basic assumptions that, implicitly or explicitly, are made about the nature of the acting person. Based on personalist phenomenology, we show how the development of technical and moral values is crucial to the long-run survival of organizations. We end by offering guidelines as to what control system should be like in order to be compatible with the nature of human persons.
CHAPTER ONE
INTRODUCTION
1.1 OVERVIEW OF STUDY
Banks are the major mobilizers of savings in any economic systems, by offering savings facilities to the public.
Statutorily, these banks are obliged to accepting deposits from the depositing public and channel such deposits to the deficit sectors of the economy who are in dire need of investible funds.
These two related and dependent function, bring the banks face to face with the investing public who call to obtain banking services.
This implies that banks attend to a large number of customers who they may not, most of the time personally know or whose identity the banks may not immediately know;
This shows that banks will be unable to have an immediate identity of these customers all of who either have honest or fraudulent intentions.
The word fraud is described literarily as a social menace, perpetuated by a person or group of persons with a view to altering the truth or fact, for selfish personal gains. It could also involve the application of deceit and trick.
Therefore, with the inception of the first three successful banks in Nigeria, namely: the National Bank of Nigeria (established in 1933), the Agbonmade Bank (1946) and the African Continental Bank Nig. Ltd., (1946) and others subsequently established, frauds have remained a permanent feature in our banking system.
During the period 1892-1952, there was no legislations to control the activities of banks, this resulted in registration of numerous “quasi’ banks, while others simply collected customers’ deposits and subsequently varnished.
This ugly practice had the effect of depriving the economy of valuable funds needed for meaningful development and individuals of their hard earned funds.
This further led to loss of trust and faith in banking industry and the resultant poor banking habit amongst the banking public.
However, with the introduction of modern banking procedures, coupled with the various regulatory measures taken by banks, against fraud in banks, the incidence and style of frauds has surprisingly assumed an alarming proportion.
Olalelye Amupitan (1981) for instance noted that it was discovered during investigation that bankers now take extra precaution before clearing any cheque because of rampant incidences of fraud and forgery which a bank executive placed on the average of One Million Naira per working day of the year in Nigeria.
Similarly, Ashimi Kola (1984) noted that fraud has become so sophisticated as to make a forged instrument look genuine enough for the owner to confirm it was h is own signature.
Unfortunately too, the banks’ internal control system are only fairly effective. In case where they try to obey the internal control procedures, they waste so much of the customer’s time, such that one couldn’t help wondering whether the bank staff are not sabotaging the internal control procedures.
1.2 STATEMENT OF PROBLEMS
Frauds have led to tremendous loss of huge sums of money or assets from innocuous or unsuspecting investing customers; in the economy of the country and in the banking industry in particular.
A good number of banks’ customers have been denied access to the bonafide ownership of their money: assets land properties resulting from successfully executed fraudulent practice on their accounts.
Besides, the banks customers suffer when security measures are tightened within the banks as a safeguard against fraud, with a net effect of delaying the customers turn – around time.
Moreover, give the essential role played by banks in the economic development of any nation; bank fraud goes a long way in depleting the funds required for sound economic activities.
Some financial analysts have even suggested fraud as contributing significant to the financial distress of some banks and the poor performance of certain banks.
Besides, fraud queries the integrity if the management and staff of the concerned banks, which in turn translate to loss of confidence in our banking system and its operators.
1.3 RESEARCH QUESTIONS
This study poses the following research questions:
(a) Could effective internal control system aid in minimizing the incidence of fraud?
(b) Do banks with effective internal system have less incidences of fraud, than those with less effective internal control system?
(c) Do employees in Merchant Banks adhere more strictly to laid-down rules than their counterparts in the commercial Banks?
(d) Do banks with defective internal control systems have other effective ways of combating fraud?
1.4 OBJECTIVE OF THE STUDY
This study is aimed at achieving certain objectives, which will indicate. Another milestone in the efforts to stop, control or minimize banks fraud.
Some of the objectives of the study are as follows:
(a) To discover the types; native causes and technique of banks fraud.
(b) To identify reasons why people engage in banks’ fraud.
(c) To examine the banks’ detection, control and preventive measure against fraud.
(d) To identify the incidence of fraud.
(e) To determine whether banks have adopted the right approach of controlling fraudulent practices.
(f) To discuss why bank fraud persists despite all control measures adopted. (g) To suggest the introduction of effective Internal Control System to help
in reducing the incidence of fraud.
1.5 SIGNIFICANT OF STUDY
This work will be of immense importance and assistance to the top management and owner of banks in Nigeria and other developing countries since it will contribute significantly towards the detection and prevention of banks’ fraud.
Similarly, the Nigerian Banking system, most especially Zenith International Bank Limited, would benefit from this work by employing the various suggestions and recommendations highlighted in the study, in piloting the affairs of the banks.
If this is done, certainly, banks will be operating more profitably as fraud would have been reduced to its barest minimum, if not totally eliminated.
Besides, the study will have effect of boosting the interest of depositors as well as enhancing a healthy banking culture amongst depositors.
This is because knowledge of fraud and fraudulent practice in banks dampens the spirit of the customers and makes them feel unsafe at keeping their deposits in the banks.
Finally, the three levels of government would also find this work relevant. This is because of the recent Federal government concern and commitment towards sanitizing our financial system.
1.6 DEFINITION OF TERMS
The under mentioned terms that constitute the core pivot of this study are defined as follows:
(a) BANKS’ FRAUD:- The dictionary of banking defines fraud to mean an act, or course of deception directed to the detriment of another.
It is said to be a conscious or premeditated action of a person or group of persons with the intention of altering the truth and or fact, for selfish monetary gains.
(b) CONTROL:- This is defined to consist of all conscious and unconscious measure employed by a business for the purpose of safeguarding it’s resources against fraud, waste and inefficiency. Control could further be said to be all measure established by management of an organization in it’s bid to carry on it’s business in an orderly and efficient manner, ensure adherence to management policies; safeguard it’s assets and secure as far as possible the completeness and accuracy of its records. Control comprises the plan of an organization, established by the management of an enterprise to achieve management’s objectives and enhance the reliability of it’s accounting records.
1.7 LIMITATIONS AND SCOPE OF STUDY
A major that grossly inhibited this study is the rate of response by the prospective respondents. A number of reasons may have given rise to this.
Firstly, the skeptical attitude of most respondents made the response rate to be low. Some respondents envisaged that the completion of questionnaire on the subject matter would evoke suspicion by their employers.
Besides, the traditional philosophy of society of banks is a major mitigant. A lot of data and information wouldn’t be made available for this researcher’s consumption because of the preservation of the secrets of banks and the need to protect the banks’ public image.
Often times, they argued that the public might lose confidence in them, should they learn that fraudulent act occur in their banks.
Besides, no bank enjoys its competitors having knowledge of how much it loses annually to fraud.
This material content is developed to serve as a GUIDE for students to conduct academic research
THE ETHICS OF MANAGEMENT CONTROL SYSTEMS IN THE BANKING INDUSTRY (CASE STUDY OF ZENITH BANK PLC)
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