The Effectiveness of Internal Control System in Detection and Prevention of Fraud in Ethiopian Banking Industry

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Addis Ababa University


Frauds are experiences Banks and other organizations have to mitigate. All organizations whether profit oriented or not, operates within conditions of resource constraints. As a result, various steps are taken and procedures established to ensure that the use of these resources is maximized in achieving organizational goals. The banks and regulatory authorities have proposed and allowed internal control(IC) measures to check the practice of bank fraud. But the effectiveness of any internal control system is dependent on how fluid the system interacts with itself and how embedded it is into the organization’s business processes. This paper examines the issues of effective internal control vs. fraud Detection and prevention in the Ethiopian banking industry by adopting primary data. Using a survey method, this work examined how the internal control systems in the Ethiopian banks have aided in combating or preventing fraud in the banking industry. To do this the study examines the effectiveness of internal control in Ethiopian banking industry and based on that effectiveness the researcher test the effectiveness of ICs in preventing and detection of fraud in Ethiopian banking industry. Among the findings were those internal control techniques employed by banks in checking fraud have been effective but put marks on some improvements and the final conclusion of this study is that there is a significant relationship between internal control system component (control environment (CE), risk assessment (RA), control activity(CA), information and communication (IC) and monitoring(MA)) and fraud. As a result, the researcher has given some recommendations so as to provide input for areas of control which needs more attention and due to ongoing process nature of the effective internal control.


A thesis submitted to the department of accounting and Finance (A.A.U) in partial fulfillment for the requirement of The degree of Master of Science in accounting & finance


Fraud prevention and detection, Internal control, Internal control components