THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT   This research work is design to  achieve a specific purpose on the role played by Auditors in protection of public funds in the government owned establishments, ministries or government  parastatals. THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT

The research goes into providing a systematic financial accountability that will promote proper stewardship of asset, deter wastes, dishonesty and promote effeteness of reasonable cost.


THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT the literature review helps to ascertain other writes view concerning the subject of the study which explains how government owned establishment is so organized in such a way that fraud could be detected easily and on time just because particular audits are assigned to particular personnel. The data used for this work was collected from primary and  secondary  source. Questionnaire were also used (200 in number) 120 were retained on filled while 20 missed on transit and  total used was  60 in number. Against the background, invaluable and reliable discoverers were made.

Finally the research recommends that  the legislative are of government should make it mandatory  for the accountant general  to submit financial statement of government account to audit department for  audit work within 6(six month of auditors to be given  power to execute or enforce its finding after its work has been review by the public account committee (P.Ac).





THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT       For a long time now Nigeria have been witnessing a down turn in her development efforts. This primary cause of this down has been linked with the in or deinate ambition of the average Nigeria to get rich quick at the  expense of less piviltedge ones. Those who a seen them selves as being opportunity  to control government owned establishment use the opportunity to perpetrate fraud or  misappropriate public funds and properties. However, the auditor should recognize the possibilities of material, misstatement or irregularities or fraud, and see that errors which could distort the trueness and fairness of the financial account are not committed.  Therefore, a statutory auditor is said to be a watch dog and not a blood hound.




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Our law makers have seen the need for acceptable accountability by making a provision for the federal and stated government to report on the account of stewardship rendered by these public officers.

Section 126 (1) the constitution of the federal republic of Nigeria 199. States that there shall be an audit general for each state who shall be appointed in accordance with the provision of section 126 of the constitution”.

Section (2) says that the public account of a state and of all offices and courts of the state shall be audited by the auditor general for the state”.

This study focused attention how well or otherwise the government audit department conduct it activities in response to section 125 of 1999 constitution of the federal republic of Nigeria.


Public embezzlement always create a consciousness on the part of the supervisory authorities as to the quality and digree of protective management in government

  1. Lack of understanding of the purpose of auditing among the society in general.
  2. Lack of a well defined goal oriented policies aimed at building up a strong and sound financial system.
  3. Inherent weakness in the existing. Administrative arrangement for government owned establishment accounting function.
  4. Improper supervision of over all officers under the authority entrusted with the receipts expenditure of public money.

Inability of the government owned establishment maintain a sound system of internal control.



In regards to this study, is set forth to present fresh insight into the nature and role of a statutory auditor in controlling  fraud in government owned establishment with a view to enabling the public appreciate the various limitations and weaknesses, inherit their effort in fraud detection and control in government owned establishments

  1. To find out roles played by the audit department in protection of public funds.
  2. To provide a system of financial accountability which will promote proper stewardship of assets deter wastes dishonesty and extravagancy and promote effectiveness at reasonable costs.
  3. To ensure efficient financial administration through system of internal control  and management information.
  4. To determine the extent to which fraud misapporiation and embezzlement of public funds have persisted in public services.
  5. To find out the delays in carrying out audit of account of government establishment.

The significance of this study is that, it will teach the inherent disabilities and limitation of auditing in government owned establishment.It is expected that  the result of this study will help improve financial reporting by government  owned establishment providing annual reports in accordance with the requirement of audit acts, 1990.

The significant of the study to society in general is to correct the wrong notion of the society in general  is to correct the wrong notion of the wealth of government  which contrary to realty is usually. Regarded in position could cut his own share at will and  get away with it.

To the government is ensuing the standard that down in the ministry manual of responsibilities and procedure are maintained.

To the auditor to pin point to them  the risk that confronts the auditors in the excretes of his duties the legal action that could be taken against the auditor she/he deficit in this  duty.

The study sure as a quite for  future quern mental  policy formulation on auditing guideline to government  owned establishment .

Finally, it is expected that this study will serve as a work of reference to future researchers.

  1. Time constraints: The researcher as a student also engaged in other activities which limited the time.

Used for the project the research was deeply affected by the shortness of time as a result of the short semester being ran by the  school. The semester coupled with dash of programme of the school and there is no special time given for proper investigation are the constraints which left the researcher with little or no time to carry out this project.

  1. SCOPE: Due to the vastness of the areas to be covered by the researcher, the researcher found it way difficult she could not obtain information from each of theses areas. For instance there are many firms dealing with auditing and investigation and for the fact that it is very difficult for one to gather information or data from each of these firm one being a student was compelled to unit his study to federal pay office (add your state  after office)

Facts were not easy to come about during the course of this project work. Even where the facts are available they were either out dated or the authorities concerned refused to bring it out or are subject necessary protocols. At the expense of my limited time before they were male available.


The researcher lacked the necessary finance to carryout extensive research on this topic .


Inadequate responses such as some ministries when interviewed defined responses and unable to help due to internal problem like staff of local government audit department of  ( ADD YOUR STATE HERE).


The bureaucracy in government establishment has made it very difficult for researcher to obtain research information.

  1. SECREY:

Most Nigeria dislike activities that appear to be probing them, they tend to avoid researchers because they gelt their activities which are not meant for public consumption would be exposed through research work.,



The following research question were formulated by the researcher for the conduct of this project.

  1. What aspect of the accounts government policies  hinders effective and efficient  auditing  of account of government owned establishment
  2. How can government establishment supervise the expenditure of government taking care that no payment were made which is not covered by proper authority.
  3. To what extent do fraud effect economic development of the country.
  4. What measures showed be taken to ensure that objective of auditing are achieved in government owned establishment.



H o: The audit does not play effective and efficient role in the control of fraud in government owned establishment .

Hi: The auditor play effective and efficient role in the control poof fraud in government owned establishment.





The study is a case study of federal pay office pay officer Enugu between 1990 2003.

In this study the researcher only considered the ministerial accounting structure or accounting structure of selected government establishment on parastatals in the state,  because of the following limitation.








THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT    In the early 1970’s the government was concerned with accounting for and disbursement and collecting taxes, those concerns were establishing controls, including audit to reduce errors and fraud on the part of dishonest officials.

The practice developed of asking directors to keep records and to prepare periodic statements of account to show to the entire body or members, and in addition, it become common for the stock holders to assume themselves that, the financial statements presented to them were revisable creditable and reflects the true position of things it was at this point and for the purpose that, the practice developed the appointment of auditors whose duty and financial statements of the director are report thereupon.

It has been stated that auditing is  an important professional task carrying heavy responsibility and calling for commensurate skill and judgement and whilst the comminute skill and justment has always been necessary for the conduct of an audit, the these words are particularly opposite today.

Historically the auditor had the accounts read to him since the term “ AUDIRE” originated from the Latin verb “AUDIT” to her. Audit operational standard defines audit as the independent  examination of and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and incompliant with any relevant statutory obligation.

Earlier bodies define an audit as an examination and investigation by an auditor into the evidence from which financial statement revenue account and balance sheet) of an organization have been prepared in order to ascertain the present true and fair view of the summarized transaction for the financial state of the establishment at the end of the accounting date, so enabling the auditor to report there on.

TERSELY define auditing is said to be an examination by an auditor of the eudence from which the final renue accounts and balance sheet of an organization have prepared in order to a certain the presentation of an true and fair view of the summarized transition of the organization at the end of a data.

There fore the auditor examine mainly the book of accounts and vouchers, but under certain circumstances may examine the actual assets held by the establishment from which certain figures have been arrived at. According to ICMA an audit is an investigation a search for evidence to enable an opinion to be formed as the  reliability of financial and other information by a person or person independent from the use of the information and the issue of a report that information with the intention of increasing its credibility and therefore its usefulness.

This word “Audit” derived from how the account of an estate. Domain etc were checked by having them called out by those  who had complied them to those in authority.

Nowadays audit is  a process carried out by qualified auditor) where by the accounts of entities including limited companies professional firms are subjected to scripting in such detail as will enable the auditor to form  an opinion as to their accuracy trust and fairness. This opinion is then embodies in an audit report addressed to those interested in an audit report addressed to those interested parties who commissioned the audit, or to whom the auditors are responsible under statute.

The main objective is to ensure that account reveal a true and fair view of the establishment and its transaction. This leads to greater emphasis being placed on ascertaining the reliability of the record from which the account are drawn up and also on verifying of the assets, liabilities  and the transition within the account. The reliability of the records is established by first ascertaining the system of internal control within the esblishment and then testing its operation. All this make the work of auditing more interesting but  at the same tracing and the occurring of the necessary knowledge and still commensurate with the task.

Government establishment can be defined as that sector of the economy established and operated  by the government  and organized on behalf  of the  whole citizen  through the democratic set up ideally, what services they want and how it should be provided.

The purpose of quaditing government owned establishment is to give euidencen of  accountability for the stewardship of government resources  it make available vital information for good control and prudent management of government activities Pandy (1989”110)



The exposure draft 1998 defined “ “fraud” ass irregularities involving  the use of criminal deception to obtain an  inputs or ill advantage.

  • Fraud can be classified into two categories fraud involving the manipulation  of the records and accountsually by the government’s  senior offices with  a view benefit  in some ways from the false picture which they covey (Example obtaining finance under false pretence or conceding a material worsening of the government the position)
  • Fraud: Usually by employees involving the theft, misappropriation or embezzlement of the government funds; usually in form of cash or of its other assets. Cash is the most readily susceptible target of fraud other areas of fraud includes:
  1. Inflation of payment voucher
  2. Inclusion of payment voucher
  • Swapping of superior assets with inferior types
  1. Printing of illegal receipts and local purchases orders and using such  to concert the company’s benefit
  2. Pilferage’s. The 1998 exposure draft on fraud introduce the notion of illegal acts in general by the government or its staffs, the auditor was only responsible for detecting these if they had a material effect on the financial  Naturally, if auditor do defect fraud even through they many not  affect the truth and fairness of the financial  statement it would be  prudent for them to discuss matters with management and perhaps seek legal advice.

The auditor is only responsible for fraud of material nature and that is up to management to try to present and defect occurrence through the implementation of an appropriate system of internal control..

Although the auditor may not accept detection of fraud as  of the audit. He will nevertheless plan and conduct the audit test in such a way as to limit the possibility that such fraud go undetected.

continuous For instance, the auditor will be aware that certain assets such as cash are more susceptible to fraud than other, and in conducting the audit of a concern, his planning will take account of this features.

For instance, the auditor will be aware that certain assets such as cash are more susceptible to fraud than other,  and in conducting the audit of a concern where cash is important such as a retailing concern where cash is important such as a retailing concern, his planning will take account of this feature.

Similarly, if the establishment is in financial difficulties the auditor should take particular care through his audit emphasis that the director do not attempt to paint a better picture of the establishment hat exist or in the extreme case, that it enters into certain irregular transaction as a means of taking money out f the ministry and defrauding creditor who will suffer loss should it go into liquidation (Anderson 1973 :16 ).

Although, auditor would always maintain that their prime function is not to detect fraud, All these factor have no doubt played their part but in the final judgement it would now be economically viable for the auditor to be responsible for the control of fraud and error.

It must be stressed that auditing would cease to exist a  discipline if the were not perceived to be satisfying some economic/ social need. Recent statement by government owned establishment would suggest that the auditor is seen to have an important role in the control of the investor from management fraud. It is perhaps illustrative that the exposure draft suggest that auditor should design his audit test in such away as to have a reasonable expectation of controlling material fraud.

In such cases as fraud is committed by responsible and trusted officers, an auditor must be particularly vigilant if he is to discover it as probably he will be given intentionally false information and explanation. He can therefore discover such fraud only by the exercise of considerable care and skill and by making exhaustive inquires and investigation  (fremgren James 1986 : 76 )


The practice of auditing in Nigeria is contained in the provisions of the Companies and Allied Matters Decree of 1990 (CAMA) under Section 357(1) that every company should at each annual general meeting appoint an auditor to audit the financial statement of the company and to hold office from the conclusion of that, until the next annual general meeting, a retiring auditor.

However, appointed shall be re-appointed without any resolution being passed, with the exception that is:

  • He is not qualified for re-appointment or
  • A resolution has been passed at the meeting appointing some other person instead of him or providing expressly that he shall not be re-appointed or
  • He has given the company notice in writing of his unwillingness to be re-appointed.

In accordance with the provision of section 358(1) unless the auditor is a member of a body of accountant in Nigeria established from time to time by an act or decrees.  While section 358(2) states that none of the following person shall be qualified for appointment as auditor of a company.

  • An officer or servant of the company
  • Professional adviser to a consultancy capacity in respect of secretarial financial management
  • A body corporate.


The auditor, in planning his audit programme us be guided by the particular circumstance of each individual case. It is impossible to lay – down any hand and fast riles, but the following general comments may serve as a guide.

  1. An auditor must not merely confirm himself ascertaining that the account or balance sheet which he certifies or on which he report are in accordance with the entries in the books, he must take reasonable steps to satisfy  himself that the entries in the book are  correct record of transaction.
  2. On the other hand. An auditor is not necessarily expected to verify every officers transaction he is entitled to rely on the system of internal check in force in the establishment. The object of which is to reduces to a minimum, the possibility of fraud or error in the accounts.
  3. An auditor cannot evade his own responsibility by relying on certificates from director or officials. He must by the exercise of his own professional skill, satisfy himself that there is no reason to doubt that such officials have properly discharged their own responsibilities.
  4. while an auditor cannot ascertain definitely that every traction which has occurred has been duly recorded, he is expected to take reasonable steps to enable him to from the opinion from his view of the book and document which come before him and by general injuries that such is the case owler (1984 : 164 )  THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT

The audit might be a thoroughly effective one without more than a small fraction of the vouchers being  examined or more than a small fraction of the positing clacked. The wood would include a careful review of the system of control. In order that the unnecessary checking of details might be avoided  and special inquires made in direction whether were most likely to occur. Certain classes of entries would be verified on block and not  individually evidence supplied by one department or official would be used to substantiate information of finished by another department or official  in detect for short period schedules of  assets and liabilities at a particular dove would be compared with those at pre union  dates. Expenses and receipt on revenue accounts analyzed under various heads. In reinforcement of what has already been said the following are extracts from a statement on the general principles of auditing issued by Nigeria;

Responsibility for the accord and financial control of  government establishment rest upon the directors. Their statutory duties include responsibility  for ensuring the maintenance of adequate record and the preparation of annual accounts showing the true and fair view required by the acts. They are responsible for safe guarding of assets and not  entitled to rely upon the auditor to protected them from any shout coming in carrying out their duties property the detailed checking by the auditors will be limited to appropriate tests which if suitable planned may extend to only a small proportion of the total transaction



Control has to be exercised one all aspects of government owned establishment. Method of control should be incorporated into all accounting  system without  them a system is likely to be ineffective and too costly to operate in relation to benefit received. (Scott 1990: 64) The need to install control method grow with the increase in size and complexity of the government ministries, accusation which  must arise is what aspect are to be controlled and how are these aspect to be broken down into lines of responsibility. Because of the different types of departments that exist and also the attitude of top management toward the control function no standard pattern can be laid down (accountant journal May/ June 99). THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT

Fraud can take place any time some where is the offices of most establishment but how long they will remain undetected depends largely on the internal check and the efficiency  of the audit.

Circumstances that allow fraud to be perpetrated

  • The absence of a well designed system of internal check/audit.
  • Under reliance placed by management upon the integrity of the staff.
  • Secretiveness and jealousy of staff concerning their duties awakens which unfortunately appears to increase with the size of the organization. Thus, the efficiency of internal audit depend upon the degree of independence under which it operates the audit of its search character and the operation that it engenders within other department. Its continuous nature excrises continuing moral effect upon the staff as it never knows when the internal audit staff will appear on the scene nor what portion of the derical work be chosen as a sample for audit examination. Arrears of account work disclosed by audit should never be allowed to remain lest they form a cloak for hiding defalcations.


It has been said that trends and various from standard represent the only time significance in figures. The study of variation of figures should be made by a person with sufficient continuous knowledge of detailed operations to be able to sense something wrong if they are not correctly reflected by the figures. To achieve this, it is essential that all person supervising operation should be finished with the accounting figures relating to the operation they supervise and that they should be though  how to interpret and use figures appreciating and enquiring into the significance of variations.

Accounts should be so drawn up as to reflect personal responsibilities and therefore accountability for operating results.


As fraud are committed by human being though human weakness, personal management plays auital role in controlling fraud. It should never be forgotten that fraud is personal. There is a belief that considerable temptation can be placed before trusted employees with risk, this is often before the courts were perpetrated by the old and trusted servant of the ministry and in several cases.


It is provided by section (3) cheque acts 989 that an unendorsed cheque which appers have been paid by the payee of the sum payable by the cheque. The auditor should therefore require the paid cheque to be filed in such away as to facilitate cross-reference. The auditor should provide that all cheque drawn are crossed “ not negotiable accounts payee only” so that the payee cannot negotiate them to third parties.

As soon as receipt or paid cheque is inspected the auditor should cancel it, preferably by the use of a rubber audit stamp, in order to present the same voucher being produced on a subsequent occasion. The auditor have to ascertain witness check as regards the examination and checking of invoices and statement for payment. The auditor should also ascertain the name of the person whose duty is to perform the work and to initiate the document as having been checked.




It is not most desirable that all receipt should be paid into bank daily and where the regulation is in force, the auditor should test the amount paid in as shown by the bank statement with the entries in the cash book. The auditor should test of representative number of entries with the counter fail paying in book and he should refer to this book particularly for the purpose of vouching moneys received and paid into the bank prior to the date of closing the account but not credited by the bank till the next period.


Where the bank statement has not already been agreed with he cash book it will be necessary for the auditor to check payment in details observe that all bank charge, dishonored bills, returned cheque etc. THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT

Have been properly recorded in the statement that omitted from the cash  book must be examined carefully and their nature ascertained particular attention being paid to the date of the entries. A reconciliation statement balance are agreed and this should be checked by the auditor (Byer J .C 1985 :87)

Accuracy in this direction can be most conveniently assured by comparing the date stamped on  the returned cheque with the date of the entry in the bank statement and this can be very giddy done where the number of the cheque are inserted both in the cash book and in the bank statement.


          According to the institute of internal auditor (I. I .A ) auditing is the independent appraised activity within an organization for the review of the accounting financial and other operation as a basis for protection and constructive services to management. It is a from of control which function by measuring and evaluating the effectiveness of other kinds of control. The independence of the internal auditor should not be compared with that of the independent accountant since he ( internal auditor ) receives authority from the management he should retail the same viewpoint and objectives of management, but at the same time should passed sufficient independence in order to make objective recommendation to management without bothering whose horse is gored.

Furthermore, the most effective way in which auditor could act to bring about control in business in by looking for constants management supervision and review, to be able to effect adequate control management he should review the government financial operation and addition to regular review call for special check of particular items. All these are carried out by the internal auditor with a principal accounting objective of assuring management of the efficient and effective design and operation of internal check within accounting systems.

Therefore, with auditor there, to constantly advice management loopholes are tied up and resources channeled towards growth of the establishment. The valuable assistance the auditor can render to management must be now apparent, assuring always that management is for sighted enough to make full use of this service and that he in turn is able to apply himself to his work in such a manner as to produce routine checking. The increasing size of establishment internal auditor can provide the essential connecting link lengthens, so does possibility of mis interpretation and  misjudgments which hinder the running of what would otherwise be on efficient and important aspect of the internal auditor work is facilitated by:

  1. Observation and investigation of the actual working of the system during the cores of his detailed audit.
  2. Comparing the shades of operation which come under his scripting when finally prepare that is not only checking the accuracy of statement but also making a critical and comparative appraisal of the budgeted figures and result obtained and comparing matter which influence various procedures but do not form part of budgeted estimate.
  3. The probing from time to time of the system of internal check to see not only weather it is still working effectively but whether it is the best system available examination of the ministries contracts including these of a continuing nature often control supply of a station etc are allowed to be controlled simply because they are adequate for the organinal purpose. Thus, the work of an  auditor should not be one emphasized, as it has been said that every embezzler was once a trusted employee. The  roles played by the audit  department is to say whether the financial records and account kept by person or group trusted with collection or disbursement of public money d property show true and fair view or say they do not. In the case of reviewing financial statement, the auditor is expected to express opinion on the truth and fairness of financial statement so that any person lading and using them can have belief in them. Management should exercise their responsibility primarily by the institution and operation of appropriate system of internal control. The auditors responsibilities towards irregulation and errors is limited to designing and evaluating his work with a view to detecting those irregulation and  error which might defect the true and fairness of the view given by the financial statement Tower (1956.14)

The auditing guideline appears to extent the auditors responsibility beyond these defined by the companies act. However, it does remind the auditor of the factor to consider in order to assess the risk of regularities and errors.

Even through it is the primary responsibility of the management                           for the detection and prevention of fraud, the research believed the auditor should be responsible for fraud which the failed to detect because of negligent audit auditors is only responsible for detecting to the management. By traditional approach the auditors apply vouching verification evaluation test  checking, check  positing investigation, tick and cross tick. Where as if system approach the auditor  evaluate the internal control system is adequate in design, efficient  in operation and consistent application throughout  the period reporting so that records processed through the system will be reliable and material  misstatement and irregularities appearing will come to his notice (detected). The audit department adopts system  approach to auditing (auditing in perspective) and traditional or early audit evidence.

We have seen that government has good intention by establishment audit department which should advice her on a continuous basis on the activities of those whose responsibilities is to disburse public funds and property. The extent  of performance is measured from the angle of effective coverage of this essential function. It is discovered with almost  dismay that audit of account of government for about three yeas and not audited partly audited audit  but not certified.

The up keep of sound system of organization and internal check  is far better than any subsequent  dramatic discovery of fraud. If fraud is discovered the most important point is not that it  has been discovered but how it was possible to control. The auditor should make sure that it didn’t occur through an  unknown weakness is the system of interned cleck (ie it was not the result of a calculated risk that failed) because of such is the case it reflects upon the ability of the auditor. In another wise well organized ministry the reason for fraud accruing is almost invariably a loophole is the internal check system.

The main factor in the control of fraud

  • A system of internal control check
  • Internal audit
  • The use of machine (a person can not easily after a machine entry)
  • Examination of comparative figures.

This is externally useful for detesting fraud or guanine  errors which have been completely wrong is principle but correct in detail it can happen that over emphasis on the detailed checking work result in a more fundamentally incorrect state of affairs being other looked, the mission for example  of a whole se of transaction such errors can some times be glarily obvious from study of comparative  figures. These should be examined in the same way as estimated and actual results in standard costs.THE ROLE OF A STATUTORY AUDITOR IN CONTROLLING FRAUD IN GOVERNMENT OWNED ESTABLISHMENT

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