The Role Of Auditing In Controlling Fraud In Government Establishment


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

Fraud Detection And Control In The Payroll Department

Accounting Project Topics for Nigeria Universities

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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 noncompliance 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 evidence from which the final revenue 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 havi9ng 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 establishment 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 quitting government establishment is to give evidence 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 unaccountably 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 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 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 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 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).

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 exercises 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 papers 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.

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.

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