FORENSIC ACCOUNTING: A PANACEA FOR CURBING CORPORATE FRAUDS IN NIGERIA


Content

Abstract

This research work was necessitated due to the increasing frauds and financial malpractice in Nigeria quoted companies and by extension, the developing world which placed financial and accounting issues atop concern for both the international community and financial institutions. The researcher aims at canvassing for the intervention of forensic accounting to solve the vexed problem of financial crimes, shareholders awareness of the concept of forensic accounting. The basic methodology employed to achieve the research objectives was a combination of structured interview and tailored questionnaire from the population of companies quoted on the Nigeria stock exchange (NSE). The Z-test binomial statistics was used as a statetistic tool for the testing of hypothesis. The study showed among others that the application of forensic accounting has a positive relationship with the credibility of audited financial statement, as well as detection of fraud in reporting audited financial statement. It was recommended that forensic accounting practice should be encouraged and integrated, into the conduct of business in the Nigeria quoted companies.

 

 

 

TABLE OF CONTENTS

Title Page                                                                 i

Certification                                                             ii

Dedication                                                               iii

Acknowledgements                                                  iv

Abstract                                                                   v

Table of Contents                                                     vi

Chapter One: Introduction 

1.1      Background to the Study                                                 1

1.2      Statement of Problem                                              3

1.3   Research Questions                                                 3

1.4   Objectives of the Study                                            4

1.5   Statement of Hypotheses                                         5

1.6   Scope of the Study                                                   6

1.7   Significance of the Study                                                 7

1.8   Limitation of the Study                                            8

1.9   Definition of Terms                                                  8

Chapter Two: Review of Related Literature 

2.1   Introduction                                                             10

2.2   Concept of Forensic Accounting                              12

2.3      Forensic Accounting and Auditing                           15

2.4   Functions of Forensic Accounting                           16

2.5   Importance of Forensic Accounting Services in

Nigeria Quoted Companies                                      17

2.6      Problems of Forensic Accounting                             18

2.7      Possible Remedies to the Problems of Forensic Accounting                                                             19

2.8      The Forensic Accountant                                                 20

2.9   The Role of a Forensic Accountant in Solving the Vexed Problem of Corporate World                                       21

2.10 Qualities of a Forensic Accountant                                 22

2.11  Duties and Responsibilities of a Forensic Accountant       24

2.12 Procedure for Conducting the Work of Forensic  Accounting                                                          25

2.13 Forensic Accountant in the Audits                         27

2.14 Financial Statement Fraud                                     28

2.15 Prevention and Detection Strategy of Financial Statement Fraud                                                   29

2.16 Fraud under Review                                                29

2.17 The Fraud Triangle for Forensic Accounting           31

2.18 Role of Information Technologies to Perform

Computer related Fraud                                           32

2.19 Forensic Information Technology (IT)                      34

2.20 Forensic Accountants Testifying as Expert Witness

and  Fraud Trial Education                                     35

2.21 Organization of Forensic Accounting Profession in Nigeria                                                                     36

2.22 Connecting Link between Corporate Governance

and Forensic Accounting                                                 37

 

Chapter Three: Research Method and Design

3.1   Introduction                                                             39

3.2   Research Design                                                      40

3.3   Description of Population of the Study                    40

3.4   Sample Size                                                             41

3.5   Sampling Technique                                                41

3.6   Sources of Data Collection                                       42

3.7   Method of Data Presentation                                   43

3.8   Method of Data Analysis                                          43

 

Chapter Four: Data Presentation, Analysis and Interpretation

4.1   Introduction                                                             45

4.2   Presentation of Data                                                45

4.3   Data Analysis                                                           49

4.4   Test of Hypotheses                                                   62

 

Chapter Five: Summary of Findings, Conclusion and Recommendations

5.1   Introduction                                                             71

5.2   Summary of Findings                                              71

5.3   Conclusion                                                              74

5.4   Recommendations                                                   74

References                                                               77

Appendix I                                                               79

Appendix II                                                              80


CHAPTER ONE

INTRODUCTION

1.1      Background to the Study

Historically, Forensic Accounting is certainly not a new field, research findings have shown that the profession has been in existence a long-time ago.

The true and fair view of the financial statements by the statutory auditors is designed to give credibility to such financial report. But going by the growing rate of corporate scandals and collapse of corporate organizations, one has to argue the relevance of this opinion.

EFCC (2004) stated that modern financial crimes such as embezzlement, bribery, bankruptcy, security fraud, among others, have taken the centre stage in the scheme of things and on the scale of governmental preference. Besides, the detection or minimization of these crimes are made more difficult and committing these crimes much easier.  

In it 2004 report on worldwide corrupt practices transparency international survey which covered 146 countries in the world, which rated Nigeria as the third most corrupt country in the world, moreover, some basic and common financial crimes have raised issues and find expression in employees theft, payroll frauds, fraudulent billing system, management theft, corporate frauds and insurance fraud, among others. Therefore the consequences and the effects of financial crimes in corporate organization are very grave.

It is against this background that forensic accounting from the public accounting domain emerges. It responds simply to the growing sophistication and awareness of these crimes. Forensic accounting encompasses three major areas of investigation, dispute resolution and litigation support.

This project aims at appraising how the investigation area of forensic accounting can minimize financial crimes in corporate organization.

 

 

 

 

1.2      Statement of Problem

This project is to address some of the deficiencies by looking towards a forensic accountant as the best antidote to curbing financial and economic crimes, and also to prevent and reduce misappropriation of corporate funds. Also, the failure of statutory audit to prevent and reduce this misappropriation of corporate funds and increase in corporate crimes has put pressure on professional accountant and legal practitioners is to find a better way of exploring fame in business world. A nation-wide study conducted by Kessler international showed that 39% of organizations have considered the need for a forensic accountant.

1.3   Research Questions

The following research questions are raised.

1.     Is there any relationship between forensic accounting and corporate fraud in Nigeria?

2.     How can the practices of forensic accounting play an important role in curbing a company’s corporate performance?

3.     To what extent can public confidence and trust be restored through the practices of forensic accounting and corporate governance in Nigeria?

4.     To what extent is the level of awareness of forensic accounting practices in Nigeria?

5.     How can the application of forensic accounting detect and minimize computers related fraud or e-crime in Nigeria companies?

1.4   Objectives of the Study

1.     To examine if there is any relationship between forensic accounting and corporate fraud in Nigeria.

2.     To evaluate how the practices of forensic accounting could play an important role in curbing a company’s corporate performance.

3.     To evaluate how forensic accounting and corporate performance can provide professional investigative and litigation support services in Nigeria.

4.     To determine the extent at which forensic accounting practices detect and minimize computer related fraud or e-crimes in Nigeria companies.

5.     To determine whether the application of forensic accounting services in Nigeria quoted companies can detect fraudulent activities.

1.5   Statement of Hypotheses  

The following null and alternative hypotheses have been formulated to serve as a base for this research.

Hypothesis One

Ho: Forensic accounting has no relationship with curbing the problem of corporate frauds for public confidence and crime eradication in Nigeria.

HI:    Forensic accounting has a close relationship with curbing the problem of corporate frauds for public confidence and crime eradication in Nigeria.

Hypothesis Two

Ho: Litigation support services by forensic accounting cannot lead to appropriate judgment for economic and financial crime eradication in Nigeria.

HI:    Litigation support service by forensic accounting can lead to appropriate judgment for economic and financial crime eradication in Nigeria.

 

Hypothesis Three

Ho: Forensic accounting practices cannot assist in the detection or minimization of computer fraud or electronic related fraud.

HI:    Forensic accounting practices can help eradicate computer fraud or e-crimes in Nigeria quoted companies.

Hypothesis Four

Ho: Forensic accounting and extent of fraud detection are not in any way related.

HI:    Forensic accounting and extent of fraud detection are positively related.

Hypothesis Five

Ho: Forensic accounting cannot help to ascertain the level of credibility of audited financial statement.

HI:    Forensic accounting has a major role to play in ascertaining the level of credibility of audited financial statement.

1.6   Scope of the Study

The area of coverage is restricted to Nigeria situation b the use of questionnaire and direct interview. Also covers a survey of quality corporate management and control in forensic accounting services in Nigeria. This study is undertaken to evaluate the role of forensic accounting: a panacea to curbing corporate fraud within Nigeria geographical states. The study limit itself to some quoted firms in the Nigerian Stock Exchange (NSE), with special emphasis on the impact it can have on restoring the credibility of audited financial statements of companies, as well as fight against corruption and computer related frauds in Nigeria.

1.7   Significance of the Study

The significance of this study is to corporate companies, investors, Nigeria government, and the general public. The study will educate these groups on the role and importance of a forensic accounting in curbing corporate frauds, thereby help to restore the lost confidence by the public and the government as regard forensic accountant and corporate performance in Nigeria and also reduce the incidence of fraud and mismanagement and protects credibility.

The study will also be beneficial to academicians and other future researchers/users in similar subject matter. 

1.8   Limitations of the Study

There is no study undertaken by a researcher that is perfect. This could be as a result of some constraints that affect the researcher in the course of the project work.

Some of these constraints are,

1.     Inadequate research materials.

2.     Inadequate primary data.

3.     Policy of the respondent company/individual e.g.
different depreciation method used will seriously affect the research data.

1.9   Definition of Terms

·                    Investigation: The use of specialized investigative skills in carrying out an inquiry conducted in such a way that the outcome will have application of the law.

·                    Forensic Accounting: Is defined as the practice of vigorous data collection and analysis in the area -of litigation support consulting, expert witnessing, and fraud examination.

·                    Forensic Audit: This refers to the examination of all evidence regarding an assertion to ascertain its correspondence to establish criteria carried out, in a manner suitable to a law court.

·                    Litigation: This simply means the judicial process of, carrying out legal context.

·                    Electronic Crimes: Are crimes committed through the use of information technology (I.T)

·                    Corporate Governance: Is defined as the system and standard by which companies are directed •and controlled.

 

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