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THE IMPACT OF COMPUTER TECHNOLOGY ON ACCOUNTING AND THE CHALLENGES OF FRAUD PREVENTION
ABSTRACT
In recent times, financial institutions rely heavily on automated systems and electronic funds transfer network for majority of their business operations. Information technology has significantly ensured that businesses are coordinated more efficiently.
Nigerian organizations have not been left behind as a major number of organizations are increasingly adopting modern information technology systems.
The primary aim of conducting this study was to find out how the advent of information technology has impacted on operational processes in financial institutions. The research gears towards finding the extent to which information technology affects the occurrence of fraudulent practices in Nigerian banks.
Both primary and secondary data was used in this research work. The primary data was based on interaction between the researcher in an oral inter view with some employees of Broad Bank of Nigeria Ltd., while the secondary data was secured from journals, newspaper, magazines, the internet, textbooks and Broad bank data base.
The results of the study indicate that:
- Information Technology has improved performance in customer service delivery by banks.
- That computer fraud can be managed to the barest minimum.
- That the advent of modern information technology has reduced the occurrence of fraud in banks.
In the light of the aforementioned, the following recommendations were made:
- Banks should ensure adequate physical security to prevent accidental or intentional damage to the computer system and related equipment.
- Ensure adequate techniques for maintaining transaction controls.
- Tight security of software and data files to ensure programs is not tampered with.
- Security communication networks to prevent unauthorized interception or alteration of electronic data.
- To ensure that all possible measures are put in place such that the authorized users of the information technology system are individuals with integrity.
Title page Declaration Certification Dedication Acknowledgment Table of content
TABLE OF CONTENT
- Introduction
CHAPTER ONE
- Nigerian Banking industry
- Historical Background of Broad Bank of Nigeria Ltd.
- Statement of the problem
- Objective of the study
- Hypothesis
- Scope of the study
- Significance of the study
- Methodology of the study
- Definition of Terms
- Literature review
- Concept of fraud
- Theories of fraud
CHAPTER TWO
- Effects of Fraud on banks
- The emergence of on-line banking
- The impact of information technology on fraud
- The impact of fraud on public confidence in the banking system.
CHAPTER THREE
- Research design and methodology
- Introduction
- Sources of data
- Sampling technique and population
- Sample size
- Research Approach and strategy
- Problems and limitation of study
CHAPTER FOUR: DATA ANALYSIS AND INTRODUCTION OF DATA
- Introduction
- Age range of Broad Bank workers
- Educational background of bank workers
- Marital status of Broad Bank workers
- The ranks of bank staff involved in fraud
- Magnitude of fraud in Nigerian Banks
- Losses incurred as a result
- Frequency of fraud by types
- Analysis of fraud by person
- Computer related fraud.
- Major findings from hypothesis test
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
- Summary
- Conclusion
- Recommendation Bibliography
CHAPTER ONE
1.0 INTRODUCTION
Modern technology has taken the world by storm in recent decades. Particularly, the advent of the computer has completely revolutionized the way people live, work and play. Computers have affected businesses in numerous ways, allowing them to run more efficiently. However, there is a dark side to computers when individuals use them to lash out malicious assaults. These assaults may include fraud; identify theft, hacking, embezzlement and a wide array of other activities.
Fraud can be defined as all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get on advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling and any unfair way which another is cheated. Information fraud denotes any fraud committed through any of the information gadgets such as computers, telephone, fax e.t.c.
The declining level of business integrity in the banking industry may threaten the operations of the system in the post consolidation era. The volume of frauds and forgeries in Nigerian banks rose sharply by 107 cases (48 %) in the second quarter to 329, up from 222 in the previous quarter. The total amount involved in fraud and forgeries over the period was a whopping N1
.47bn, up by 25.6% from N 1.1 5bn in the first quarter of the year.
Whether simple or advanced, data analysis provides many benefits in the prevention and detection of fraud. While occupational fraud takes various forms, the result is always the same: the numbers generated by fraud cannot hold up to the unfailing logic of the accounting equation. For example, if executives add false sales and account receiveable to increase the organization’s revenue, profits and cash will be out of the kilter. The advancement of technology has allowed this “accounting equation” to be systemized into computer logic and applied to company data. Results of this logic could take the form of a simple matching of the human resource file to the accounts payable vendor master file. On the other side of the coin, it could be an advanced neural network application focused on detecting money laundering schemes.
Computerization of banking operations enables the systematic transfer of all relevant information into the computer logic. This enables information to the accessed at the touch of a button. Transactions are also concluded on-line
i.e. as soon customer approaches the bank for a transaction; it is executed and concluded on the spot. It has also greatly reduced the long queues and waiting time of carrying out business transactions in banks.
1.1 NIGERIAN BANKING INDUSTRY
The Nigerian Banking Act of 1969 term a bank as “any person who carried on banking business. The Act (as amended by section (1) (K) Banking Amendment Decree No. 3, 1970 stated that banking business of receiving monies from outside sources as deposits irrespective of the payment of interest and the granting of money, loan and acceptance of credits of the purchase of bills and cheques or the purchases and sales of securities for account of others or the incurring of obligation to acquire claims in respect of loans prior to their maturity or the assumption of guarantees on other warranties for others or the effecting of transfer, clearings such other transaction as the commissioner may on recommendation of the Central
Bank, by order published in the Federal Gazettes designate as banking business (Adekanye,1986).
1.2 HISTORICAL BACKGROUND OF BROAD BANK OF NIGERIA LIMITED (BBNL)
Broad Bank of Nigeria Limited was licensed to carry on commercial banking business in November, 1989. The bank formally commenced business on September, 3 1990 with mixed results until new core investors joined the bank (the AOG Group acquired a 55% stake). On acquisition, the new management, focused on the restructuring the business information technology and creating a niche market for the bank’s product.
Broad Bank was restructured in October, 2001 and it has come from a negative net worth of N55mm in 2001 to N1.5bn core capital in 2004. The bank’s authorized share capital at incorporation was N30,000,000.00 (Thirty Million Naira) divided into thirty million ordinary shares at N1 .00 each. This was increased to N50,000,000.00 in October, 1990 N150,000,000.00 in 1998 N1,000,000,000 in 2000 and subsequently to N2,000,000,000 (Two
Billion Naira) in 2001 of which N1,640,380,000 is wholly owned by Nigerians who have distinguished themselves
in various professions. With shareholders spread over 22 states of the federation. The bank is managed by a team of professionals with diverse experience in both domestic and international banking. The bank operates through a network of about 36 business offices strategically located all over Nigeria, and by virtue of its universal banking license, offers a complete range of financial services. The clientele base has access not only to commercial and consumer banking services, but also lease financing, equity and debt securities brokerage, transactions services, investment banking and advisory services. The bank has achieved market recognition through winning and successfully executing several high profile transaction mandates. In the last three years, the bank has continued to penetrate key economic sector, and today its client base includes major players in growth sectors such as Oil & Gas, Telecommunications and commerce. Innovation skillfulness and provision of customized financial solutions has been the cradle of the bank’s success and these qualities have been instrumental to the achievement of their market position.
1.3 STATEMENT OF THE PROBLEM
Computer fraud is just one area of fraud which occurs in the banking industry, there are other types such as clearing fraud, cashiering fraud, forgeries of cheques and signatures, opening and operating of fraudulent accounts, over-invoicing for services to banks etc. but as the use of computer is gradually becoming indispensable in modern day banking, this research work becomes invaluable as this would profoundly prove useful to the banking industry.
1.4 OBJECTIVES OF THE STUDY
- To create an awareness of the impact of information technology in relation to banking services.
- To analyze the positive and negative contribution of information technology on banks.
– To identify the various areas of fraud associated with information technology in Nigerian banks particularly Broad Bank of Nigeria Ltd.
– To proffer recommendation on how these fraudsters/fraud could be checked.
1.5 HYPOTHESIS
These hypotheses are all stated in the null form and in such a way that testability and subsequent acceptance or rejection is easy.
HYPOTHESIS I
Hi — That the introduction of advanced information technology in Broad Bank of Nigeria Limited has improved performance.
Ho — That the introduction of advanced information technology in Broad Bank Of Nigeria Limited has not improved performance.
HYPOTHESIS II
Hi — That computer fraud in Broad Bank of Nigeria Limited can be curbed. Ho — That computer fraud in Broad Bank of Nigeria Limited cannot be curbed.
HYPOTHESIS III
Hi — That the adoption of information technology has facilitated the increase
of fraud.
Ho — That the adoption of information technology has not facilitated the increase of fraud.
1.6 SCOPE OF THE STUDY
The research topic is not beyond the confines of the impact of information technology in Broad Bank of Nigeria Limited. However the study is limited to the period from 2001 to 2004 to reflect when all the branches and processes in the BBNL were automated.
1.7 SIGNIFICANCE OF THE STUDY
The study is significant in that present and future researchers would access information on the impact of information technology on fraud in the banking industry.
The negative and positive impact of information technology will be of immense use to bankers, stakeholders as well as students of banking.
1.8 METHODOLOGY OF THE STUDY
Quantitative and qualitative methods of research were used in obtaining information. They include textbooks, journals, Broad Bank of Nigeria Limited publications, interviews etc.
1.9 DEFINITION OF TERMS
Fraud – Fraud includes a wide variety of acts all characterized by the intent to deceive the victim or to obtain unearned benefit.
Information Technology -The application of computer and telecommunication to manipulate information.
Analysis — Examination of issues by breaking it up into the parts of which it is made (Chamber Dictionary, 1980).
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