CHAPTER ONE

INTRODUCTION

1.1        Background of the Study

No economic entity can progress when there is fraud in the operations of its management. Fraudulent activities in business organizations are traceable to lapses in the internal control system operating in their respective department. Internal control is an essential function of management that deals with measurement and correction of the performance of the subordinate with a view to achieving organizational goals with maximum efficiency and at minimum cost. Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organizations operations.

 Millichamp (2000) said that the use of criminal deception to obtain an unjust or illegal advantage is known as fraud. There could be fraudulent manipulation of figures in accounting information and forgoing of cheque and other document and using ones approval more than once, which is not done by the auditor but by the employees of the organization. Effective internal control system can be said to exist hand in hand with fraud as the controlling tool in a business in regards to fraudulent act. A weak internal control system could be a fertile channel for fraud perpetration in any organization. The importance of solid internal control system in manage of an organization cannot therefore be over emphasized.

1.2        Statement of the Problem

A good quality internal control services will make positive contribution to the hospital management. Some of the problems that actually hinder internal control are problems of incompetent persons that are engaged by the organization, poor management and uncooperative attitude of non-audit staff due to ignorance of internal control objectives. That is lack of skill in the discharge of duties

1.3        Objectives of the Study

Many public organizations of different sizes have seen the need of internal control as the means for fraud prevention and detection in hospital management for ensuring effective working and internal control system.

 Some of the objectives of the study includes;

·                    To check the internal audit work of the department of hospital management.

·                    To renew the function of internal control generally in the hospital management

·                                            To detect and prevent fraud and irregularities in Aluta Hospital, Oleh

·                    To determine the degree of reliance placed on internal control report and corrective measures taken in the past.

1.4        Research Questions

1.           What is the control measure your hospital put in place to prevent fraudulent practices?

2.                           How does your hospital guide against fraudulent practices?

3.           To what extent does management actually rely on internal control in hospital management?

4.           What factor limits internal control function in fraud detection and prevention in hospital management.

5.                           What do you understand as internal control?

1.5        Significance of the Study

This research work will be of great significance to benefit a lot of persons which have been having problems with internal control system and its accounting meaning in general. It will enable management of hospitals and other business organizations to detect and prevent fraud among the employees.

    The study will also serve as a guide line to students and researchers who may which to carry out research work in this area in the future.

1.6        Scope of the Study

This research study is mainly on the effective internal control system as a means of fraud prevention and detection in hospital management with special reference to Aluta Hospital, Oleh in Isoko South Local Government area delta state.

This research will be on descriptive research therefore, hypothesis testing will not be required.

1.7        Limitation of the Study

In the cause of this study, the researcher was faced with a number of problems. Among the short comings includes, financial constraint, which prevented the researcher from carrying out his study in details.

    Unwillingness to release information required for the research which were considered confidential to the organization by the officers concerned. Time factor had also been one of the greatest constraint.

1.8        Brief History of Aluta Hospital

Aluta Hospital was established in the year 1993. The owner was Doctor Aluta, the Hospital was later approved and commissioned by the Delta State Government on July 1996.

This hospital was owned and directed by Doctor Aluta.  It is a private hospital which is located at Oleh/Emede expressway in Isoko South Local Government Area, Delta State.

1.9        Definition of Terms

·                 Fraud: it is a deliberate act and may require specific procedures in order to detect. It involves the use of deception to obtain an unjust or illegal financial advantage

·                    Internal Control: this is a whole system of control, financial or otherwise established by management in other to carry on the business of the enterprise in an orderly and efficient manner ensure adherence to management policies, safeguard the asset and secure as far as possible the completeness and accuracy of the records.

·                 Internal audit: this is an independent, objective assurance and consulting activity designed to add value and improve an organizations operations.

·                    Auditing: it is independent examination of books of account and record of the company with a view to expressing an opinion on the true and fairness of financial statement by an auditor.

·                 Control: this is the monitoring of activities to ensure their conformity to laid down plans and procedure.

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