Application of Fraud Box-Key Model in the Determination of Fraud Risk Factors : Evidence from Banks in Nigeria

This study examined the application of fraud box-key model in the determination of fraud risk factors in the banking industry in Nigeria. The objectives of the study were to investigate the extent to which elements of fraud diamond (pressure, opportunity, rationalization and capability) contribute to fraud risk and to appraise the role of corporate governance in the determination of fraud risk factors. The variables on which data were collected from secondary source include assets and liabilities of banks as well as the income statement. The techniques of data analysis adopted comprised descriptive, quantitative, qualitative and comparative approaches. The statistical tools used in testing the hypotheses in order to determine the level of significance of elements of fraud diamond and corporate governance was regression analysis. Our finding revealed that elements of fraud diamond model are critical factors, in the determination of fraud risk in Nigeria banks. The study also revealed that there is a positive relationship between corporate governance dysfunction and financial statements fraud. The researchers developed fraud box-key model as improvement on fraud diamond model by adding a fifth element (corporate governance) as contribution to knowledge. The implication of this study therefore is that fraud diamond model can be an alternative to CAMELS model (an acronym for Capital adequacy, Asset quality, Management efficiency, Earnings strength, Liquidity position and Sensitivity to market risk) in the assessment of banks in Nigeria especially where fraud is suspected. Thus, the researcher recommended that fraud diamond model should be adopted in the professional literature like the fraud triangle that was included in Statement on Auditing Standard (SAS) 99 (Consideration of fraud in a financial statements audit). Good corporate governance, segregation of duties and close monitoring of people with capabilities in the banks were equally recommended