Internal Control System and Fraudulent Practices in the Nigerian Public Sector; A Survey of Nigerian National Petroleum Corporation (Nnpc) Nigeria

ABSTRACT 

The researcher investigated the relationship between ‘internal control system and fraudulent practices in the Nigerian public sector; a survey of Nigerian National petroleum Corporation (NNPC)’. The purpose of the study was to determine the Effect of Internal Control system on fraudulent in the Nigerian National Petroleum Corporation, Nigeria. The specific objectives were to determine the relationship between internal control system components (Control Environment, Risk Assessment, Control Activities, information and communication, and monitoring) and fraudulent practices in the Nigerian public sector. The study adopted a cross sectional research and descriptive research design in which data was collected and analyze using quantitative method. The sample size of 300 was selected from the target population of 1205 using Slovene’s formula. Results from the Pearson linear correlation and regression analysis shows that there are statistical significant relationship between the internal control system variables and fraudulent practices in the Nigerian public sector and internal control system have a negative Effect on fraudulent practices. Thus Control Environment was regressed on Fraudulent Practices and the result of linear regression showed that R 2=0.961 and significant at P < 0.000; Risk Assessment was regressed on Fraudulent Practices and the result of linear regression showed that R2=0.951 and significant at P < 0.000; Control Activities was regressed on Fraudulent Practice and the result of linear regression showed that R2=0.936 and significant at P < 0.000; Information and communication was regressed with Fraudulent Practices. The result of linear regression showed that R2=0.936 and significant at P < 0.000; monitoring was regressed with Fraudulent Practices. The result of linear regression showed R2=0.936 and significant at P < 0.000. The results of multiple regression analysis performed simultaneously on the variables showed that information and communication control has a positive weak relationship with fraudulent practices, this suggest that improper information and communication control will aid the fraudulent practices instead of mitigating it. The researcher concluded that internal control system has a negative effect on fraudulent practices in the Nigeria public sector but the implementation of internal control is weak thereby making ineffective. The study contributed to the growing body of knowledge in the area of theories used to spur the effectiveness of internal control system and in understanding the motivation to fraudulent practices. The study recommends that those who are in charge of managing public funds should set the appropriate tone and demonstrate it through directives, actions, integrity and ethical values that support the functioning of the system of internal control system.

TABLE OF CONTENTS

DECLARATION.................................................................................................................I

APPROVAL .......................................................................................................................II

ACKNOWLEDGEMENT............................................................................................... III

TABLE OF CONTENTS .................................................................................................IV

LIST OF ABBREVIATIONS AND ACRONYMS .....................................................VIII

ABSTRACT.......................................................................................................................IX

CHAPTER ONE .................................................................................................................1

INTRODUCTION...............................................................................................................1

1.0 INTRODUCTION.............................................................................................................1

1.1 BACKGROUND ..............................................................................................................1

1.1.1 HISTORICAL PERSPECTIVE .........................................................................................1

1.1.2 THEORETICAL PERSPECTIVES.....................................................................................3

1.1.3 CONCEPTUAL PERSPECTIVES .....................................................................................3

1.1.4 CONTEXTUAL PERSPECTIVE.......................................................................................4

1.2 PROBLEM OF THE STATEMENT ......................................................................................5

1.3 PURPOSE OF THE STUDY................................................................................................6

1.4 SPECIFIC OBJECTIVES....................................................................................................6

1.5 RESEARCH QUESTIONS..................................................................................................7

1.6 HYPOTHESES ................................................................................................................7

1.7 SCOPE...........................................................................................................................8

1.7.1 GEOGRAPHICAL SCOPE ..............................................................................................8

1.7.2 THEORETICAL SCOPE.................................................................................................8

1.7.3 CONTENT SCOPE ........................................................................................................8

1.8 SIGNIFICANCE OF THE STUDY .......................................................................................8

1.9 OPERATIONAL DEFINITION OF KEY TERMS ....................................................................9

CHAPTER TWO ..............................................................................................................10

LITERATURE REVIEW ................................................................................................10

2.0 INTRODUCTION...........................................................................................................10

2.1 THEORETICAL REVIEW................................................................................................10

2.1.1 SOCIAL CONTRACT THEORIES ..................................................................................10

2.1.2 JOHN RAWLS THEORY OF JUSTICE............................................................................13

2.1.3 THE WHITE COLLAR CRIME THEORY (SUTHERLAND 1939). ...................................13

2.2 CONCEPTUAL FRAMEWORK ........................................................................................16

2.3 EMPIRICAL REVIEW....................................................................................................32

2.4 IDENTIFYING THE GAP ................................................................................................35

CHAPTER THREE..........................................................................................................36

METHODOLOGY ...........................................................................................................36

3.0 INTRODUCTION...........................................................................................................36

3.1 RESEARCH DESIGN......................................................................................................36

3.2 RESEARCH POPULATION .............................................................................................36

3.3 SAMPLE SIZE...............................................................................................................36

3.4 SAMPLING PROCEDURE...............................................................................................37

3.5 SOURCES OF DATA......................................................................................................37

3.6 RESEARCH INSTRUMENT.............................................................................................38

3.7 RELIABILITY AND VALIDITY OF THE INSTRUMENT......................................................38

3.7.1 RELIABILITY............................................................................................................38

3.7.2 VALIDITY ................................................................................................................40

3.8 DATA COLLECTION PROCEDURE .................................................................................40

3.9 DATA ANALYSIS.........................................................................................................41

3.10 ETHICAL CONSIDERATIONS.......................................................................................42

CHAPTER FOUR.............................................................................................................43

PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS ..............43

4.0 INTRODUCTION...........................................................................................................43

4.1 DEMOGRAPHIC CHARACTERISTICS OF RESPONDENTS..................................................43

4.3 DESCRIPTIVE CHARACTERISTICS OF INTERNAL CONTROL SYSTEM IN NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC)......................................45

4.4 DESCRIPTIVE CHARACTERISTICS FRAUDULENT PRACTICES ........................................50

4.5 CORRELATION ANALYSIS OF INTERNAL CONTROL SYSTEM AND FRAUDULENT PRACTICES...........................................................51

4.6 TESTING OF HYPOTHESES ...........................................................................................52

4.7 MULTIPLE REGRESSION ANALYSIS OF INTERNAL CONTROL SYSTEM AND FRAUDULENT PRACTICES IN THE NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC)...........57

CHAPTER FIVE ..............................................................................................................59

DISCUSSIONS, CONCLUSION AND RECOMMENDATION .................................59

5.0 INTRODUCTION...........................................................................................................59

5.1 DISCUSSION................................................................................................................59

5.1.1 OBJECTIVE ONE THE RELATIONSHIP BETWEEN CONTROL ENVIRONMENT AND FRAUDULENT PRACTICES IN NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC). 59

5.1.2 OBJECTIVE TWO THE RELATIONSHIP BETWEEN RISK ASSESSMENT AND FRAUDULENT PRACTICES IN NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC).......................60

5.1.3 OBJECTIVE THREE THE RELATIONSHIP BETWEEN CONTROL ACTIVITIES AND FRAUDULENT PRACTICES IN NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC). 61

5.1.4 OBJECTIVE FOUR THE RELATIONSHIP BETWEEN INFORMATION & COMMUNICATION AND FRAUDULENT PRACTICES IN NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC).............62

5.1.5 OBJECTIVE FIVE THE RELATIONSHIP BETWEEN MONITORING AND FRAUDULENT PRACTICES IN NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC).......................62

5.2 CONCLUSIONS ............................................................................................................63

5.3. RECOMMENDATIONS .................................................................................................64

5.4 CONTRIBUTION TO KNOWLEDGE.................................................................................66

5.5 SUGGESTED AREA FOR FURTHER RESEARCH ..............................................................68

REFERENCES..................................................................................................................69

APPENDICES ...................................................................................................................75

APPENDIX I .....................................................................................................................75

TRANSMITTAL LETTER..............................................................................................75

APPENDIX II:...................................................................................................................76

INTRODUCTION LETTER ...........................................................................................76

APPENDIX III ..................................................................................................................77

INFORMED CONSENT..................................................................................................77

APPENDIX IV...................................................................................................................78

RESEARCH INSTRUMENT ..........................................................................................78

APPENDIX V ....................................................................................................................82

SPSS OUTPUT..................................................................................................................82