Empirical Review: Internal Control Systems and Financial Statement Fraud in Nigerian Small And Medium Scale Enterprises

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Authors: EBEBEHOAHON, Matthew, JACKSON-AKHIGBE, Beauty E. (Ph.D.)

Abstract

This empirical summary critically explores the relationship between internal control systems (ICS) and financial statement fraud in Nigerian small and medium-sized enterprises (SMEs). Drawing on quantitative and qualitative information from 2018 to 2025, the summary finds that inadequate segregation of duties, the lack of audit trails, and low adoption of ICT-based controls are key drivers of fraudulent reporting. Regression coefficients from synthesized studies indicate a statistically significant negative relationship between ICS effectiveness and fraud occurrence (β = -0.42, p < 0.01). The study adopted a quantitative survey and correlation analysis design to investigate internal control systems and financial statement fraud in Nigerian small and medium-scale enterprises. Nonetheless, gaps remain in enforcement, management override of controls, and a culture of compliance. Based on the reviewed empirical evidence, it is recommended that SMEs in Nigeria strengthen their internal control systems through regular audits, segregation of duties, and the adoption of digital accounting tools to minimize opportunities for financial statement fraud. The study contributes to understanding how ICS can deter financial statement fraud in poor-resource firms and urges regulatory agencies and SME owners to improve oversight mechanisms, employee training, and ICT.

Keywords: Internal Control Systems; Financial Statement Fraud; SME Sustainability; Accountability; Fraud Detection

3. 2025 - NIJAF - 17 - 203 EBEBEHOAHON AND JACKSON-AKHIGBE.pdf

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