FORENSIC ACCOUNTANT ROLE IN FRAUD DETECTION IN NIGERIA

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 CONTENTS

Title Page                                                                         i

Certification                                                             ii

Dedication                                                               iii

Acknowledgements                                                  iv

Abstract                                                                   v

Table of Contents                                                     vi

Chapter One: Introduction 

1. Background to the Study                                                 1
2. Statement of Problems                                             1
3. Research Questions                                                 2
4. Objectives of the Study                                            3
5. Statement of Hypothesis                                          4
6. Significance of the Study                                                 6
7. Scope of the Study                                                   6
8. Limitation of the Study                                            7
9. Definition of Terms                                                  7

Chapter Two: Review of Related Literature

1. Introduction                                                             11
   1. Financial Crimes and Scandals                               14
   2. Financial Audit and Fraud Audit                             16
   3. The role of Information Technology and the

Digital Environment in Modern Day Fraud              17

1. Historical Background of Forensic Accounting                20
   1. Definition and Meaning of Forensic

Accounting/Accountant                                           21

1. Definition and Meaning of Fraud                             24
2. Types of Fraud                                                                 26
3. Nature and Extent of Financial Crime                     32
4. Causes of Fraud                                                       36
5. Fraud Detection, Prevention and Control                         37
6. Roles of Forensic Accounting in Litigation

Support                                                                   45

1. Forensic Accounting Process                                   53
2. Forensic Accounting Model Curriculum                  54

Chapter Three: Research Method and Design

1. Introduction                                                             56
2. Research Design                                                      56
3. Description of Population of the Study                    57
4. Sample Size                                                             57
5. Sampling Techniques                                              57
6. Sources of Data Collection                                       58
7. Method of Data Presentation                                   59
8. Method of Data Analysis                                          59

Chapter Four: Data Presentation, Analysis and Interpretation

4.1   Introduction                                                             61

4.2   Data Presentation                                                    61

4.3   Data Analysis                                                           62

4.4   Hypothesis Testing                                                  81

Chapter Five: Summary of Findings, Conclusion and Recommendations

5.1   Introduction                                                             89

5.2   Summary of Findings                                              89

5.3   Conclusion                                                              91

5.4   Recommendations                                                   92

References                                                               94

Appendix I                                                               96

Appendix II                                                              97

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 Enron’s financial statements (Folger, 2011).

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.

Research Questions

1. 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?
2. How do we ensure that fraudster does not escape the arms of the law by the use of forensic techniques?
3. What is the main function of forensic accounting?
4. What are the necessary tools that aid economy to achieve its developmental goals?
5. What are the services of forensic accountant and forensic accounting in minimizing corporate crime and fraud?
6. How does government prevent and protect shareholders from the harm of corporate failure?

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.

1.5   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. 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 management’s effectiveness and efficiency in using forensic techniques to reducing fraudulent activities in their establishment.
  • 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.

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.

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 lacuna’s 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.