ABSTRACT
The impact of forensic accounting on financial fraud in Nigeria was investigated in this study. Three research questions were created to do this. The study was conducted at the Nigerian Central Bank in Abuja. In this study, the survey design was used, as well as simple random sample procedures. The study’s sample size has been set at 42 CBN employees. The questionnaire was utilized as the data collection tool, and the data was analyzed using a frequency distribution table.
The findings show that forensic accounting’s effectiveness in detecting and preventing fraud in Nigeria is practically non-existent; forensic litigation has a positive effect on the recovery of funds lost to fraud; and the extent to which forensic accounting reduces fraudulent occurrence in Nigeria is unacceptably low.
Based on the findings, the researcher proposed that the Nigerian government, commercial and non-profit groups, and government officials develop the necessary equipment, software, and other technology goods to aid accountants in fraud detection and prevention. Furthermore, most accounting practices and kills in Nigeria are stopped or out of date with current skills and effective skills, thus firms should provide training chances for accountants.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Fraud is an endemic that is gradually becoming a normal way of life in both the public and private sectors in Nigeria, ranging from presidential cabinets through political officers, ward councillors, managing directors of enterprises, middle management cadre, and lower managers (Gbegi & Adebisi, 2014). Financial fraud has long been regarded as a threat, with the Enron and Bernie Madoff scandals, WorldCom, Lehman Brothers, Tyco International Ltd, and Adelphia Communications Corporation in the United States, the Parmalat problems in Italy, and HIH Insurance Ltd in Australia all falling victim to it. Cadbury Nigeria Plc, Afribank Nigeria Plc, NAMPAK, Oceanic Bank Nigeria Plc, and African Petroleum Plc all faced similar problems in Nigeria.
Despite the numerous laws in place to limit, alleviate, and, if possible, eliminate the occurrence and instances of fraud, it is concerning that fraud has become so pervasive in Nigeria that it is fast approaching epidemic proportions.
In reality, in Nigerian businesses, fraud has become an everyday occurrence.
Forensic accounting is a three-part process that involves using accounting, auditing, and investigative abilities to help with legal issues. It’s a type of accounting that deals with engagements that arise from real or anticipated conflicts or litigation. As a result, forensic accounting can be thought of as a branch of accounting that is acceptable for legal scrutiny and provides the highest level of confidence (Apostolou, Hassell & Webber, 2000). According to Ojaide (2000), the number of fraud and fraudulent actions in Nigeria is on the rise, necessitating the prominence of forensic accounting services. According to a research published by the Centre for Forensic Studies (2010), the growing demand for forensic and investigative accounting in the banking sector stems from the difficulties of modern banking, which involves vast amounts of complicated data. This makes manual auditing procedures difficult to use to keep track of transactions. As a result, auditing’s control usefulness is rendered ineffective. Almost all of the vulnerabilities and challenges discovered in Nigeria’s post-consolidation banking system, as well as criminal investigations and prosecutions stemming from them, are forensic accounting issues.
As a result, according to Modugu and Anyaduba (2013), the prevailing expectation is that forensic accounting will provide some relief from the apparent vulnerability of traditional accounting and auditing systems to financial crime.
According to Abdulrahman (2019), the rise in financial crime has necessitated the use of forensic accounting to aid in the investigation and prosecution of financial crime syndicates, such as in the case of some prominent political parties ex-governors in Nigeria who are currently facing money laundering, embezzlement, misappropriation of funds, security fraud, and breach of contract trials in various courts throughout the country. According to Ehioghiren and Atu (2016), forensic accounting is divided into three areas: investigation, dispute resolution, and litigation assistance. In order to detect and implement white-collar investigations, forensic accounting has been regarded as a useful technique (Hansen, 2009). To detect and investigate financial crimes and related accounting wrongdoing, Degboro and Olofinsola (2007) defined forensic accounting as the application of criminalist methods, as well as the integration of accounting investigation operations and legal procedures. Forensic accountants play a role in litigation support services in the public sector, according to Enofe, Olorunnuho, and Okporua (2016), and are important in documenting and reporting. It has been observed that forensic accounting plays an important role in reducing crime and corrupt practices in any public sector since it provides a means to hold people accountable, ensuring that those who commit crimes are held accountable.
Gbegi and Adebisi (2014) observed that forensic accounting skills and techniques could aid in fraud investigation because external auditors lack or may lack the necessary training to deal with modern frauds such as security fraud, embezzlement, bankruptcy, contract disputes, and possible criminal financial transactions.
In Nigeria, the incidence of fraud and fraudulent activities is increasing at an alarming rate, necessitating the exposure of forensic accounting services. Also, the recent events in the oil industry forensic audit, where the current administration is requiring that another forensic audit be conducted after a Nigerian audit firm has supplied the authorities with a report.
STATEMENT OF THE PROBLEM
In Nigeria, fraud has become a recurring theme. In fact, according to an FBI analysis from 2018, Nigeria is one of the top five fraud hotspots in the world, with the majority of perpetrators hailing from the country. According to the Central Bank of Nigeria’s 2018 report and the Nigeria Deposit Insurance Commission’s 2018 report, banks lose a large amount of money to fraud each year. According to a report by the Economic and Financial Crime Commission (EFCC), huge businesses and powerful individuals in Nigeria have continued to fall victim to scammers, losing large sums of money in the process. A succession of frauds have been conducted in the public and private sectors of the economy in recent years. These are undoubtedly carried out under the supervision of the organization’s internal auditors. As a result, forensic accounting has emerged as a method of detecting fraud, as regular accounting systems and auditing have failed to detect fraud in some instances. In fraud prevention, detection, and management, forensic accounting is considered as playing a more advanced function. However, its use and effectiveness have generated severe issues, as it has been suggested that it is mostly utilized in the aftermath of a scam to identify the perpetrators and how the fraud was perpetrated in order to prevent future occurrences. The sophistication of fraud perpetrators and the participation of insiders who know how to sneak around the system and avoid being detected have also cast doubt on the effectiveness and necessity of forensic accounting as a technique used primarily for legal purposes. Furthermore, beyond the numerous incorrect viewpoints that abound, there has not been enough attention, particularly survey research, on how forensic accounting might help curtail financial and economic crimes. All of these issues, as well as others, have necessitated the creation of this study.
PURPOSE OF THE STUDY
The overall goal of this research is to determine the impact of forensic accounting on fraud management. The following are the precise goals:
1.To investigate the efficacy of forensic accounting in the detection and prevention of fraud.
2.To see how forensic litigation affects the recovery of cash lost due to fraud.
3. To determine how effective forensic accounting has been in reducing fraud in Nigeria.
RESEARCH QUESTIONS
The following research questions were posed to guide the research in order to fulfill the study’s objectives:
1.To what extent is forensic accounting useful in detecting and preventing fraud?
2. How does forensic litigation affect the recovery of cash lost due to fraud?
3. How effective has forensic accounting been in reducing the incidence of fraud in Nigeria?
SIGNIFICANCE OF THE STUDY
The following are the implications of the research:
1. To the government: The study will inform various governments on how to give forensic accountants and auditors more power and responsibility in order to combat fraud and lower operational costs.
2. This study aims to educate the public on the purpose and operations of forensic accounting, as well as the importance of forensic accounting.
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