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Management exercises a great deal of discretion in preparing financial statement which is the working paper the auditor. An audit provides reasonable assurance that management’s representations on his activities are reliable. Therefore, an audit has value because management’s stewardship is examined and reported to the users of accounting information.

The purpose of audit therefore, is to provide assurance. Assurance to share-holders, bankers, creditors, government agencies and authorities, investors and the general public at large these people need confidence that the picture of the company as given by the Directors via the financial statements is not misleading. The law, therefore, has requested the Directors to obtain a second opinion from an expert-the auditor.

It is the duty of the auditor to examine the financial statements and consequently form an opinion of fairness in conformity with generally accepted accounting principles.

As a secondary function, it is also his duty to uncover an act of omission or commission which in his view is fraudulent in nature.

It is a common thing in Nigeria that almost everybody wants to get rich very quickly without actually working very hard for it. To Nigerians, wealth connotes power and importance and one of the shortest and easiest  cut to wealth today is seen as fraud in whatever form and content, with little or no regard to its unpleasant consequences to the individuals and the Economy at large.

It is no exaggeration to state that, three out of every four Nigerian Adult has the tendency to exploit every fraudulent opportunity available to him/her, such opportunity does not exist, two out of every four will try to create one for himself/herself. It is’ safe to state here that public liability companies have become a major target of these fraudsters who take advantage of the vastness and unprofessionalism of these public companies to perpetrate their nefarious acts. The list of public companies with publicized cases of fraud in various degrees, which are in millions of Naira is endless. They include, the Nigerian National Petroleum Corporation (A case study of this research work) National Electric Power Authority (Now, Power Holding Company of Nigeria). Nigerian Ports Authority PIc. NIPOST PIc., NITEL and so on. Worse still, even Government Ministries and Parastatals are not left out of the mess.

Auditing has over the years gone considerably to a’ commendable length to expose various fraudulent practices both in public and private sectors of the economy. This has assumed so much importance that it has become inevitably necessary to critically evaluate the role of external auditors in fraud prevention, particularly in the public liability companies in these present days of what the ‘writer prefers to call “wealth craze Age” resulting in increasing fraudulent acts d practices.


Honestly speaking, it is not misleading to make it point clear that the bane of Nigeria’s Economic woes and problems has its roots from the numerous fraudulent practices perpetrated and perpetuated by so many of the greater number of the citizenry who are well placed in the society. These people accounted for the unimaginable amount of tax payer’s money running into billions of naira squandered and siphoned away in many foreign lands.


It is very worrisome to observe that this types of sharp practice are found among our politicians whom we look up to as real models in governance. The case of Umaru Dikko and others. Who looted public funds and siphoned away into their private accounts in foreign countries.

The uniformed men have neither assumed the position of the saints.

There have been so many reported cases of looting in higher quarters by some of the uniformed men. These men acquire luxurious and ostentatious items which ordinarily they could never have acquired on their salary in the barracks. The most vocal  of such unpleasant cases of fraudulent acts by the uniformed men that bug my mind are that of President Abacha Looting of Nigeria money into foreign country.

Since the early 80s reports of fraudulent acts particularly in the public tor

have never failed to make headlines both in the Electronic and Print Media is so appealing that the Government and the public at large have come out to courage and organize public lecturers, campaigns and workshops to create awareness so as to reduce the increase in fraud and arrest its damaging influence on the country’s image abroad. Just, in 2005, the transparency international ranked Nigeria as the third (3) most corrupt nations in the world. This is regrettable.

Section 357 of company and Allied Masters Decree of 1990 (CAMD) requires that all registered limited liability companies – both public and private must have their financial records audited annually by external.

auditors so appointed. It is the duty of the auditors in the course of their work to uncover any fraudulent practices either by omission or commission. , This therefore, leads to the question, H()w then can the auditor’s role be extended to include fraud prevention? The answer is not fare fetched. This, I hope to uncover as I progress.


Nigerian National Petroleum Company is one of the Limited Liability Companies in Nigeria and’ it is owned by the government.

For some time now, Nigeria has been experiencing increasing fraudulent practices in public limited liability companies. Companies and allied matters decree of 1990 provides that the accounts of public limited companies shall be subjected to audit annually. However, such audit has not entirely eliminated the occurrence of fraudulent practices in some public limited liability companies. Such limited liability companies that readily came to my mind are: –

  1. The Nigerian National Supply Company (NNSC)
  2. International Telephone and Telecommunication (ITT)

iii.      Bank of credit and Commerce

iv      Co-operative and Commerce Bank (CCB)

  1. African Continental Bank (ACB)

The above listed public liability companies are just to mention but a few. The sharp practices surrounding the operations of these companies have led to their untimely demise. Thank goodness that African Continental Bank has revived and is now on its Banking business again. ,

The bureaucratic nature of public liability companies causes a lot of unnecessary delays which allows enough space and time for fraud to be conceived and perpetrated. Some of these fraudsters take advantage of this set back to explore all avenues that will aid them succeed in their shameful acts.

Inefficiency, of company staff result in improper, book keeping and in some cases they refuses to co-operate fully with ,the auditor. Certain transactions are off records. Due process” is not followed in the expenditure of funds. Consequently, the auditor is left at a cross road.

One cannot also ignore the great threat posed to the auditor by the temptation of money as a form of “settlement” (also and most popularly referred to “Ghana Must go” in the Eastern part of the country). The slang means that the auditor should keep mute even in the face of high fraud and financial irregularities. Some government banks that were distressed. Such as African Continental Bank (ACB) and co-operative and commerce bank (CCB). These Banks attributed their failures to the negligence and improper



auditing of auditors. The truth is that the cause of their failure is linked to fraud perpetuated by both insiders and outsiders to the bank.

The above mentioned problems and others have often put doubts on the ability and relevance of external auditors to help prevent and detect fraud in Limited Liability Companies, even with the presence of the external auditors (Management Employee) could make no difference. And this IS why the subject is given another serious look by this research work.


Growing trends of a fraudulent acts and practices have really questioned the role of audit and what it seeks to achieve. Therefore, one would at this juncture, pause and ask these questions. How can we effectively check and curb this canker worm in the society called fraud? Where actually does the auditor fits in. answers to these questions and others . I will attempt to proffer.

Hence the objective of this study can be summarized as follows: –

  1. To identify the causes of fraud in public Limited Liability Companies.
  2. Examine the statutory principles of auditors in relation to fraud.

iii.      Seek how the scope of present day audits can be extended to include prevention and not only discovery of fraud.

  1. To suggest solution for combating fraud in Public Limited Liability Companies.


The study, in consideration of the problems it seeks to address attempt to provide answers tot he following specific problems.

  1. Is the present day audit approach enough to expose fraudulent practices?
  2. Is it possible to introduce an audit approach that will not only aim at uncovering fraud but also adopt measures to help prevent them before hand?

iii.   Are present day auditor culpable in not uncovering fraudulent practices for the fact that, it is not their duty to detect fraud (this is a statutory defence?)

  1. Can audit report which is the end product of audit exercise deter finance staff from committing fraud?


The role of the auditor and is influence on the decisions made by users of financial statements cannot be stressed often enough~ Shareholders, Bankers, Creditors, Government Agencies, Investors, etc all rely on the auditor’s report to base their investment decisions. This is so because they require assurance that they are not being mailed by the financial statements

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