The Role Of The Forensic Accountant In Fraud Detection In Nigeria

Project and Seminar Material for Accountancy / Accounting

Abstract

This research work examines the role of the forensic accountant in fraud detection in Nigeria. Forensic accountant plays a significant role in the Nigeria organizations whereby he investigates with the use of technological equipment in its assignment. The researcher employs primary data (questionnaire and personal interview) in its data collection. Hypotheses was analyzed with the use of z- test at 5% level of significance and the result reveal that a good forensic accountant will assist in the growth and development of any organization in which he carried out his assignment. This work recommend among others that a high degree of mutual trust, respect and understanding should exist among the lives of the forensic accountant, management in order to achieve the organizational objectives.

Table of Content

Title Page
Certification
Dedication
Acknowledgement
Table of Content
List of Tables
Abstract

Chapter One:

Introduction

1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Limitation of the Study
1.9 Definition of Terms
1.10 Organisations of the Study

Chapter Two:

Review of Literature

2.1 Conceptual Framework
2.2 Theoretical Framework
2.3 Empirical Review

Chapter Three:

Research Methodology

3.1 Research Design
3.2 Population of the Study
3.3 Sample Size Determination
3.4 Sample Size Selection Technique and Procedure
3.5 Research Instrument and Administration
3.6 Method of Data Collection
3.7 Method of Data Analysis
3.8 Validity of the Study
3.9 Reliability of the Study
3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

4.1 Data Presentation
4.2 Analysis of Data
4.3 Answering Research Questions
4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

5.1 Summary
5.2 Conclusion
5.3 Recommendation
References
APPENDIX
QUESTIONNAIRE

Chapter One

Introduction

1.1 Background to the Study

The trend and the volume are increasing on a daily basis and all levels of the society are involved. The rich, the poor, the young and the elderly, the male and female all are neck deep in fraud and fraud related activities that say a lot about our moral and family situations. From the politicians to the bank directors/executives, from the legal officers to the law enforcement personnel, from the civil servants to the school teacher, from the trader in the market to the hawkers on the street, the tendency for fraud and fraud related crimes is endless.

The first and most sophisticated way of carrying out the fraudulent activities in many organizations is through the accounting and financial records. It is a recognized fact that the management of Enron-the celebrated energy company in USA defrauded by her top management used creative accounting to make the company look good and powerful on paper than it really was using special purposes subsidiaries that have a single purpose and that did not need to be included in Enron’s balance sheet to hide risky investment activities and financial losses. However, forensic accounting helped subsequently to determine that many of Enron’s recorded assets and profits were inflated, and in some cases, completely fraudulent and nonexistent. Some of the company’s debts and losses were recorded in offshore entities, remaining absent from Enrons financial statements (Folger, 2011).

Forensic accounting is the tripartite practice of utilizing accounting, auditing and investigative skills to assist in legal matters. It is a specialized field of accounting that describes engagements that result from actual or anticipated disputes or litigation. Forensic accounting can, therefore, be seen as an aspect of accounting that is suitable for legal review and offering the highest level of assurance (Apostolou, Hassell & Webber, 2000). Ojaide (2000) notes that there is an alarming increase in the number of fraud and fraudulent activities in Nigeria, requiring the visibility of forensic accounting services. According to the Centre for Forensic Studies (2010) report, the increasing need for forensic and investigative accounting in the banking sector results from the complexities of modern day banking with large volume of complex data. This makes it difficult to monitor transactions by applying manual audit processes. This in turn makes the control utility of auditing ineffective. Virtually all the weaknesses and challenges identified in the banking industry in Nigeria’s post-consolidation, and criminal investigations and prosecutions arising from them, are issues for forensic accounting. Hence, Modugu and Anyaduba (2013) conclude that the general expectation is that forensic accounting may offer some respite to the seeming vulnerability of conventional accounting and audit systems to financial fraud.

According to Abdulrahman (2019), financial related fraud and increase in financial crime has led to the need of forensic accounting in order to aid investigation and prosecution of the syndicates of financial crimes just liked in the case of some prominent political parties ex-governors in Nigeria are presently facing trials on money laundering, embezzlement, misappropriation of funds, security fraud, breach of contract from different court of laws within the country and many more including some public civil servants that converted public treasury as personal assets to their pockets.

Ehioghiren and Atu (2016) opined that forensic accounting encompasses three major areas, investigation, dispute resolution and litigation support. Forensic accounting has been identified as tool in detecting and implementation of white-collar Investigations (Hansen, 2009). Degboro and Olofinsola (2007) described forensic accounting as the application of criminalist methods, and integration of accounting investigative activities and law procedures to detect and investigate financial crimes and related accounting misdeeds. According to Enofe, Olorunnuho and Okporua (2016), forensic accountants play a role in litigation support services in the public sector and are relevant in documentation and reporting. It was observed that forensic accounting plays a significant role in curbing crime and corrupt practices in any public sector since it provides a mechanism to hold people accountable, such that those who manage resources in a fiduciary capacity do not easily abuse that trust without detection. Gbegi and Adebisi, (2014) observed that the forensic accounting skills and techniques could help to investigate fraud occurrence since the external auditors do not or may not have the required training to be able to tackle modern frauds like white collar crimes such as security fraud, embezzlement, bankruptcy, contract disputes, and possible criminal financial transactions.

There is an alarming increase in the number of fraud and fraudulent activities in Nigeria, requiring the visibility of forensic accounting services. Also the recent happening in the forensic audit of the oil sector where the present government is demanding for another forensic audit exercises to be carried out after a Nigerian audit firm has presented a report to the authority. In recent, several studies have centered on the detective role of forensic accounting in fraud management in Nigeria especially in banks. It is on this note that this study takes more in-depth look at forensic accountant and its role in fraud management by firms in Nigeria.

1.2 Statement of Problem

The study seeks to address issues of concern to researchers that bothers on fraud and corruption which includes: The continuous increase in crimes, fraud and embezzlement is not withstanding the presence of law enforcement agencies.

The evidence to prove the guilt of criminals and fraudsters are properly led in the court of law. The law enforcement agencies are able to effectively and efficiently prosecute criminals and fraudsters without prejudice.

The emerging economy is able to survive and realize its developmental goals in a fraudulent environment. Forensic accounting services can be used in reducing the rate of fraud, crime and corruption. The government assist in protecting shareholders who have suffered from corporate failure due to fraud. The services of forensic accountant help in reducing the rate of fraud, crime and corruption.

1.3 Objective of the Study

This study seeks to:

To find out the inherent weakness of other programmes, policies, systems and agencies set up by the government or the institutions to prevent and fight against the commission of fraud, crime and corruption.
To find out ways in ensuring that fraudster does not escape the arms of the law by the use of forensic techniques.
To seek out ways in ensuring that law enforcement agencies carry out their activities without prejudice.
Providing the necessary tools that will aid an emerging economy to achieve its developmental goals irrespective of the challenging fraudulent environment.
Using the services of forensic accountant and forensic accounting as a tool in minimizing corporate crime and fraud.
To know how government will prevent and protect shareholders from the harm of corporate failure through effective and efficient policing of the activities of corporate managers.

1.4 Research Questions

What is the role of forensic accounting towards the inherent weakness of programmes, policies, systems and agencies set up by the government or the institutions?
How do we ensure that fraudster does not escape the arms of the law by the use of forensic techniques?
What is the main function of forensic accounting?
What are the necessary tools that aid economy to achieve its developmental goals?
What are the services of forensic accountant and forensic accounting in minimizing corporate crime and fraud?
How does government prevent and protect shareholders from the harm of corporate failure?

1.5 Statement of Hypotheses

Hypothesis is a tentative statement of relationship between dependent and independent variables. This hypothesis intends to gather data and test.

The following hypothesis are tested:

Hypothesis One

HO: The activities and functions of forensic accountants will not help to reduce fraud and corruption in an emerging economy.
HI: The activities and functions of forensic accountants help to reduce fraud and corruption in an emerging economy.

Hypothesis Two

HO: That despite the different regulatory agencies established by government, nothing seemed to have been achieved in an attempt to reduce corporate fraud and corruption.
HI: That despite the different regulatory agencies established by government, something seemed to have been achieved in an attempt to reduce corporate fraud and corruption.

Hypothesis Three

HO: That forensic accounting service employed in the private and pubic sector or organization and other institution through their expert suggestion will not assist in the growth and development of such organization.
HI: That forensic accounting service employed in the private and pubic sector or organization and other institution through their expert suggestion will assist in the growth and development of such organization.

1.6 Significance of the Study

This study will in no small way assists in bringing to bear the knowledge of forensic accounting in a more familiar way to citizen of Nigeria.

The suggestion provided, if adequately implemented will obviously minimize if not completely erase the rate of fraud and corruption in most Nigerian organizations.

The study further highlights the relevance of forensic accountant to the legal system in terms of being an expert witness.

This study will be of immense value to other researchers in the field of academics by proving secondary data for their research work. It will also aid managements effectiveness and efficiency in using forensic techniques to reducing fraudulent activities in their establishment.

1.7 Scope of the Study

This study examines the relevance of the forensic accountant in fraud detections in Nigeria. This study will illustrate the role of the forensic accountant as it impact on organizational timeframe performance in Nigeria between 2008-2013.
For the course of this study, the researcher used a high sample size of 50 for effective survey.

1.8 Limitations of the Study

The essential constraint militating against this research work is the inability to assess a sizeable number of accountants, accounting firms, banks and other financial institutions given the time constraint for the completion of this work.

1.9 Definition of Terms

Industrialization:

Is a process of social and economic change whereby a human society is transformed from a pre-industrial to an industrial state.

Forensic Industrialization:

Is an expertise laboratory, combined with the rapid response capacity across analytical techniques, which can give customers a rapid analysis and understanding of crucial industrial processes and issues.

Forensic Accounting:

Is the identification interpretation and communication of the evidence of economic transaction and reporting system. It is the application of legal and financial skills in the conduct of evidence with respect to unresolved issues in the business communities.

Forensic:

Is a scientific method in the investigation of crime. It can also be seen as a method of fraud investigation which includes the analysis of records to prove or disprove.

Accounting:

Is seen as a systematic identification, measuring, recording, classifying, summarizing, interpreting and communicating of financial or economic information so as to enable the users of the information make an informed judgement therefrom.

Fraud:

Is a legal term that refers to the intentional misrepresentation of the truth in order to manipulate or deceive a company or individual.

Auditing:

Is a systematic process of objectively obtaining an evaluating evidence regarding assertions about economic actions and events to ascertain the degree to correspondence between those assertions and established criteria and communicating the results to interested users.

It is also the independent examination of, and expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory and professional obligation.

Financial Auditing:

Is the verification of financial statement of a legal entity with a view to express an audit opinion, which is intended to provide reasonable assurance, but not absolute assurance, that the financial statement are presented fairly in all material respects, and/or give a true and fair view in accordance with the financial reporting framework.

Compensation:

It is the given payment to reduce the bad effect of loss, injury, etc. It is also the money that someone pays you because they have harmed or hurt in some ways.

Fraud Detection:

This is a suitable aspect in the forensic process whereby crimes are being discovered in the process of analytical lacunas or mistrusted high five in an organizational statement or assignment.

Fraud Preventions:

This is a system or fiduciary process of safeguarding the assets under control as a crucial factor in declaring them responsible for the prevention of fraud and other irregularities in the organization.

Control of Fraud:

It is a systematic process by the forensic accountant whereby he put all necessary act that will lead to the greatness of the enterprise in which he endog himself safe and all other crime committed at past being eradicated with its professional skill and ability of bringing out the best in the enterprise.

1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
Chapter three deals on the research design and methodology adopted in the study.
Chapter four concentrate on the data collection and analysis and presentation of finding.
Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary of Findings, Conclusion and Recommendations

5.1 Introduction

After the relevant points have being summarized a conclusion is reached with respect to the topic and consequently, the necessary suggestion and recommendation are made.

5.2 Summary of Findings

The study showed the greater percentage of the respondents believed that there is a positive role that forensic accounting played in Nigeria. They affirmed that forensic accounting plays a significant role within the concept of generating and improving the wealth of an organization.

Beside, the research also revealed that the role of the forensic accounting information is more prevalent subject in the international countries than that of Nigeria.

5.3 Conclusion

Forensic accountant is usually integrated into the live in harmony with its operating in Nigeria. So there is the need to resolve the problems that could hinder the discharge of forensic accountant.

This is so because an organization can perform optimally in the role of forensic accountant where it is situated in a forensic organization which could be discharged from time to time.

5.4 Recommendations

Based on the findings, the analysis of information and data collected, the researcher therefore made the following recommendations:

Nigeria should adopt the system of forensic accounting.
The use of forensic accounting, forensic accountant in fraud detection will help an organization in determining the amount of crime in its operation and eradicate crime so organization should adopt the system of forensic.
The accounting sectors in Nigeria should follow the steps used in the international countries to have a high level of trusted forensic account and personnel in its sectors.
Since forensic accounting play a crucial role in the Nigeria organizations, government should give companies the free hand in exercising and formulating their policies based on forensic accounting purposes.
Forensic accounting if adopted will improve all level of personnel in an organization whereby their level of thinking and the use of scientific machine adopted down to the gateman.

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