ABSTRACT
This project work investigates the role of auditors in the detection and prevention of fraud in some selected business organization. In carrying out this research work, textbooks were consulted for related literature as well as questionnaires and oral interview for collecting data. All essential departments relevant to the study were properly enlightened and the examinations of an auditor in areas of ramification were thoroughly dealt with.
The study revealed that in any business organization, the employment of an auditor whether internal or external can contribute immensely towards the effective management of the organization. It also revealed that auditing the financial statements of companies increases investment and it helped in knowing the importance and role of an auditor in the detection and prevention of fraud in a business organization to enable the organization make efforts in maintaining a positive and at the same time pursue its growth and objectives. This project work will be useful to researchers who try to find out the contribution of an auditor towards business organization in detecting and preventing fraud. Finally, there must be adequate provisions for the reliance of auditor on the control of an organization and any advice given by the auditor must be seen as a professional opinion and it should be taken seriously.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Fraud is not a recent phenomenon associated to some highly-publicized cases. It can be found early in the history of our world as men have made use of tricks, manipulation, and deceit in order to acquire money, land, goods, or trust, with the overall objective of making profit. The creation of accounting and audit are connected in economic history with the desire, especially on the part of the state and the church, to contain and prevent stealing and misrepresentation in their finances.
Traces of the precursors of audit can be dated back to Antiquity, to ancient Babylon and Egypt, where archaeological findings have proven the existence of some justifying documents of commercial transactions that allowed for a rudimentary form of verification and accounting (Bogdan, 2005). And once the commercial trades blossomed during a period or another, the need to keep a record of transaction also emerged albeit at a primitive level. But with economic prosperity came also the temptation to deceit and manipulate others for self-profit. Control mechanisms were, therefore, developed by state institutions in order to verify and supervise the use of funds and the circuit of transactions, as was the case for example in ancient Rome, where the questors elected by the people were responsible of this role (Bogdan, 2005).During the middle Ages, however, the interest to control financial documents and accounts and to verify the use or misuse of funds increased in Western Europe.
The main objective was to discover those who eluded payment, appropriated funds, or misused money and property, and to defer them to justice. The three institutions that introduced as early as the 13th-14th centuries the idea of verifying accounts and hold the wrongdoers accountable were the state (represented by the reigning monarch), the Catholic Church, and the universities (especially those from Northern Italy), and employed functionaries or monks to keep the accounting of their respective structure (LeGoff, 1990).From the mid-19th century, the professional category of accountants and auditors emerged as a specialized group of people involved in preventing and detecting real or possible frauds and errors in the financial situations within the state or an economic entity.
Their role was not only to investigate, but also to assess possible risks and to guarantee the responsibility of internal control mechanisms. At the end of the 20th century and the beginning of the 21st century, auditors have become a necessity for the good-functioning and efficiency of an economic entity’s management that can prevent and deter possible scenarios of trickery, funds embezzlement, or theft.