Fraud is a universal phenomenon which has been in existence for so long. In the prevailing situation in Ethiopia following the fast expansion of the banking industry and adoption of new technologies the internal fraud practice is emerging and observed. The main objective of this study is to determine factors and effects of internal fraud in commercial banks. In convenience of Managements and Senior staffs from each branch, purposive sampling method comprising of the Branch Manager’s, Customer service Manager’s, Accountant’s, Branch controller’s(Auditor’s) and senior clerks with more than five years of work experience within the bank from each of the eleven (11) branches of the bank was employed. Information was gathered from Fifty eight (58) selected staff members who were more expertise and involved in prevention, detection and reporting of fraud related cases. Primary data is used to as the source of data. Three dimensional simple bar-diagram and pie-chart were used in exploring counts and percentages of the resulting descriptive analysis outputs which obtained through SPSS. The study found that fraud considered to be a major problem with in the bank. Hence, the concerned bodies should give due attention to factors identified as contributing high risk of bank fraud due emphasis.