INTERNAL AUDITING TECHNIQUES AND FRAUD

MANAGEMENT OF QUOTED INSURANCE COMPANIES IN

NIGERIA

BY

MODEBELU VICTOR SOMTO

U2014/0606096

DEPARTMENT OF ACCOUNTING

FACULTY OF MANAGEMENT SCIENCES

UNIIVERSITY OF PORT HARCOURT

SUPERVISOR: DR. C.C. EBERE

SEPTEMBER, 2018

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 INTERNAL AUDITING TECHNIQUES AND FRAUD

MANAGEMENT OF QUOTED INSURANCE COMPANIES IN

NIGERIA

BY

MODEBELU VICTOR SOMTO

U2014/0606096

BEING A B.Sc. PROJECT SUBMITTED TO THE

DEPARTMENT OF ACCOUNTING, FACULTY OF MANAGEMENT SCIENCE

UNIIVERSITY OF PORT HARCOURT

IN PARTIAL FULFILMENT OF THE REQUIREMENT OF THE AWARD OF

BACHELORS DEGREE IN ACCOUNTING

SUPERVISOR: DR. C.C. EBERE

SEPTEMBER, 2018

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 CERTIFICATION

UNIVERSITY OF PORTHARCOURT

FACULTY OF MANAGEMENT SCIENCE

DEPARTMENT OF ACCOUNTING

INTERNAL AUDITING TECHNIQUES AND FRAUD MANAGEMENT OF

QUOTED INSURANCE COMPANIES IN NIGERIA

BY

MODEBELU VICTOR SOMTO

U2014/0606096

The board examiner certifies as follows

That to the best of my knowledge, this is the original work of the candidate

DR. C.C EBERE

Supervisor Signature Date

DR. U.I IRONKWE

Head of Department Signature Date

PROF. B.F NWINEE

DEAN, Faculty of Signature Date

Management sciences.

EXTERNAL EXAMINER Signature Date

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 DECLARATION

I hereby declare that this project titled: INTERNAL AUDITING TECHNIQUES AND

FRAUD MANAGEMENT IN QUOTED INSURANCE COMPANIES IN NIGERIA was

carried out by me under the supervision of DR. C.C EBERE. that this work is done in partial

fulfilment for the award of (B.Sc.) Degree in the department of accounting, management science,

University of port Harcourt, Choba, Rivers State, Nigeria.

MODEBELU VICTOR SOMTO

U2014/0606096 SIGNATURE/DATE

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 DEDICATION

This work is dedicated to God Almighty for his inspiration, knowledge, protection, grace and

unmerited favours throughout this academic programme.

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 ACKNOWLEDGEMENT

I give thanks to God Almighty for his grace and providence without which I wouldn’t have made

it this far.

My sincere thanks appreciation goes to my Supervisor Dr. C.C Ebere for his advice supervision

and constructive criticism. I am also thankful to lecturers in the department of accounting for the

undiluted knowledge impacted on me positively.

My heart felt appreciation extends to my lovely parent Mr. and Mrs. MODEBELU for their

financial and moral support, throughout the academic programme.

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 Abstract
The discourse objective of the study was to evaluate the relationship between internal audit techniques
and fraud management in quoted insurance companies in Rivers State in Nigeria. This study adopted a
descriptive survey that aimed at analyzing how internal audit techniques relate with fraud management in
quoted insurance companies. The population consist of Twenty (20) companies listed at the Nigeria Stock
Exchange (NSE) as at June 2018. A simple random sampling method was used to pick a sample of 5
insurance companies listed at NSE. The objective of the study is to examine the relationship between
internal audit techniques and fraud management in quoted insurance companies in Rivers State listed at
the Nigerian Stock Exchange. Primary data and secondary data was used. Questionnaires was issued to
70 respondents on their opinion on internal audit techniques and fraud management, a total of 1050
questions were answered concerning quality of audit work, size of the internal audit, qualification of the
internal audit, fraud prevention and fraud investigation. Data was sorted, cleaned and coded then
entered into statistical package for social science (SPSS). Data analysis was done using Pearson moment
correlation since the nature of the data was quantitative. Based on the analysis results, it was found that
the r-squared for the model was < than significance of 0.05 hence the null hypothesis was rejected. It was
also empirically verified that the size of internal audit, qualification of internal audit and quality of audit
work have strong positive significant relationship with fraud prevention and investigation in Insurance
Firms. The researchers recommended that firms should establish fraud policy and have a fraud
governance structure in place that assigns responsibilities for fraud investigations and they should
incorporate appropriate controls and skills to prevent, detect, and investigate fraud. This in turn will
increase investors’ confidence in Nigerian Stock Exchange (NSE).

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 TABLE OF CONTENT

Cover page - - - - - - - - - - - - - - - - - - - - - - - - - --- i

Certification - - - - - - - - - - - - - - - - - - - - - - - - - - - ii

Declaration - - - - - - - - - - - - - - - - - - - - - - - - - - - iii

Dedication - - - - - - - - - - - - - - - - - - - - - - - - - - - - iv

Acknowledgement - - - - - - - - - - - - - - - - - - - - - - - -- v

Abstract- - - - - - - - - - - - - - - - - - - - - - - - - - - - - vi

Table of content - - - - - - - - - - - - - - - - - - - - - - - - - - vii

CHAPTER ONE: INTRODUCTION

1.1 Background of the study - - - - - - - - - - - - - - - - - - - - ---- 1

1.2 Statement of the Research problem- - - - - - - - - - - - - - - - - - - - -5

1.3 Aims and Objectives of the study- - - - - - - - - - - - - - - - - ---- 7

1.4 Research Questions- - - - - - - - - - - - - - - - - - - - - -- ----8

1.5 Research Hypothesis - - - - - - - - - - - - - - - - - - - - - ---- 8

1.6 Significance of the study - - - - - - - - - - - - - - - - - - -- - - --9

1.7 Scope of the study- - - - - - - - - - - - - - - - - - - - -- - - - - - 10

1.8 Limitation of the study - - - - - - - - - - - - - - - - - - - - ---- 10

1.9 Definition of terms - - - - - - - - - - - - - - - - - - - - - - - - - - - 11

1.10 Organization of the study - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 13

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CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Theoretical Literature Review - - - - - - - - - - - - - - - - - - - - - - - 14

2.1.1 Fraud triangle theory- - - - - - - - - - - - - - - - - - - - - - - - 14

2.1.2 Fraud scale theory- - - - - - - - - - - - - - - - - - - - - - - - - - 14

2.1.3 Agency theory - - - - - - - - - - - - - - - - - - - ---- -- - - -15

2.1.4 Stewardship theory - - - - - - - - - - - - - - - - - - - - - - - - - 16

2.2 Conceptual Literature Review - - - - - - - - - - - - - - - - - - - 17

2.2.1 The concept of internal auditing - - - - - - - - - - - - -- --- - - - - 17

2.2.2 Internal auditing function - - - - - - - - - - - - - - - - - - - - - 18

2.2.3 Internal audit effectiveness - - - - - - - - - - - - - - - -- - - - - - 20

2.2.4 The scope of internal audit work- - - - - - - - - - - - - - -- - - - - 21

2.2.5 Internal audit performance - - - - - - - - - - - - - - - - - - - - 23

2.2.6 Internal audit as a control mechanism - - - - - - - - - - - - - - - - 25

2.2.7 Internal audit as internal governance mechanism - - - - - - - - - - - - - 26

2.2.8 The independence of internal audit departments - - - - - - - - - - -- - - - 27

2.2.9 Competence of internal auditors - - - - - - - - - - - - - - - - - - - 29

2.2.10 Dimensions of internal audit - - - - - - - - - - - - - - - - - - -

30

2.2.10.1 Quality of audit work - - - - - - - - - - - - - - - - - - - - - - 30

2.2.10.2 Internal audit size - - - - - - - - - - - - - - - - - - - - - - - - 31

2.2.10.3 Internal audit qualification - - - - - - - - - - - - - - - - - - - - 33

2.2.11 Concept of fraud - - - - - - - - - - - - - - - - - - - - - - - - 34

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2.2.12 Forms of fraud - - - - - - - - - - - - - - - - - - - - - - - - - 35

2.2.13 Financial crimes - - - - - - - - - - - - - - - - - - - - - - - - - 36

2.2.14 Fraud management- - - - - - - - - - - - - - - - - - - - - - - - 37

2.2.15 Measures of fraud management - - - - - - - - - - - - - - - - - - - - - - 39

2.2.15.1 Fraud prevention - - - - - - - - - - - - - - - - - - -- -- - - - 39

2.2.15.2 Fraud investigation - - - - - - - - - - - - - - - - - - - - - - - 41

2.2.16 Relationship between internal audit and fraud management - - - - - - - - -- - 44

2.3 Empirical Review - - - - - - - - - - - - - - - - - - - - - - - - - 47

CHAPTER THREE: METHODOLOGY

3.0 Introduction - - - - - - - - - - - - - - - - - - - - - - - - - - - - 50

3.1 Research design - - - - - - - - - - - - - - - - - - - - - - - - - - - 51

3.2 Population of the Study - - - - - - - - - - - - - - - - - - - - - - - - 51

3.3 Sampling technique- - - - - - - - - - - - - - - - - - - - - - - - - 52

3.4 Sample size determination - - - - - - - - - - - - - - - - - - - - - - 52

3.5 Methods of data collection - - - - - - - - - - - - - - - - - - - - - 53

3.6 Instrument for data collection - - - - - - - - - - - - - - - - - - - - - - 54

3.7 Validation of the instrument - - - - - - - - - - - - - - - - - - - - - - - 54

3.8 Reliability of the instrument - - - - - - - - - - - - - - - - - - - - - - 54

3.9 Operational measurement of variables - - - - - - - - - - - - - - - - - - - 55

3.10 Data analysis technique - - - - - - - - - - - - - - - - - - - -- - - - - - 55

CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION

4.1 Introduction - - - - - - - - - - - - - - - - - - - - - - - - - - - - 57

4.2 Data presentation - - - - - - - - - - - - - - - - - - - - - - - - - - 58

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4.3 Data analysis - - - - - - - - - - - - - - - - - - - - - - - - - - - 62

4.4 Test of hypothesis - - - - - - - - - - - - - - - - - - - - - - - - - 64

4.5 Discussion of findings - - - - - - - - - - - - - - - - - - - - - - - - 73

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.0 Introduction - - - - - - - - - - - - - - - - - - - - - - - - - - - - 76

5.1 Summary of findings - - - - - - - - - - - - - - - - - - - - - - - - 76

5.2 Conclusion- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 77

5.3 Recommendations - - - - - - - - - - - - - - - - - - - - - - - - - 78

5.4 Suggestion for further studies - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 78

REFERENCES - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 79

APPENDIX - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 82

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