3) Control Activities.
This part helps an organisation to choose and establish control activities that help to the
remission of risks, to develop accustomed control activities over technology and to help
an organisation to set up improved control activities through policies to form the
expected 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, quality
information to help in the operation of internal control. Information is internally
communicated, as well as objectives and responsibilities for internal control.
Furthermore communication with third parties with regards to matters affecting the
operation of internal control should be made.
5) Monitoring of activities.
The organisation chooses, establish, and performs continuous independent evaluations
to verify if the components of internal control are materialised and operative. Internal
controls 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.
2.10 Use of technological tools to detect fraud
Technology tools enhance the ability of management at all levels to detect fraud. Data
analysis, 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 fraud
detection efforts that analyse journal entries to mitigate management override of the
internal control system. These tools identify transactions subject to certain attributes
that could indicate risk of management override, such as user identification, date of
entry, and unusual account pairings. Evidence of fraud can sometimes be found in emails
Before the integration of technology and the automation of many corporate accounting
systems, the audit was usually designed to go around the computer, but with increased
usage 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 of
any 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 capture
data, not with the intention of uncovering fraud, but merely as a safeguard in the event
that a retrospective search for evidence may be necessary.
According to (IIA, Fraud Prevention and Detection in an Automated World, 2009), the
use of data analysis technology helps auditors and other fraud investigators to evaluate
transactional data to have an insight about the efficiency of the work of internal controls
and to determine factors of fraud risk or present fraudulent activities.
Data analysis technologies can help internal auditors in addressing the fraud risks of an
organisation whether it is used to inspect payroll records or in assessing whether there
as duplicate transactions accounts payable invoices. To assess and supervise internal
controls efficiently, organisations need to analyse all related transactions in distinction
to control parameters, across all applications and systems. Investigating transactions at
its 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, because
if ever there missing records or blank fields, it will probably falsely point out a case of
fraud or cause an authentic case of fraud to go unnoticed
As elaborated above, we can conclude that internal audits should be independent of any
decision 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 the
organisation by making use of audit procedures and making use of internal controls and
help in the prevention of frauds. In that perspective internal auditors may uncover
frauds if ever there is one and should report such activities to management and to the
CHAPTER 3: RESEARCH METHODOLOGY
The aim of this chapter is to explain methodological framework, research design and
methods which will be used to understand the roles and responsibilities of internal
auditors in the detection and prevention of fraud in organisations. This study seeks to
investigate and analyse the key issues relating with this dissertation. Emphasis is put
on the methods of collecting data, techniques used to analyse the information,
justifications, the strengths and limitations of the approaches used and the constraints
encountered during the process of gathering data.
3.2 Research Design
There is normally two types of ways to perform research in order to obtain an overall
strategy that will help to choose and assimilate the different components of the study in
a coherent and logical way, thereby ensuring that the research will be effectively
o Qualitative Research
A qualitative research which is one of the two types, is primarily an explanatory
research which enables us to gain an understanding of underlying reasons, opinions and
motivations pertaining to the research problem and therefore makes ground for
development of ideas or hypotheses for prospective qualitative research. Some
common methods to conduct this type of research includes; group discussions,
individual interviews or the conduction of observations relating to the topic. This type
of research method normally targets a smaller population and is less expensive.
o Quantitative Research
The other type of research which is the quantitative research, is used to quantify the
problem by making use of numerical data or data which can be transformed into
statistical information, to formulate facts and uncover patterns in research. It therefore
enables us to quantify attitudes, opinions, behaviours, and other relating variables for
the purpose of study. To conduct a quantitative research, making use of various surveys
like, online surveys, paper surveys, face to face interviews, online polls and statistical
observations will be the main ways to obtain information. The quantitative method for
research targets a much larger population for the conduction of research and it looks at
the context and social meaning and how it affects individuals.
Another approach while collecting data is whether to make use of primary data or
secondary 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 study
as the survey will be tailored to a specific purpose even though it is time consuming
and 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 or
surveys 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 and
information will be obtained from both primary and secondary data.
A target population in an educational research work is normally described as all the
members of a real or hypothetical group of people, events, to which educational
researches wish to generalise the results based on the research. Researchers normally
collect data from a limited number of accessible population because otherwise it will
be too large to reach. The target population for this study will be made of Mauritian
professionals in accounting and audit firms and also members of the public whereby
their views and perception on the topic will be accessed.
3.4 Sampling Strategy
Sampling is normally used to obtain a representative picture about the population,
without studying the entire population. A representative sample produces results which
can be used to formulate generalisations. However, this can only be achieved by using
probability sampling where the likelihood of the sampling unit to be included in the
sample is known.
There are many types of sampling methods, but stratified sampling will be chosen
because it will generally have more statistical precision than simple random sampling.
Stratified random sampling is a method of sampling that involves the division of a
population into smaller groups known as strata. In stratified random sampling, the
strata are formed based on members’ shared attributes or characteristics. A random
sample from each layer is taken in a number proportional to the layer’s size when
compared.to the population. Thus it may be possible to reduce the sample size required
to achieve a given precision. Or it may be possible to increase the precision with the
same sample size.
3.4.1 Sample size
In this study, a targeted population of 150 respondents has been identified so as to get
results that reflect the targeted population. The targeted population will consist of any
type of person that are from different age groups, different genders, different
occupations 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 Instruments
Questionnaire surveys has been used for this dissertation, whether being printed
questionnaires or online forms, and this generated the collection of primary data. For
the purpose of this research, the close-ended questionnaire will be primarily chosen in
order to reach the maximum number of respondents. Questionnaires can be classified
into Closed-form and open form questionnaires. An open-ended question was asked to
the respondent to formulate his own answer and the closed-ended questions required
the respondents to pick an answer from a given number of options.
3.6 Pilot Study
A pilot study is a test conducted with the subjects from the target population and it
simulate the procedures and protocols that have been designated for data collection A
pilot test means finding out if your survey, or observations will work by first trying it
out on a few people in order to help fine-tune usability studies, in an attempt to predict
an appropriate sample size and improve upon the study design prior to performance of
a full-scale research project
A pilot study was carried out using five respondents from an accounting profession and
five from an auditing profession. The feedback were positive but however they
proposed that certain minor changes needed to be made, to help understand the
question. The appropriate changes were made and it has been found that approximate
time to fill in the questionnaire was five minutes.
3.7 Data Analysis
For the purpose of this research, Statistical Package for Social Sciences (SPSS 20) will
be 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 the
chi-square, reliability test and mean test.
Furthurmore the use of Micorsoft word 2013 and Microsoft Excel 2013 has been of
great importance to key in data, produce bar charts and pie charts amongst others.
3.8 Hypothesis formulation
A hypothesis is a precise statement of predictions of what is expected to happen in a
particular question study.
Does 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 report
it to the appropriate authorities?
H13: It is the main responsibility of the internal auditor to uncover fraud and report it
to the appropriate authorities?
Does technological tools improve the ability to prevent and detect frauds in a
H04: Businesses that do not have technological tools are better equipped to prevent and
detect fraud in their business.
H14: Businesses that have technological tools are better equipped to prevent and detect
fraud in their business.
Does 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 report
fraud than companies that do not have an internal control system.
H15: Companies that have an internal control system are more likely to detect and report
fraud than companies that do not have an internal control system.
3.9 Reliability Test
The reliability of a measure indicates the extent to which it is without bias and ensures
consistent measurement across time and various items. It is a measure of stability and
consistency with which instrument measures the concept (Sekaran, 2003). Cronbach’s
Alpha will be used for the reliability test in this research. Cronbach’s Alpha is a
measure of internal consistency, that is, a measure to evaluate how closely related a set
of items are as a group. It is considered as a measure of scale reliability and to check
the dimensionality of the scale using factor analysis
While using this formula, if there is an increase in the number of items, there will also
be an increase in Cronbach’s alpha. Additionally, if the average inter-item correlation
is low, alpha will be low. As the average inter-item correlation increases, Cronbach’s
alpha increases as well.
3.10 Ethical consideration
It is essential to have ethical practices when doing a research. According to the
legislation of ethical research strategy, the right to retain and protect confidential
information to an unauthorised third party is very important, which include protection
that covers the ethical investigation, methodology and research strategy of data among
each individual was will have to be highly confidential. It should be made clear that
the purpose of this survey study will be for academic purposes only. Furthermore,
safeguarding the privacy of identities of the participants and the information given
would help to ensure that they feel reassured and at ease during the conduction of filling
in questionnaire or interviewing exercises. These steps are crucial to ensure that the
participants wholeheartedly offer their assistance and contribution.
The point of this section is to depict the techniques that will be used to gather data and
then examine the information received. It can be concluded that the research instrument
used for this study will be a questionnaire which will be set to target a sample of 150
professionals in the accounting and auditing field and also the general public. The
sampling strategy, research design and how information will be gathered, that is a
quantitative approach as well as gathering data from both a primary and secondary
source, has been explained in this chapter.
Chapter 4: Data Analysis
4.1 Collection of questionnaires
This chapter consists of analysing data by using SPSS 20.0 from 137 questionnaires
which have been collected after having circulated 150 questionnaires, to people
involved in accounting and auditing profession at various levels of responsibility. After
questionnaires had been successfully completed by the participants, the data gathered
were 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 profile
Figure 1 : Gender
An analysis of the results of the questionnaires revealed that out of a total of 137
respondents, 51.1% of them were males and 48.9% were females.
4.2.2 Age Group
Figure 2: Age Groups
Figure 2 shows that the age of 33 of the respondents were between 18 and 25 years, the
majority of the 46 respondents were aged between 26 and 33 years, followed by 36
respondents with age ranged between 34 and 41. Furthermore, it can be seen that there
is not a great difference for the first three age groups. However, the following two age
groups shows that there was only 11 respondents for both age groups between 42 and
49 years and 50 and above.
0 10 20 30 40 50
18 – 25
26 – 33
34 – 41
42 – 49
50 and above
4.2.3 Marital status
Figure 3: Marital Status
It can be observed from the pie chart above that the results shows that 65.7% of the
respondents are married and 34.3%% are single.
4.2.4 Level of qualification
Figure 4: Level of qualification
According to Figure 4, only 4.4% of the respondents have done only HSC, 30.7% have
an undergraduate degree, 16.8.% holds a postgraduate degree, the large majority which
consists of 40.1% of the respondents relates to those who have followed or are
following ACCA courses. Finally 8% of the respondents have followed other types of
qualifications related to accountancy.
3) Control Activities.