3) Control Activities.This part helps an organisation to choose and establish control activities that help to theremission of risks, to develop accustomed control activities over technology and to helpan organisation to set up improved control activities through policies to form theexpected procedures to establish which policies to put into operation.4) Information technology and communication.This part focuses on how an organisation collects or develop and adopt relevant, qualityinformation to help in the operation of internal control.
Information is internallycommunicated, as well as objectives and responsibilities for internal control.Furthermore communication with third parties with regards to matters affecting theoperation of internal control should be made.5) Monitoring of activities.The organisation chooses, establish, and performs continuous independent evaluationsto verify if the components of internal control are materialised and operative. Internalcontrols are evaluated and communicated if there are deficiencies, to the management,senior management and the director who are responsible for taking appropriate actions,in a timely manner. 212.10 Use of technological tools to detect fraudTechnology tools enhance the ability of management at all levels to detect fraud. Dataanalysis, data mining, and digital analysis tools can: (The IIA)? Identify hidden relationships among people, organizations, and events.
? Identify suspicious transactions.? Assess the effectiveness of internal controls.? Monitor fraud threats and vulnerabilities.
? Consider and analyse thousands or millions of transactions.Some auditors and consulting firms have developed tools, as part of their frauddetection efforts that analyse journal entries to mitigate management override of theinternal control system. These tools identify transactions subject to certain attributesthat could indicate risk of management override, such as user identification, date ofentry, and unusual account pairings. Evidence of fraud can sometimes be found in emailsas well.
Before the integration of technology and the automation of many corporate accountingsystems, the audit was usually designed to go around the computer, but with increasedusage of technology, it has become essential to audit through the computer.(Byington et al. 2003).”The ability of an organisation to capture, maintain and review the communications ofany of its employees has led to the detection of numerous frauds in the past decade.This is accomplished through the use of strict and regular backup programs that capturedata, not with the intention of uncovering fraud, but merely as a safeguard in the eventthat a retrospective search for evidence may be necessary.According to (IIA, Fraud Prevention and Detection in an Automated World, 2009), theuse of data analysis technology helps auditors and other fraud investigators to evaluatetransactional data to have an insight about the efficiency of the work of internal controlsand to determine factors of fraud risk or present fraudulent activities. 22Data analysis technologies can help internal auditors in addressing the fraud risks of anorganisation whether it is used to inspect payroll records or in assessing whether thereas duplicate transactions accounts payable invoices. To assess and supervise internalcontrols efficiently, organisations need to analyse all related transactions in distinctionto control parameters, across all applications and systems.
Investigating transactions atits origin helps to ensure the fairness and accuracy of the data.The main test of the data to be done at first is to verify if it is complete and honest.These two steps are highly important when handling a potential case of fraud, becauseif ever there missing records or blank fields, it will probably falsely point out a case offraud or cause an authentic case of fraud to go unnoticed2.11 ConclusionAs elaborated above, we can conclude that internal audits should be independent of anydecision they take and does not have the primary role to detect fraud in an organisation.But it is however his responsibility to preserve the integrity and reputation of theorganisation by making use of audit procedures and making use of internal controls andhelp in the prevention of frauds. In that perspective internal auditors may uncoverfrauds if ever there is one and should report such activities to management and to theappropriate institutions.23CHAPTER 3: RESEARCH METHODOLOGY3.
1 IntroductionThe aim of this chapter is to explain methodological framework, research design andmethods which will be used to understand the roles and responsibilities of internalauditors in the detection and prevention of fraud in organisations. This study seeks toinvestigate and analyse the key issues relating with this dissertation. Emphasis is puton the methods of collecting data, techniques used to analyse the information,justifications, the strengths and limitations of the approaches used and the constraintsencountered during the process of gathering data.3.2 Research DesignThere is normally two types of ways to perform research in order to obtain an overallstrategy that will help to choose and assimilate the different components of the study ina coherent and logical way, thereby ensuring that the research will be effectivelyperformed.o Qualitative ResearchA qualitative research which is one of the two types, is primarily an explanatoryresearch which enables us to gain an understanding of underlying reasons, opinions andmotivations pertaining to the research problem and therefore makes ground fordevelopment of ideas or hypotheses for prospective qualitative research. Somecommon methods to conduct this type of research includes; group discussions,individual interviews or the conduction of observations relating to the topic. This typeof research method normally targets a smaller population and is less expensive.
24o Quantitative ResearchThe other type of research which is the quantitative research, is used to quantify theproblem by making use of numerical data or data which can be transformed intostatistical information, to formulate facts and uncover patterns in research. It thereforeenables us to quantify attitudes, opinions, behaviours, and other relating variables forthe purpose of study. To conduct a quantitative research, making use of various surveyslike, online surveys, paper surveys, face to face interviews, online polls and statisticalobservations will be the main ways to obtain information. The quantitative method forresearch targets a much larger population for the conduction of research and it looks atthe context and social meaning and how it affects individuals.Another approach while collecting data is whether to make use of primary data orsecondary data.
Primary data refers to the direct collection of data using surveys,interviews and direct observations. It will be more specific to the purpose of this studyas the survey will be tailored to a specific purpose even though it is time consumingand expensive. The other way for collection of data is making use of secondary data.This means using data which is already available through previous researches orsurveys conducted by other people, and as such, it is cheaper and saves time.For the purpose of this research, a quantitative approach will be adopted andinformation will be obtained from both primary and secondary data.
3.3 PopulationA target population in an educational research work is normally described as all themembers of a real or hypothetical group of people, events, to which educationalresearches wish to generalise the results based on the research. Researchers normallycollect data from a limited number of accessible population because otherwise it willbe too large to reach. The target population for this study will be made of Mauritianprofessionals in accounting and audit firms and also members of the public wherebytheir views and perception on the topic will be accessed.
253.4 Sampling StrategySampling is normally used to obtain a representative picture about the population,without studying the entire population. A representative sample produces results whichcan be used to formulate generalisations. However, this can only be achieved by usingprobability sampling where the likelihood of the sampling unit to be included in thesample is known.There are many types of sampling methods, but stratified sampling will be chosenbecause it will generally have more statistical precision than simple random sampling.Stratified random sampling is a method of sampling that involves the division of apopulation into smaller groups known as strata. In stratified random sampling, thestrata are formed based on members’ shared attributes or characteristics.
A randomsample from each layer is taken in a number proportional to the layer’s size whencompared.to the population. Thus it may be possible to reduce the sample size requiredto achieve a given precision. Or it may be possible to increase the precision with thesame sample size.3.4.1 Sample sizeIn this study, a targeted population of 150 respondents has been identified so as to getresults that reflect the targeted population. The targeted population will consist of anytype of person that are from different age groups, different genders, differentoccupations and so on.
The research will be conducted using a stratified sampling,which gives more statistical precision than when using a simple random sampling.3.5 Data Collection InstrumentsQuestionnaire surveys has been used for this dissertation, whether being printedquestionnaires or online forms, and this generated the collection of primary data. Forthe purpose of this research, the close-ended questionnaire will be primarily chosen inorder to reach the maximum number of respondents.
Questionnaires can be classified 26into Closed-form and open form questionnaires. An open-ended question was asked tothe respondent to formulate his own answer and the closed-ended questions requiredthe respondents to pick an answer from a given number of options.3.6 Pilot StudyA pilot study is a test conducted with the subjects from the target population and itsimulate the procedures and protocols that have been designated for data collection Apilot test means finding out if your survey, or observations will work by first trying itout on a few people in order to help fine-tune usability studies, in an attempt to predictan appropriate sample size and improve upon the study design prior to performance ofa full-scale research projectA pilot study was carried out using five respondents from an accounting profession andfive from an auditing profession. The feedback were positive but however theyproposed that certain minor changes needed to be made, to help understand thequestion. The appropriate changes were made and it has been found that approximatetime to fill in the questionnaire was five minutes.
3.7 Data AnalysisFor the purpose of this research, Statistical Package for Social Sciences (SPSS 20) willbe used to code the data collected during the survey or distribution of questionnaires,to generate frequency tables, cross tabulations and to carry many other tests such as thechi-square, reliability test and mean test.Furthurmore the use of Micorsoft word 2013 and Microsoft Excel 2013 has been ofgreat importance to key in data, produce bar charts and pie charts amongst others.
273.8 Hypothesis formulationA hypothesis is a precise statement of predictions of what is expected to happen in aparticular question study.3.81 HypothesesDoes gender of the respondents have an effect on the encountering of fraud?H01: There is no relationship between gender and encountering of fraud.H11: There is relationship between gender and encountering of fraud.
Does the age of the respondents have an effect on the encountering of fraud?H02: There is no relationship between age and encountering of fraud.H12: There is relationship between age and encountering of fraud.Does internal auditors have for main duty to detect fraud in an organisation?H03: It is not the main responsibility of the internal auditor to uncover fraud and reportit to the appropriate authorities?H13: It is the main responsibility of the internal auditor to uncover fraud and report itto the appropriate authorities?Does technological tools improve the ability to prevent and detect frauds in abusiness?H04: Businesses that do not have technological tools are better equipped to prevent anddetect fraud in their business.H14: Businesses that have technological tools are better equipped to prevent and detectfraud in their business.28Does internal control system help to detect and prevent fraud in a business?H05: Companies that have an internal control system are less likely to detect and reportfraud than companies that do not have an internal control system.
H15: Companies that have an internal control system are more likely to detect and reportfraud than companies that do not have an internal control system.3.9 Reliability TestThe reliability of a measure indicates the extent to which it is without bias and ensuresconsistent measurement across time and various items. It is a measure of stability andconsistency with which instrument measures the concept (Sekaran, 2003). Cronbach’sAlpha will be used for the reliability test in this research. Cronbach’s Alpha is ameasure of internal consistency, that is, a measure to evaluate how closely related a setof items are as a group.
It is considered as a measure of scale reliability and to checkthe dimensionality of the scale using factor analysisWhile using this formula, if there is an increase in the number of items, there will alsobe an increase in Cronbach’s alpha. Additionally, if the average inter-item correlationis low, alpha will be low. As the average inter-item correlation increases, Cronbach’salpha increases as well.3.10 Ethical considerationIt is essential to have ethical practices when doing a research. According to thelegislation of ethical research strategy, the right to retain and protect confidentialinformation to an unauthorised third party is very important, which include protectionthat covers the ethical investigation, methodology and research strategy of data amongeach individual was will have to be highly confidential. It should be made clear thatthe purpose of this survey study will be for academic purposes only.
Furthermore,safeguarding the privacy of identities of the participants and the information givenwould help to ensure that they feel reassured and at ease during the conduction of filling 29in questionnaire or interviewing exercises. These steps are crucial to ensure that theparticipants wholeheartedly offer their assistance and contribution.3.11 ConclusionThe point of this section is to depict the techniques that will be used to gather data andthen examine the information received. It can be concluded that the research instrumentused for this study will be a questionnaire which will be set to target a sample of 150professionals in the accounting and auditing field and also the general public. Thesampling strategy, research design and how information will be gathered, that is aquantitative approach as well as gathering data from both a primary and secondarysource, has been explained in this chapter.30Chapter 4: Data Analysis4.
1 Collection of questionnairesThis chapter consists of analysing data by using SPSS 20.0 from 137 questionnaireswhich have been collected after having circulated 150 questionnaires, to peopleinvolved in accounting and auditing profession at various levels of responsibility. Afterquestionnaires had been successfully completed by the participants, the data gatheredwere compiled and sorted.The entities chosen from are:? Accountancy firms? Public sector companies (Accountancy department)? People having knowledge in accountancy? Students of University of technology (Accountancy field)4.2 Section A: Respondent profile4.
2.1 GenderFigure 1 : Gender7051.1%6748.9%Male Female31An analysis of the results of the questionnaires revealed that out of a total of 137respondents, 51.1% of them were males and 48.9% were females.4.2.
2 Age GroupFigure 2: Age GroupsFigure 2 shows that the age of 33 of the respondents were between 18 and 25 years, themajority of the 46 respondents were aged between 26 and 33 years, followed by 36respondents with age ranged between 34 and 41. Furthermore, it can be seen that thereis not a great difference for the first three age groups. However, the following two agegroups shows that there was only 11 respondents for both age groups between 42 and49 years and 50 and above.
0 10 20 30 40 5018 – 2526 – 3334 – 4142 – 4950 and above3346361111FrequencyAgeAge groups324.2.3 Marital statusFigure 3: Marital StatusIt can be observed from the pie chart above that the results shows that 65.7% of therespondents are married and 34.3%% are single.4.
2.4 Level of qualificationFigure 4: Level of qualificationSingle Married9065.7%4734.3%64.4%4230.7%2316.
8%5540.1%118%Hsc UndergraduateDegreePostgraduateDegreeACCA Other33According to Figure 4, only 4.4% of the respondents have done only HSC, 30.7% havean undergraduate degree, 16.
8.% holds a postgraduate degree, the large majority whichconsists of 40.1% of the respondents relates to those who have followed or arefollowing ACCA courses.
Finally 8% of the respondents have followed other types ofqualifications related to accountancy.