CASH INTERNAL CONTROL WEAKNESSES IN PERPETUATING FRAUD IN CAMEROONS COMMERCIAL BANKS
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THE FIRST CHAPTER
1.1 The Study’s Background
The issue of fraud in the banking industry in Cameroon, and around the world, is attracting greater attention currently than it has ever been. This is owing to the fact that it has a negative impact on customer confidence.
Furthermore, the frequency and magnitude of the transactions have a significant impact on the profitability of the institutions in question. Indeed, the commercial sector in Cameroon is rife with fraud, which has long been a characteristic of the country’s society.
Commercial banks, being part of the financial system, which is the pivot around which any economy revolves, require special attention when it comes to detecting and combating fraud.
Commercial bank fraud began on a small scale and has grown in a geometric development since then. In general, fraud is practiced in every organization in the country, along with a great deal of bribery and corruption, but nowhere in the national order are these socio-economic symptoms more pronounced and all-pervasive than in the banking sector, which was once regarded as the “new lease of life’s” palladium.
This hydra-headed phenomenon, fraud, comes in an endless variety of forms, with an equal number of definitions. Fraud, according to the Oxford English Dictionary, is “criminal deceit” defined as “the use of false representation to achieve an unfair advantage or to harm another’s rights and interests.”
Fraud is defined as “an intentional perversion of truth for the purpose of enticing another in reliance upon it to part with some valued thing belonging to him or to renounce a lawful right” from a legal standpoint.
Despite the fact that there are numerous definitions of fraud, the researcher believes that the foregoing definitions are appropriate, adequate, and reinforcing for the purposes of this study because they contain the rudiments of fraud, namely that: There must be deception or deception directed against another; A false representation is one that is produced consciously without believing in its validity or with reckless disregard for whether it is true or untrue.
Fraud can take many different forms, degrees, techniques, and levels of expertise. Forgery, which is the falsification of documents and authorized signatures, and outright stealing are the most common forms of activity.
It is important to highlight that a fraudulent act that causes no damage or damage that causes no fraud is not actionable. However, fraud is punishable if it causes any kind of harm, such as one person profiting at the expense of another.
Given the foregoing scenario, the government, regulatory agencies, stakeholders, management, and other economic actors all want to ensure that fraud is reduced, if not eliminated, from the financial system.
It is clear that a well-designed, precisely built, and steadfastly managed management control system (or internal control system) will inevitably reduce, if not eradicate, fraud in our commercial banking system.
Internal control system, according to the Auditing Standards and Guidelines, is the entire system of financial and other controls established by management in order to conduct the enterprise’s business in an orderly and efficient manner, ensure adherence to management policies, safeguard assets, and ensure, as far as possible, the completeness and accuracy of the records.
‘Controls’ or ‘internal controls’ are the various components of an internal control system. These restrictions include, among others, the establishment of dual systems, the limitation of authority, and the monitoring of activity in specific areas.
However, the internal control system has various flaws, including poor payroll time data entry, division of payroll procedures, absence of payroll preview, and lack of systematic internal audits.
The continuous survival of commercial banks is predicated on maintaining public trust. This necessitates the implementation of an effective internal control system, which will, among other things, ensure that the organization’s accounting activities are carried out in compliance with established rules, standards, and statutory requirements.
As a result, fraud as a widespread occurrence in our commercial banking system has had a painful effect on clients, resulting in ill faith, loss of confidence, and trust in our commercial banks. It should be mentioned that banks should be established on trust rather than fraud as custodians of public/funds. people’s
1.2 The Problem’s Statement
There are numerous statutory statutes that deal with bank fraud and financial malpractice. Banks have functioned within the confines of these statutory regulations and other policy measures, and frauds should be checked or eliminated from the banking system.
But the key question is, “how effective and to what extent have these various pieces of legislation, as well as other prevention and detection methods, been in reducing fraud in commercial banks?” Various interest organizations and individuals have stated their opinions in this regard.
These include a lack of willpower on the part of the government to effectively implement various laws and policy measures, poor supervision by regulatory authorities due to ill-equipped and inadequate manpower, resulting in a lengthy litigation process; and a non-complacent attitude on the part of the police and other law enforcement agencies to conduct quick, in-depth, and adequate investigations due to a lack of motivation, equipment, and, to some extent, experience.
The aforementioned could be viewed as control flaws, and it is clear that, as a result of these flaws, the above-mentioned statutory legislation and policy actions cannot be considered to have completely eliminated fraud in Buea’s commercial banks.
As a result, fraud is clearly bad for any commercial bank. There are various reasons for this, but the goal of this study is to demonstrate how flaws in the cash and payroll internal control systems can lead to fraud in commercial banks.
MORE ON The Effect of Internal Control Systems on Fraud Mitigation in Micro Finance Institutions
The Effect of Internal Control on the Financial Performance of micro finance institutions in Buea
Impact of Internal Control System on the Performance of financial institutions (Case Study; Banque Atlantique S.A.)
1.3 Research Issues
What are the cash management internal control flaws in commercial banks in Buea?
How might such flaws contribute to bank fraud?
1.4 The Study’s Objectives
The major goal of this research is to determine how internal control flaws in commercial banks in Buea can lead to fraud.
The following are the precise goals:
To investigate cash management’s internal control flaws.
To investigate how fraud is perpetrated as a result of such flaws.
1.5 Hypothesis Statement
H1: In Buea’s commercial banks, a good internal control system significantly reduces bank fraud.
ANALYSIS OF CASH INTERNAL CONTROL WEAKNESSES IN PERPETUATING FRAUD IN COMMERCIAL BANKS IN BUEA