Chartered Accountant Francis Ohaegbu has emphasised that strong internal controls are essential for businesses seeking to prevent fraud and maintain financial integrity.
In a statement issued to The PUNCH on Tuesday, Ohaegbu noted that the credibility of financial statements is central to good corporate governance and critical to the trust that stakeholders place in any organisation.
“With extensive experience in financial reporting, I have observed how two major forms of fraud, misappropriation of assets and fraudulent financial reporting, can severely undermine a company’s operations,” he said.
According to Ohaegbu, misappropriation of assets typically occurs when employees divert company resources for personal use.
He cited an example involving a cashier in a retail store in Lagos who pockets cash from daily sales before entering the final figures into the system.
“Fraudulent financial reporting, on the other hand, is more sophisticated and usually involves senior executives,” he explained, referring to a tech start-up in Abuja where financial officers allegedly overstated revenue to attract investors.
“This gives a distorted view of the company’s financial health, which is misleading and ultimately detrimental.”
He warned that such fraudulent practices are widespread in businesses with weak internal controls and stressed that robust oversight is necessary to prevent significant financial and reputational damage.
“To reduce fraud risks, firms must separate key duties such as approving and recording transactions to limit the possibility of manipulation,” he advised. “In smaller enterprises, this simple division of responsibilities can make a considerable difference.”
Ohaegbu also advocated regular bank reconciliations and internal audits as effective tools for early fraud detection. He pointed to a manufacturing company in Kano that conducts monthly inventory reviews, helping to prevent asset misappropriation and flag control gaps.
He further highlighted the value of leveraging modern accounting software to enhance financial transparency. “Advanced tools allow for automated transaction tracking and provide detailed records that improve both accuracy and accountability,” he said.
Beyond technology, Ohaegbu urged companies to cultivate a culture of integrity by training employees and encouraging whistleblowing.
“A well-informed staff member who understands the ethical expectations of the organisation is less likely to engage in fraud. ‘Implementing a whistleblower policy, where employees can safely report suspicious activity, is equally important in safeguarding the business,’ he said.
Ohaegbu concluded by urging business leaders to prioritise internal controls as a strategic investment: “It’s not merely a compliance issue; it’s a vital step in protecting the business from within.”
