Cyber Fraud and Financial Statement Integrity in Nigerian Deposit Money Banks: The Moderating Role of Internal Audit Effectiveness

Abstract

The rapid digitisation of banking services has increased exposure to cyber fraud, including phishing, identity theft, system intrusion, and unauthorised electronic transactions. The effectiveness of internal audits can significantly influence the extent to which cyber fraud affects financial statement integrity, acting as a critical moderating factor. This study examined the effect of cyber fraud on the integrity of financial statements in Nigerian deposit money banks, with internal audit effectiveness as a moderating variable. Specifically, the study focused on vishing and card skimming as key forms of cyber fraud affecting financial reporting. A survey research design was adopted, utilising structured questionnaires to collect primary data from employees, including banking professionals, internal auditors, finance managers, and IT personnel from selected banks. Data were analysed using frequency tables, percentages, and multiple regression analysis. The findings revealed that both vishing (coefficient = -0.478, p = 0.000) and card skimming (coefficient = -0.352, p = 0.000) have significant negative effects on the integrity of financial statements, indicating that these cyber fraud activities compromise the accuracy, completeness, and reliability of financial reporting. Additionally, internal audit effectiveness was found to significantly moderate the relationship between cyber fraud and financial statement integrity, with interaction terms VISHIAE (coefficient = 0.145, p = 0.005) and CSIAE (coefficient = 0.127, p = 0.009), demonstrating that robust audit practices can mitigate the adverse impacts of fraudulent activities. Based on these findings, the study recommends strengthening cyber fraud prevention strategies, enhancing technological safeguards against card skimming, and reinforcing internal audit functions to protect financial statement integrity. The study contributes to understanding cyber fraud risks and the importance of internal audit oversight in maintaining reliable financial reporting within the Nigerian banking sector. The findings imply that policymakers and regulatory authorities, such as the Central Bank of Nigeria, should develop guidelines that promote the adoption of best practices in cyber risk management and audit governance.