Various surveys and researches have been carried out in different countries with the aim to ascertaining the true scale and costs of fraud to businesses and societies. On the whole, findings varied significantly from different researchers which made it difficult to ascertain the exact implication of fraud on organizations. However, a great number of the surveys established the prevalence of frauds within organizations especially in government ministries and remained serious and costly problem to virtually every unit of organizations particularly in developing economies of the world.

Despite the serious risks fraud poses to business and countries, many organizations and government still seem not to have efficient formal systems and procedures in place to prevent, detect and respond to this menance. Even when they exist, the implementation and application seem inefficiently applied. Owing to increasing unethical practices, deceitful activities and the frequently recurring financial impropriety, it is now more demanding and of necessity the services of internal audit function in both public and private organizations [1]. The main objective of internal auditing has been assumed to ensuring financial effectiveness and efficiency of operations, promotion of accountability and deterrence to any fraudulent activities, safeguard assets of the organizations and minimize losses that may occur due to dereliction of duty.

Internal audit units of organization are supposed to be manned by competent personnel named “Internal Auditors” with special attributes that made them stand out in the organization as watchdogs, policeman, whistle-blowers and the likes. How the internal auditors have applied their privileged position to minimize the recurrences of fraud in the Nigeria Public Sector organizations given their differentia requires empirical investigations. Hence, this research aims at ascertaining how internal auditors attributes has contributed to fraud prevention in government Ministries, Departments and Agencies (MDAs) in Akwa Ibom State, Nigeria.

Objectives of the Study

The objective of the study is to evaluate the composite influence of internal auditors’ attributes (effectiveness, independence, training, experience and qualifications) on fraud prevention in MDAs of government in Akwa Ibom State, Nigeria.

Research Questions and Hypothesis of the Study

The research question raised for this study is stated as: What is the composite influence of internal auditors attributes on fraud prevention in selected MDAs of government in Akwa Ibom State, Nigeria?

In line with the research objective and question, the hypothesis of the study is developed and stated in null form as follow:

• Ho: Internal auditors attribute do not significantly affect fraud prevention in selected MDAs of government in Akwa Ibom State, Nigeria

Significance of the Study

The results of this empirical investigation is significantly relevant in the light of the recent search by stakeholders for procedures that could protect, improve and create efficient and effective use of public fund and ensuring financial management assurance in government. The findings would benefit government ministries, departments and agencies in policy formulation and implementation in respect to internal control issues, researchers, consultants as well as an addition to existing empirical literature in this area of interest. 

The remaining part of this paper cover review of related literature, methodology of the study, results and findings and summary and conclusion.

Review of Related Literature

The conceptual issues, theoretical review, empirical review and gap in the literature are discussed in this section.

Conceptual Framework

The following concepts are discussed-Public sector, internal auditing and attributes of internal auditor.

Public Sector

The public sector comprises of all government organizations, institutions, agencies and other entities that are funded through public resources such as taxes, fines and so on to render public services, program and deliver goods and services to the general public [2].

In other words, public sector is all organizations which are not privately owned and operated but which are established, ran and financed by government on behalf of the public. These entities include all government ministries, departments and agencies. In Akwa Ibom State, there are twenty ministries and one hundred and twenty seven departments and agencies [3].

In the Nigerian public Sector entities, the issues of weak institutions, inefficiency and ineffectiveness in processes and procedures in the conduct of government business have been recurring reports in the broadcast media; thereby begging for answers the workability of the internal control systems which are manned by internal auditors with their lofty qualities despite varying degrees of reorganization and realignment of programs which should engendered improved performance and more reliable services by public agencies.

Internal Auditing and Attributes of Internal Auditors

The Statement on Auditing practice (SAP-6) of the institute of Chartered Accountant of India describes internal audits as “the plan of organization and all the methods and procedures adopted by the management of an entity to assist in achieving management’s objective of insuring, as far as possible, the orderly and efficient conduct of its business, including adherence to management policies, the safeguarding of assets, prevention and detection of fraud and error, the accuracy and completeness of accounting records and timely preparation of reliable financial information. On the other hand, internal audit is a critical appraisal of functioning of various operations of an enterprise including the functioning of internal check system. Accuracy, completeness, reliability and timeliness of accounting information are tested and reported for remedial in cases of slack. Internal audit unit in an organization is described as a unit saddled with the responsibility of giving objective assurances about the operation of the organization with the aim to boosting the effectiveness of the operation of the establishment. It is an independent action geared towards helping an organization achieve its mandate through a systemic effort to improve risk management effectiveness and control processes. How well this is achieved is a function of the attributes of the internal auditor. Ali et al. [4] argued that, in public sector institutions, the functions of Internal Audit embrace possibilities for stimulating responsibility and improve government performances.

Rafay and Shakeel [5] opined that the accelerated evolution of internal auditing functions is anchored on its effectiveness, training, staffing and qualification, independence, experience and the ability to plan, control and record their work. These combined attributes should aimed at ensuring more efficient operations, accountability, sufficient, knowledge and experience to handle problematic circumstances which could arise from fraudulent situations.

Fraud and Fraud Prevention

Bierstaker et al. [6] defined fraud as “all multifarious means which human ingenuity can devise and which are resorted to by one individual to get advantages over another by false suggestions or suppressions of the truth. It includes all surprises, tricks, cunning or dissembling and any unfair way by which another is cheated. The term fraud is also commonly used to describe a wide variety of dishonest behaviours such as deception, bribery, corruption, forgery, false representation, collusion and concealment of material fact.

In the public sector, a suitable summary of fraud within the context of the study is an act of obtaining financial value by trick or deceit through inflation of contract, kickbacks, paying or collecting money for non-existing commodity, misappropriation of cash, manipulation of accounts to disclose false position, wage fraud, computer frauds and ghost workers, embezzlement as well as misallocation of budgeted funds. Although, the responsibilities for fraud prevention and detection rest with the Board of Directors [7], the audit committee, legal counsel and internal auditors, a clinical analysis would reveal that the internal auditors are the feeder unit of information for the other parties to functions and to fulfil their mandate. Consequently, the need to harness the attributes of internal auditors in fraud prevention in the public sector.

Theoretical Framework

Two theories, the theory of inspired confidence and the institutional theory formed the theoretical foundations of the study.

The Theory of Inspired Confidence

This theory was advanced in the late 1920s by the Dutch Professor Limperg with the hope to address both the demand and the supply of audit services. Limperg in 1920 argued that auditing of management activities is necessary to inspire confidence in the stakeholders who may not trust management entirely to be fair in their report since the management are expected to prepare reports that meet divergent interest of different stakeholders. The idea here is that auditors are expected to audit the information provided by the management to check for biases and deviation from normalcy. This theory is relevant to this research work because the public sector is accountable to the public for funds used which are gotten from funding sources such as taxes, grants and other sources.

The Institutional Theory

Institutional theory seeks to explain the processes and reasons for organizational behavior as well as the effect of organizational behaviour patterns within a broader, inter-organizational context. The foundations of institutional theory as it is currently understood took root between 1977 and 1983 amid a broader search for understanding the elements that support successful and sustained organizational performance. The theory is adopted in this study because it identified the role of internal auditors has being significant in improving corporate governance mechanism of public sector organization as a way of streamlining processes and controlling of operations for effectiveness.

Review of Related Empirical Literature

Some of the related empirical researches reviewed for the study are presented in a summarized form on Table 1.

Gap in the Literature 

The review of empirical literature indicated that different studies had been conducted on the determinant of effectiveness of internal audit but none of the reviewed studies looked at attributes of internal auditors and fraud prevention in the public sector, which this study focused on. 

The survey research design was used in the study to gather data from one hundred and seven internal auditors determined using Taro Yamene’s statistical formular. The respondents sampled were heads of Internal audit units in the Akwa Ibom State Ministries, Departments and Agencies (MDAs).

Sources of Data and Instrument of Data Collection

The data used for this study was primary in nature obtained through structured questionnaire designed using five-point Likert-Scale with appropriate sections for the independent variables. To ensure the validity of the instrument, three copies of the instrument were discussed with other accounting lecturers for inputs and amendments. The reliability of the instrument used was carried out by computing the Cronbach’s Alpha Coefficient for each variable using the questions in the instrument. The results are shown in Table 2.

The Cronbach’s Alpha Coefficients were all above 70% index and hence; the instrument adjudged suitable for use in the study.

Theoretical Specification of Model

The theoretical model specified for this study is in line with the research interest as shown in Figure 1.

Empirical Specification of Model

The empirical model for this study is expressed in the following econometric model which is developed to test the relationship between the dependent and independent variables.

FP = ƒ (IAEFF, JAINDEP, JATRA, IAQUA, JAEXP)

(1)
 

Table 2.1 Summary of Empirical Literature 

 Source: Researchers’ Compilation (2022)

Figure 1: Theoretical Model

Source: Researchers’ Conceptualization (2022)

Table 2: Crombach Alpha Coefficients 

Source: Researcher’s Computation (2022)

Table 3: Measurement of Variable and Apriori Expectations 

Source: Researchers’ Compilation (2022)

Specifically:

FP = β₀+β₁IAEFF+β₂ IAINDEP+β₃IATRE+β₄IAQUA+β₅IAEXP+ƹ

(2)

Where:

FP             = Y is the independent variable (Fraud Prevention)

P                =  Regression Constant or Intercept 

β₁+β₅        =  Internal Auditors’ Effectiveness 

IAINDEP  =  Internal Auditors’ Independence 

IATRA      =  Internal Auditors’ Training 

IAQUA      =  Internal Auditors’ Qualifications 

IAEXP       =  Internal Auditors’ Experience 

               =  Stochastic Error Term 

Measurement of Variable and Apriori Expectations

The Variable of the Study are measured with their apriori expectations as shown on Table 3.

Method of Data Analysis 

Multiple Linear regression analysis technique and descriptive statistics are employed in the analysis of data. The decision rule for acceptance or rejection of the hypothesis is based on 5% level of significance for calculated F and p-values. The R, R² adjusted R² and Durbin-Watson (D-W) statistic are also used in analysis of the data. The descriptive statistic acceptance range is 2.5 average value and above.

The results of data analyses are disclosed in this section with the discussion of the findings.

Descriptive Analysis of Data

The descriptive analysis of the responses to the questionnaire on each variable of interests studied is presented in this section of the paper. 

Descriptive Analysis on Fraud Prevention Activities

The responses relating to fraud prevention indices are presented on Table 4.

From the Table 4 which shows descriptive statistic values (means values) for indices of fraud prevention in the MDAs in Akawa Ibom State. All the indices met the average value of 2.5 mean point and above except for the management regularly reviewing entity’s policies in the light of changing environment and economic conditions with mean value of 2.40. This implies there is a lag between current operational realities and what should ordinarily be done by those saddled with management of entities for fraud prevention.

Table 4: Descriptive Analysis of Responses to Fraud Prevention Activities 

Source: Researchers’ Computation (2022), U = Undecided, SD = Strongly Disagree, D = Disagree, A = Agree and SA = Strongly Agreed

Table 5: Responses on Internal Auditor’s Effectiveness 

Source: Researchers’ Computation (2022)

Table 6: Responses to Internal Auditors’ Training 

Source: Researcher’s Computation (2022)

Descriptive Analysis of Internal Auditors’ Effectiveness 

The descriptive analysis of internal auditors’ effectiveness is presented on Table 5.

From Table 5, involving responses to internal Auditors’ effectiveness, all the indices met the acceptance or tolerance level except for the index “management of the organization creates a positive control working environment in order to discourage rationalizing behavior to commit fraud” This implies that available controls do not take cognizance of creating controls that discourage fraudulent behaviours.

Descriptive Analysis of Internal Auditors’ Training 

The descriptive analysis of internal auditors’ training is presented on Table 6.

Table 6 revealed that the mean scores of responses to internal auditors’ training questions had mean values within the range 2.00 and 2.33. This implies that all the indices relating to training fell short of the acceptance range. It reveals that training of internal auditors is not accorded priority, hence not taking seriously dispute it importance in fraud prevention.

Table 7: Responses to internal Auditors’ Qualification

Source: Researchers’ Computation (2022)

Table 8: Responses to Internal Auditors Independence 

Source: Researchers’ Computation (2022)

Table 9: Responses to Internal Auditors’ Experience

Source: Researchers’ Computation (2022)

Descriptive Analysis of Internal Auditors’ Qualification

The responses relating the internal auditors’ qualification variable indices are presented on Table 7.

Table 7 revealed the mean scores of responses to internal auditors’ qualification questions. The mean scores revealed that internal auditors’ certification had 2.31 mean score and qualification of internal auditors as tool to performance of duties 2.40 mean score. This implies that not all internal auditors are certified professionally does impacting discharge of their duties. Other indices considered on the internal auditors’ qualification met the 2.5 mean score affirming the relevance of Internal Auditors Qualification in Fraud prevention.

Descriptive Analysis of Internal Auditors’ Independence

The responses on Internal auditors’ independence indices are presented on Table 8.

From Table 8, the statistics revealed that all the indices of internal auditors independence failed the mean score threshold of 2.5, except for unrestricted access to records and books of account. The implication is that internal Auditors’ in government organizations are relatively not independent in the discharge of their duties.

Descriptive Analysis of Responses on Internal Auditors’ Experience 

The responses in respect of internal auditors’ experience variable indices are presented on Table 9.

The Table 4.6, all the indices relating to Internal auditors’ experience met the acceptance threshold of 2.5 means score and above, thus affirming the necessity of experience in fraud prevented in MDAs in Akwa Ibom State.

Inferential Statistical Analysis of Hypothesis of the Study

The test of hypothesis for this study is conducted using the multiple regression results shown on the model summary, ANOVA and coefficients of the regression output as shown on Table 10-12.

The null hypothesis was stated as “internal auditors” attributes and experience do not significantly affect fraud prevention in selected MDAs in Akwa Ibom State, Nigeria”. From the regression output (ANOVA), based on the decision rule, the null hypothesis of the study is rejected since the p-value 0.00 is less than 0.05 and the calculated F-value of 406.798 is greater than the critical F-value of 1.983. 

This implies, when the independent variables are jointly regressed, they are potent to fraud prevention in government establishments.

Table 10: Model Summary for Hypothesis Testing 

^aPredictors: (Constant), IAEFF, IAINDEP, IATRA, IAQUAL, IAEXP, ^bDependent Vairable: FP

Table 11: ANOVA

^aPredictors: (Constant), ^bDependent Vairable: FP

Table 12: Regression Coefficients 

Source: Researchers’ Computation (2022), ^aDependent variable: FP

From the findings, 95.2% fraud prevention activities are attributed to the independent variable studied and that there exists 97.6% correlation between fraud prevention and Internal Auditors’ attributes.

Evaluating the independent variables on an item by item basis, all the indices relating to internal auditors’ effectiveness, shows each item was potent in fraud prevention. The t-value was 5.687 and p-value 0.0000 which are statistically significant, indicating that internal auditors’ effectiveness is a good attribute in fraud prevention. This finding is in line with the findings of Hailemarian [8] who found internal audit effectiveness as a good determinant of organizational control.

Internal auditors training, qualification and independence were statistically not significant in the joint model as their p-values were greater than 0.05, although with positive t-values. The findings were in line with those of Salma et al. [9] who investigated the determinants of internal audit effectiveness in the Sudan public sector and report positive but insignificant influence of these variables on internal audit performance. The descriptive statistic also confirms the inferential result.

The result in respect of Internal Auditors’ experience were both descriptively and inferentially statistically significant and positive as the t-value was positive and p-value 0.003<0.005. The findings corroborate those of Julius and Patrick [10] in their Rwanda revenue Authority investigation of internal audit effectiveness. On the whole, the apriori expectation were confirmed by the results of the data analysis.

Financial impropriety and mismanagement particularly at the Nigerian public sector require a shift from the traditional auditing which has been financially oriented to a more value investigative and analytical approach geared to preventing the malady from recurring. Internal auditing which is designed to safeguard assets against defalcation or other similar irregularities is expected to be carried out by personnel with distinct attributes. The study was conducted to examine how these internal auditors’ attributes help in fraud prevention in government MDAs in Akwa Ibom State, Nigeria.

Based on the findings of the study, it is concluded that fraud and fraudulent practices can be prevented through improvement in the effectiveness, independence, training, experience and qualification of the internal auditors in MDAs of government.

Recommendations

Based on the findings, it is recommended that conducive environment be created for internal auditors to function including regular training and re-training programs to update them on contemporary developments in fraud prevention techniques. There should be review of internal auditing policies in MDAs in line with global best practices and organization for Economic Development and Co-operation framework on public financial management models.

Acknowledgment

The authors would like to thank the internal auditors in MDAs of government in Akwa Ibom State for their willingness to respond to the research instruments with objectivity.

Policy Implications of the Findings

The implication of the findings is that public assets will not be misappropriated and socio-economic development would be enhanced to scale-up societal living standard. It would serve as measures to prevention of fraudulent activities and minimize wastages and draining away of the common wealth of the people by effective, efficient, independent and thorough internal auditing.

Suggestions for Further Researches

A further study can be conducted by extending the scope geographically to other States in Nigeria and other developing economies.

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