CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The essence of this study is aim at examining the deterring and fraud management in Nigerian construction firms in order to eliminate fraud from its operation and thereby enhance effectiveness and efficiency in its management in order to achieve its defined goal.

Construction firms all over the world have through their unique position in the economy, contributed immensely in the economy growth and development of a nation. Therefore any problem that tends to hinder their operation such as fraudulent practices is often viewed with seriousness.

Construction firms is perceive to be the life wire of all nation economy as it impact cuts across all aspect of human activities (Ayangade, 2009) and the Nigerian construction firms is not an exception to this. Its contribution ranges from enabling the procurement of goods and service to the provision of buildings and other infrastructure, thereby providing employment opportunities to its labour force while contributing immensely to the Gross domestic product (GDP). According to Ayangade (2009), the contribution of the Nigeria construction firms is yet to measure up to those of the western world like the UK and Australia due to its developing nature.

According to the website for the federal bureau of investigation, corporate fraud cases increases every years since 2002 and as a result of this fact about 490 corporate fraud cases has been investigated which has resulted in 171 indictment and 124 conviction of corporate criminals.

Deterring and fraud management is an essential and suitable working tool to apply in construction firms in order to prevent and mitigate fraud and as such to secure the integrity, growth, and development of a firm.

Fraud deterrence is the proactive identification and removal of the causal and enabling factors of fraud while according to “Wise GEEK” fraud management is a system of policies and procedures implemented by a corporation to detect and mitigate its internal risk of employees committing illegal acts against the company’s interests to enrich them selves.

Fraud has a negative impact on construction firms. According to Dimkpa (2010) in his book titled, principles and practice of professional auditing” view fraud as a very comprehensive field of crime under which different activities relate. Also considering the menace and peril over the negative impact of fraud, DrBernadHerdan, chief executive of National Fraud Authority, said ‘victims of fraud are found in all sector of the society” therefore it is vital we join together to take action to stem the rising tide of fraud.

Beyond all reasonable doubt, having considered and being knowledgeable of the negative impact of fraud, it is pertinent to render zero tolerance to fraud in Nigerian construction firms through fraud deterrence and fraud management because once a fraud became firmly established within an organization, the financial, legal, reputational or regulatory ramification will be considerably more severe.

1.2 STATEMENT OF THE PROBLEMS

In Nigeria, fraud is almost recorded in all construction firms. This act has hindered so many opportunities in the construction firms and nation economy through its negative impact. Some of this problem includes:

•        Large financial losses.

•        Problem of high contract cost and

•        Poor quality of job. Example, erection of un-sound structures through the use of inferior construction materials.

1.3 OBJECTIVES OF THE STUDY

The purpose of this study is to examine the various fraudulent practices in the construction firms and the perpetrators of this act’s. Also, to expose or disclose the position of the law toward this crime and thereby geared up the buoyancy of fraud deterrence and fraud management in the system in order to proffer solution on how construction firms can detect, prevent, and minimize construction fraud in the Nigerian construction firms.

However, to achieve this objective, the following secondary objectives are of necessity to be considered:

To identify the causes of fraud in the construction firms.

To identify types of perpetrators involved.

To recommend commensurate measures for reducing the incidence of construction fraud in the Nigerian construction firm.

1.4 SIGNIFICANCE OF THE STUDY

The significance of this study is in the fact that it highlights the immediate and remote causes of fraudulent practices, effects, prevention, and controls in the Nigerian construction firms. Also another significance of this study is that it will serve as a reliable resource material for related research and consultation as this research is covered with lucid explanation and elaborate illustrations with standard references.

1.5 RESEARCH QUESTION

(a)     How effective and efficient is fraud management, in their performance towards deterring fraud in the Nigerian construction firm.

(b)     To what extent is fraud deterrence method a reliable and suitable tool to apply towards deterring fraud in the Nigerian construction firm.

1.6 RESEARCH HYPOTHESIS

Ho:    There is no significant role by the fraud management towards deterring fraud in the Nigerian construction firm.

1.7 SCOPE OF THE STUDY

This project entitled “Deterring and fraud management in the Nigerian construction firms”. Focused on fraudulent activities in the Nigerian construction firms, the effects it has on construction firms and means to correct the anomalies. In order to attain the objectives of this research, the scope of the study will be focus on the selected construction firms in Rivers State.

1.8 LIMITATION OF THE STUDY

This research is limited to studying the causes of fraud in the Nigerian construction firms and the means on how it can be prevented. However, this research was restricted due to lack of fund, time duration and sourcing of the right materials at the right time because the sample that is relevant to this study was not available on time.

1.9 DEFINITIONS OF TERMS

Construction firm: These are business enterprises concerned with the construction of buildings, bridges, civil engineering project, mechanical and electrical installation.

Corporate fraud: This are activities under taken by an individual or company’s that are done in a dishonest or illegal manner and are design to give an advantage to the perpetrators.

Fraud deterrence: This is the proactive identification and removal of the causal and enabling factors of fraud.

Fraud management: This is a system of policies and procedures implemented by a corporation to detect and mitigate its internal risk of employee’s committing illegal act against the company’s interest to enrich themselves.