FRAUD AND ITS CONTROLS MECHANISM A CRITICAL ANALYSIS OF COMPUTER USAGE IN BANKS
CHAPTER ONE
Introduction 1
- Background of Study 1
- Statement of Problem 7
- Purpose/Objective of Study 8
- Significance of Study 9
- Research Question 10
- Hypothesis 10
1.7 scope of delimitation of the study 11
1.8 Definition of Terminologies 12
CHAPTER TWO
- Literature Review 15
- Growing Role of Computer in Banking Industry 20
- Nature of Computer Fraud 20
- Stages of Computer Fraud in Banks 27
- Processing/Program Stage 30
- Output Stage 32
- Control of Computer Fraud in Banks 34
CHAPTER THREE
Research Methodology 39
- Design 39
- Area of study 40
- Population of the Study 40
- Sample and Sampling Procedure 40
- Instrumentation 42
- Validity and Reliability 42
- Method of Data Collection 43
CHAPTER FOUR
- Data Presentation and Results 46
- Data Analysis Interpretation 52
- Summary of Result/Findings 57
CHAPTER FIVE
Discussion, Implication and Recommendation 58
- Discussion of Results 58
- Conclusion 60
- Implication of the Results 62
- Recommendation 63
- Limitation of Study 64
References 66
Appendices 68
LIST OF TABLES
Response to question number One
Response to question number Two
Response to question number Three
Response to question number Four
Response to question number Five
Response to question number Six
Response to question number Seven
Response to question number Eight
Response to question number Nine
Response to question number Ten
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Definition of Fraud
Fraud has been variously defined in literature of scholar and experts. It is defined as a criminal deception by the Oxford Advanced Learner’s Dictionary.
Fagbenri (1996) defined it as the act of dishonesty depriving a person of something which is his or of something to which he is or would or might be entitle, but for the perpetrating of fraud.
In its lexical meaning, fraud is an act or course of deception deliberately practiced to gain unlawful or unfair advantages deception directed to the detriment of another (F.I.T.C).
According to Omotoso (1992), fraud may be defined in a layman’s new as “any activity that is trained with criminals intention to cheat or deceive”.
Archibong (1992) described at as “a predetermined and well planned tricky process or device usually undertaken by a person or group of persons with the sole aim of cheating another person or organization to gain ill gotten advantages be it monetary or otherwise which would not have accrued in the absence of such despiteful procedure”.
From the above definitions, we can define a clearing fraud as an act of stealing from, depriving of, duping or exploring an individuals, or organization or group of individuals, or institutions through criminal manipulations of clearing instruments, eg. Computer.
The reasons why I am interested in fraud is to control fraud through compute.
A computer is an electrical device which works faster than ordinary human brain. Although compute has no brain of its own to reason like a human being, but has built in memories that enable it perform complete mathematical problems as fast as possible, even faster than the human brain. The American herritone dictionary of the English language defines a compute as:
A device that computers: especially, an electronic machine that performs high speed mathematical or logical calculations, or that assembles, stores, correlates or otherwise process and print information derived from headed data in accordance with predetermined program.
There are two major types of computer, namely the Digital computer and the Analog computer. Also there is computer language that concerns the accountant is the common business orientate language (CoBoL) which is English like in nature.
HISTORY OF COMPUTER
Although, the computer is a relatively recent innovation, the development rest on centuries of research, thought and discoveries. To search for better way to store and process data is not recent. The processing equipment has gone through generations of changes and improvement. An understanding of the evolution of data processing will be very helpful in understanding the capabilities and limitations of modern compute.
The origin of computing aids can be traced to China where merchants first made use of the ABACUS while the history of modern day computers, the best of business traced to France where Blaise Pascal in 1642 invented the first machine for doing the four fundamental operations of arithmetic in money to six digits or figure and was later improved upon by Hotlfied Leibnittz in 1671, and recommended for use in the large volume of astrominical calculations required at that time. The first analogue computers were derived from Kelvins Jrade.
Analyses in 1876, for predicating ticles. The first digital computer was built by Charles Babbage in 1833. The punch cards system was invented by a French textile Engineer…. J.R. JAC QUARD (1752:1834) of Lyons to control wearing looms.
The electronic computers for the both scientific and commercial work were introduced in the early 1950s. The worlds first stored programme computer EDBAC was built at Cambridge University.
Development of Computer Usage in Banks
The First Bank of Nigeria of recent has gone computerization. Their service is fest and easy to serve the customers.
Before the introduction of the computer into the business world, accounting computation were usually done manually. But with the introduction of computers accounting become easier and quicker to perform. The rate of errors was reduced to the barest minimum since the computer cannot make errors as it is human, unless there is a human error with regard to feeding in of the input where the logic of garbage – in garbage – out (1990) will emanate.
Sophisticated data processing systems are rapidly becoming standard banking equipment and imposed conspicuous changes in methods of banking operation.
By 1955, when Industrial Business Machine (IBM) model le 50 was introduced, two banks one in san Francisco, the other in New York were experiencing in the computer field on their own. The following year, a method of perfected advancing the process of cheque reading and sorting. Later computer applications was advancing beyond cheque processing to savings, dividends, disbarrasement and other more challenging activities such as trust and general ledger accounting.
Development of Computer usage in Nigeria
Ben Okezie an analysist recalled in his work in National concord Newspaper, his analysist of Mr. Etiebet. Like a computer expert, he recalled the advantages of the obodex series and what made them a unique system. By the way, Obotex in a subsidiary of the man’s frame computer manufacture, Data Science Company which steamed the Nigeria market with compute in 1974. But the first bank recognized for compute usage in Nigeria in (UBA) United Bank for Africa in 1976 with its IBM 370 model 137 which the bank is still using presently.
Of recent, the first bank has also gone comperization, though after UBA. Most recently, Union Bank of Nigeria Plc has welcomed the wonder boy. The main happening people in usage of computer in bank is First Bank of Nigeria Plc.
According to a compute writer, Mr. Steven Boxer, “tested one of the Obeodes series NB 33OC with some processor hungry wind applications. It adhered some impressive result”. Today in Nigeria, computer has been designed to suite our climate. Mr. Okezie in countermotion of his analysist described it as it is a genius mouse, with a decent case”. According to Etiebet Obodex personal computes are tropicalised and manufactured to suit the house Nigeria operating environment. It has users programmable boot panword which further protects the system from village use or infiltration by unauthorized persons, a district feature that is only available in the Obodex series.
1.2 STATEMENT OF PROBLEM
Though the Nigerian banking industry is one of the most profitable within the economy higher performance could be attained in terms of their private returns and obligations to the society. This must be so if the banking industry is to perform a leading role in reactivating the economy.
The sub-optimal performance of the Nigeria banking industry which is due to an array of problems issue of fraud that has extended even to the introduction of compute is one of the most intractable aspects and quite momumental.
The magutude of this problem and its implication for the industry has inspired this research on compute fraud in banks.
According to the First bank Plc. Compute crime could occur as a result of natural phenomenon, accident, mistakes but largely as a result of and individual expecting to profit out of them. It is a result of an individual expecting to profit out of them. A bank is a human institution run by human beings. Was it ever realistic to expect bankers not to be prone to human afflictions such as greedy power struggles and mordinate ambition? Was it ever realistic to expect bankers to be such super human beings that some of them would never be over come by the urgent human ambition to sup with the rich who see money they are employed and said to keep safe and help multiply? The study and answers therefore will eventually go in depth into areas as they relate to the banking industry in Nigeria. This leads me to sources and collection of data method used in t his research.
1.3 PURPOSE OR OBJECTIVE OF THE STUDY
Since it has been discovered that fraud is an aged threat to the smooth operations of every business especially banks and all banks are going computerized even when their managers are ignorant of computer usage.
The aim and objective of this study therefore is to bring into line highlight that computer aids fraud in one hand and as such can be used in controlling fraud.
The mission of the banks and their primary objectives must be to remain true to its name at all times as a financial institution in the country by providing to its customers, across the nations and beyond, within the parameters of regulatory police, the best banking service in the use of computers.
Moreover to suggest possible ways of controlling fraud associated with the use of computer.
1.4 SIGNIFICANCE OF THE STUDY
There have been very great number of reported fraud cases which invariably resulted in the striking of the owners find involved and increasing the liquidation rate of such establishment as it relates to banks. The prime motive is to expose various areas of the computerized banking operation where fraud can be perpetrated. The types of fraud involved and the possible controls measures. The research also seek possible ways of keeping management information on how to detect such fraud.
This will be for the mutual benefit of management and shareholders whose fund is being managed. Therefore this research is significant in putting management and auditors at alert in the various possible loop holder in computer usage in banks. This leading to over all security of funds and assets of the organization or the achievement of management over all goals and better output for Nigeria in general.
1.5 RESEARCH QUESITON
The following are the key questions to be used in the research questionnaire and the details will be in the appendix.
- Does computer usage facilitate perpetrates of fraud in banks.
- Do banks officials manipulate international control system in the banks to commit fraud.
- What extent of collusion bank staff an external influence in fraudulent practice
1.6 HYPOTHESIS (H1)
In this work the writer has selected the following problems for test in this research study.
- Use of computer facilitate fraud in banks
- Manipulation of internal control system contributes t o perpetration of bank frauds
- Internal control system manipulate perpetrate banks frauds.
NULL HYPOTHESIS (H0)
In this work the writer has tested the result of the research question and it will be reflect clearly to research objective
- The use of computer does not facilitate fraud in banks.
- Internal control system manipulation does not perpetrate bank frauds.
- Manipulation of internal control system does not contributes to perpetration of bank frauds.
1.7 SCOPE OF DELIMITATION OF THE STUDY
The computer application is very vast in the field of human endeavour like in all fields of commerce for instance, banking and finance insturances and other businesses. There are wide application of computer in the field of physical science like medicine, surveying, applied sciences, and almost every field of human endeavour.
Under the banking circle however, considering many types of banking like Central Bank, Commercial Banks, Merchant Banks, Agricultural Banks etc it may be viewed proper concentration on the areas that the researcher can easily and reasonably handled with regards to the materials and financial resources at my disposal. The writer therefore will concentrate his research on First Bank of Nigeria Plc Okpara Avenue.
1.8 DEFINITION OF TERMINOLOGIES
- Hardware: The computer is made up of a number of machines connected by electric hiring, theses machines are referred as hardwares.
- Soft ware: Embrace the program, voutine and language developed by both the use and manufacturers of the computer
iii. System Analysis: This is a clear study of the operation of the organization to find out data processing problem and designing system that can be applied to the computers.
iv: Programme: The computer programme is the person who programmes ie instruction of the computer.
- Packages: These are programmes or application systems which are used for complete sequence of operations such as payrolls or sales ledger posting. It may be purchased from the manufacturers of computer.
vi: Computer Operator: He is responsible for handling the software.
vii: Key Punch Operator: Works on data preparation, key data from source document to punched cards paper tapes etc.
viii. Program: A series of instructions to be performed by a computers to solve a given problems.
- Program Library: All the program written by the user manufacturers out side agencies, which are stored and used by a particular computer installation.
- Output: The information or result from a data processing system via an output device eg. Printer.
xi: Input: The raw data which is to be entered into a data processing system also refers to existing file or information to which amendment is to be carried on the procedure output.
xii: Disc: A direct access storage device (magnetic) consisting of several flat circular plate (layers from which data can be inserted or retrieved as the case may be, using read or write head).
xiii. Data Base: All data and files are relevant to an application.
xiv: Machine Code: The lowest level of compouter programming language.
xv: Memory Device: Storage device
xvi: Key: An identifier used to identify records.
xvii: Data Processing Manager: The man or woman in charge of all data processing activities.
xviii: Information: That which is potentially available to computer as data. The result of relationship between two or more things
xix: Backing Store: A store used to supermarket the main store of a computer
- Batch Processing: Processing batches of record.
xxi: Address: The number which identifies a particular location in the store.
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