Effects And Remedies Of Accounting Fraud In Public Enterprises (A Case Study Of Some Selected Public Enterprises Portharcourt)
Literature review is the process of summarizing or commenting on theories, methods and findings that are related to the topic or research problems. As Cookey (1978) clearly stated, a comprehensive review of literature serves many purposes which include:
It helps to develop a clear understanding and insight into the research problems.
It also shows how earlier studies were handled.
The topic of this study or research work which is effects and remedies of accounting fraud in public enterprises has to do with the implications or problems that accounting fraud will cause in the organization and the steps that should be taken in order to fight mostly against, control and prevent it in public enterprises in Rivers state.
According to Okezie (2004), cash receipt and payment voucher should be reviewed and any weaknesses pointed out to the directors. The cashbook or ledger must be cast and checked in details with the trend of payment into banks should be examined by reviewing the relevant documents. There should also be fraud investigation inorder to avoid this accounting fraud or defalcation of money or money’s worth by employees of an enterprises. Okpara (1990) made mention of how in stages fraud investigation should follow. They are:
The nature and objective of the investigation.
The scope of investigation.
To whom should the investigations report to cash has been the most affected asset in fraudulent practices.
2.2 CONCEPTUAL FRAMEWORK
The concept of fraud:
The topic was conceived based on the rapid growth of fraud in public enterprises due to lack of accountability.
Before proceeding, it is reasonable that we first of all know what is meant by fraud/accounting fraud and all that goes with it.
According to Okpala (1990), he defined fraud as the use of deception to obtain an unjust or illegal financial advantage while Okezie (2004) saw fraud as an intentional misstatement made knowingly without caring whether they are true or false.
Following these definitions, fraud is present whenever there is intentional omission of amount from an entity’s accounting records and financial statement.
Due to lack of accountability of definitions of the basis of accounting records and functions in the public services, many employees in public enterprises fail to give account of what they have done, thereby committing accounting fraud.
This accounting fraud can take many forms which includes:
Manipulation of accounts which may or may not be accompanied by actual theft of asset.
Misappropriation of income.
Defalcation of money of the enterprises which might be in the act of theft, concealment and conversion (Okpala, 1996).
Misappropriation of payment which involves:
Creation of false supplies followed by payment for goods not supplied.
Over payment of creditors and going behind to collect the over payment mostly by collusion.
Destruction of financial records and creation of a fictitious ones. Okezie (2000).
This concept of fraud in public enterprises has to be detected and now look for preventing techniques and the primary responsibility of preventing it rest upon management. Management should ensure that there is appropriate division of accounting responsibilities in an organization. They should also install effective accounting system.
2.3 CURRENT REVIEW OF LITERATURE
Public enterprises/government organizations:
Definition: Public enterprises comprises of all corporations authorities, boards, council and limited companies in which government has full or majority interest (Aniele, 2006).
Public enterprises are mainly government owned business or organizations charged with the responsibility of providing services that are of public interest. In Nigeria, public enterprises include: Universities, Nigerian Railway corporation, Federal Radio corporations, Nigerian Television Authority, Water Boards etc. Each of these organizations is established by the government, hence the extent of their operation and ownership of property are subject to control by the government. According to William A.R (1989:46) the major concerns of public enterprises are to provide vital services for people’s welfare and progress and to accelerate development.
Administration of public enterprises
Administration is present whenever and wherever two or more persons comes to put their resources together in an attempt to achieve organizational objectives. The large number of employees have to be supervised, coordinated and controlled. In most industries, the span of activities is nationwide. Often, it is international, thousands of workers have to be brought together and distributed for work among the various departments which the establishment is composed and are graded in different levels of authority. Everyone has to be assigned his specific function and contribution of each must be towards the objectives of the whole organization.
Adams (1913:47) it is because of this that made organization and management the main constituents of administration.
Bernard (1948:72) sees organization as group of people working together under one authority towards achievement of goals that will mutually benefit the participants and the organization.
Organizational problems in Nigeria public enterprises.
The recalls of the findings of the series of tribunals and commissions of energy set up by government reveals degree of inefficiency, waste and down right fraudulent practices perpetrated in public enterprises.
Many of the enterprises are not sufficiently responsive to the rapidly changing requirements of a dynamic economy like ours. For instance the Nigerian Railway corporations whose system is twenty years out of date lacks the rolling stock to service even its existing system and which has become totally unreliable as a means of transport either for passenger or goods.
Some of the problems facing public enterprises are:
Problems arising from incoherent and ambiguous defunction of objectives, inappropriate organizational structure and procedure, political interference, out model personnel practices, lack of delegation, deficiencies in investment planning and accounting and budgetary systems.
Over the last three decades, public enterprises have become an increasing tool of public intervention in the development process. Their primary purpose is to stimulate and accelerate national economic development under conditions of capital scarcity and structural defects in private business organization. There are also basic considerations arising from the danger of leaving vital sectors of the national economy to the whelms of the private sector often under the direct and remote control of foreign large scale industrial combines. Public enterprises are thus crucial in Nigeria’s quest for true national economic development and self reliance.
In the late twenties and the early part of the eighties the phrase “Government sick babies” was used to describe such public enterprises as N.E.P.A now power holding company, Nigeria Railway, Nigeria Airways, and then PXT now part of NITEL. This derogatory phrase, no doubt was coined to describe the inefficiency, ineffectiveness, poor performance etc. that have characterized such enterprises.
The problems are now described below:
Problem of ambiguous objectives:
Quite often the objective for which public enterprises are established creates ambiguity. It is left with the managing boards and the management of the enterprises to interpret the objectives in the way they will understand them often with devastating consequences both enterprises and the national economy as a whole.
Inappropriate organizational structure:
The creation of new public enterprises is usually determined by the government as a political solution to a perceived economic problem.
The problem of inexperienced staff may have affected some selected public enterprises in Rivers state mostly Portharcourt.
A problem common to most public enterprises in Nigeria is the use of “Employment agencies”. And this is whether it is military or civilian administration. In a civilian setting, board members are drawn from the ranks of political parties stalwarts who were either election causalities or simply party faithful. Even where the appointee is suitably qualified the appointment is made in such circumstances as to leave no doubt in the minds about the relative merits of his political acceptability and qualification. Top executives are appointed more because of their demonstrated loyalty to a political party rather than their qualification or experience and they in turn use their influence to direct appointments and promotions below them to reflect their political sensitiveness.
Outdated personnel practice.
This is a practice which contributes to over staffing. Just as much political interference and the nepotic actions of top executives, recruitment and promotion in most enterprises are made on consideration other than merit and the following evidence of a witness at a tribunal of inquiry into the operations of the public enterprises in Nigeria is equally true and applicable to most public enterprises in the country (Nigeria management Review 1986).
Lack of delegation
Most management centralize all power in themselves. Many enterprises particularly the large utility undertaking are reluctant to delegate authority resulting in over centralization and consequent inefficiency. The size and complexities of such entities such as some selected public enterprises in Portharcourt Operating on a country wide basis over a vast land area and in the face of inadequate communication facilities make remoteness between management and others thereby creating inefficiencies.
Defective accounting and budgeting system
The accounting system in Nigeria public enterprises vary in quality and sophistication, but generally, there is a tendency towards a mixture of government and private enterprises acting with emphasis on expenditure control. There is usually a complicated system of checks and counter checks which tend to hamper the efficiency and timeless of action. Some public enterprises have not rendered published accounts for over five years. Top management become involved in vast and totally unnecessary routine paper work without improving the efficiency, financial control or accountability, resulting in financial and business decision being taken without facts.
The main problems is that scarce attention is paid to generating revenue and in some cases, the little that is collected is pilfered.
Over staffing is a serious problem which public enterprises must deal with as a matter of urgency if they are to become as cost effective as they should be. Over staffing has a demoralizing effect on the underemployed persons. It breeds indolence which lowers the general tone of efficiency of an organization. It also imposes on the organization a crippling wage bill whose size is totally act of proportion with productivity. The problems facing Nigeria’s public enterprises are endless. We have only attempted to high light the most obvious ones.
Prospect For Prevention Of Accounting Fraud
Seminars and training have to be organized for staff to enable them understand the concept of the organizations objectives.
An effective means of controlling and monitoring deviations from the new path would be devised for prompt identification and effective correction.
Management would then know the need to provide staff with working materials and then motivate staff adequately by giving them incentives and training them for optimum performance.
With adequate motivation, participative management, performance monitoring and supportive fellowship, other internal problems of the organization would go underground and the corporation would prosper.
The achievement of workers optimum performance rest with the management.
2.4 SUMMARY OF LITERATURE REVIEW
In conclusion, literature review is a comprehensive review of research work done which is centered on the effects and remedies of accounting fraud on the performance of public enterprises specially in Rivers state.
It has a clear understanding of the concept of fraud, public enterprises, administration of public enterprises, its organizational problems and prospect for prevention of accounting fraud in public enterprises.
From the review above, following recommendations can be made:
Installation of effective accounting system.
Appropriate organizational structure and procedures.
There should be time to time fraud investigation and formulation of fraud investigation committee.