Internal Control System and Fraud Mitigation: A Case of Selected SMEs in Nigeria

Abstract

Many SMEs in Nigeria struggle with the implementation of effective internal control systems. Internal controls, where they exist, are frequently weak, poorly documented, or inconsistently applied. Hence, this study examined the effect of internal control system on fraud mitigation: a case of selected SMEs in Nigeria. The specific objective was to ascertain the extent to which control activities and monitoring activities affect fraud mitigation among selected SMEs in Nigeria. Descriptive survey design was adopted. A sample size of 196 respondents was calculated using Cochran Formula for sample size determination. Structured questionnaire was used in collecting the primary data for the study. In addition, the data collected were first presented using frequency distribution while the hypotheses were tested using multiple regression. It was found that: control activities have a positive and significant effect on fraud mitigation among selected SMEs in Nigeria (β = 0.418, p = 0.000); monitoring activities have a positive and significant effect on fraud mitigation among selected SMEs in Nigeria (β = 0.574, p = 0.000). In conclusion, when these enterprises embed structured procedures and maintain vigilant oversight within their operations, they create an environment less conducive to fraudulent practices. The study recommends that internal auditors and supervisory staff in SMEs should regularly conduct monitoring exercises, including audits and performance reviews, to ensure that existing controls are functioning effectively and fraud risks are promptly identified.