Forensic Accounting As A Toolfor Fraud Detection And Prevention In Nigeria

Forensic Accounting As A toolfor fraud detection and Prevention In Nigeria

Chapiter 1

Introduction

1.1. The Study’s History

Forensic or investigative accounting has become necessary due to the problem of fraud, money laundering, and other unethical behaviors in commercial and governmental institutions. The area of accounting known as forensic or investigative accounting deals with recouping the proceeds of fraud, money laundering, and other associated corrupt activities that may take place in an organization. When fraud is suspected or identified, forensic accountants are enlisted to assist in identifying the fraud and provide management with strong evidence that can be used to prosecute the suspects involved in the fraud in court. Due to an increase in white collar crimes, the term “forensic,” which refers to evidence or material(s) to be used in court, has been integrated into accounting and finance (Mazunder, 2011). Mazunder also said that although law enforcement officials were increasingly aware of white collar crimes in recent years, they lacked the knowledge and training to stop them.

Zysman (2004) asserts that forensic accounting makes use of talents in accounting, auditing, and investigation. Enyi (2012) said that an accountant is necessary to catch a dishonest or corrupt accountant since a man must be able to pull off a monkey’s trick to capture one. To successfully complete forensic accounting, an auditor must adhere to strict ethical standards. An auditor must be completely impartial and knowledgeable about the strategies used by management and employees to commit fraud in a firm.

Kutilya was the first economist to publicly acknowledge the necessity for forensic accountants, and Joshi (2003) traced the development of forensic accounting back to him. A court decision from 1817 served as the foundation for the earliest type of forensic accounting. ‘Forensic Accounting’ was first used in 1946 by Puloubet. ‘Forensic Accounting’ was originally mentioned in a work by Publoubet.

Due to an increase in fraud, money laundering, and other types of economic and financial crimes since Nigeria won independence in 1960, forensic accounting has been around (Enyi, 2012). The term “forensic accounting” is not new in Nigeria, where it is regularly used by auditors, police, and intelligence agencies in the course of their work.

One well-known feature of the majority of businesses throughout the world is the rising demand for forensic accounting. The need for forensic accounting results from the consequences and root causes of fraud and human mistake in technology. The practice of forensic accounting is relatively new in Nigeria since businesses have only recently understood the importance of hiring a forensic accountant due to the sharp rise in the number of fraud cases. According to Arokiasamy and Cristal (2009), forensic accounting is the use of financial expertise and an investigative mindset to unresolved problems. It takes place within the framework of the rules of evidence.

According to Bologna and Lindquist (1987), the field of forensic accounting includes knowledge of fraud, financial skill, a solid grasp of business reality, and a comprehension of how the judicial system functions. One of the best and most successful ways to lessen and stop accounting fraud may be through forensic accounting. Worldwide interest in forensic accounting is currently growing. According to Howard and Sheetz (2006), it has been offered as a major course in numerous educational institutions around the world.

According to a statement, “Government spending has always been a big business, but it has become so massive today that the public through its legislators is demanding to know whether the huge outlays of money are being spent wisely or whether they should be spent at all.” Officials and staff who oversee public sector operations are obligated to provide the public with adequate accounts of their operations (Ribadu, 2005).

All around the world, in both the public and commercial sectors, fraud is becoming more prevalent. No country is immune from fraud, but developing countries and its many governments experience the most damage.

According to reports, forensic accounting will significantly enhance the effectiveness of fraud prevention and detection. Through the establishment of a professional forensic accounting service, this study aimed to assist and remind the public sector organizations in Kogi State’s impacted ministries to develop an integrated approach to preventing and controlling fraud and corruption in the workplace.

1.2 Statement Of The Problem

Numerous frauds have recently been committed in the economy’s public and commercial sectors. There is no doubt that these are carried out under the organization’s internal auditors’ oversight. It is sufficient to remark that because the internal auditor is an employee of the government or organization, his independence is not ensured. Then the concept of external auditors is introduced, although scams are still happening every day.

The aforementioned case demonstrated how fraudsters continue to build their own strategies for engaging in fraudulent behavior as more and more growth occurs in both the information and communication technology (ICT) industry and other industries.

Since external auditors may not have the necessary training to handle contemporary frauds like white collar crimes like security fraud, embezzlement, bankruptcies, contract disputes, and possibly criminal financial transactions, including money laundering by organized criminals, it is now important that forensic accounting be introduced and practiced. Another important factor is the forensic accountant’s ability to provide litigation support and investigative services. These regions have grown to be a complicated source of worry for the accounting industry.

1.3. The Study’s Objectives

The study’s goal is to learn the following things:

to consider the forensic accountant’s position inside a business.

to investigate the viability of employing forensic accounting to lessen the incidence of fraud cases.

the ability of forensic accountants to aid in the detection and prevention of fraud in the public sector

to determine whether forensic accountants and external auditors differ significantly.

1.4 Questions For Research

What function does a forensic accountant have in a company?

Is it possible to use forensic accounting to lessen the frequency of fraud cases?

Is it possible for forensic accountants to assist in identifying and stopping fraud in the public sector?

Is there a significant difference between external auditors and forensic accountants?

Research hypotheses

HOPOSETY 1

H0: A forensic accountant has no official position within a company.

H1: Forensic accountants are important to an organization.

11th Hypothesis

H0: Forensic accounting applications do not materially lower the frequency of fraud cases in the public sector.

H1: Using forensic accounting considerably lowers the number of fraud cases that occur in the public sector.

111 Hypothesis

H0: Professional forensic accountants and conventional external auditors are not significantly different from one another.

H1: Professional forensic accountants and conventional external auditors differ significantly from one another.

1.6. The Study’s Significance

The study will help create a strong foundation for the planning and execution of forensic accounting procedures in Nigeria. This study will help policy makers and other stakeholders design appropriate policies to govern the practice of forensic accounting in Nigeria because it is still relatively new in developing nations like Nigeria.

The study will also act as a manual for college students and any independent researchers who might be interested in the topic. Other research projects in forensic accounting and fraud detection in corporations will be guided by the conclusions and suggestions from this study.

1.7. The Study’s Scope

The study is focused on the use of forensic accounting in Nigeria as a tool for fraud detection and prevention with a specific focus on the Eti Osa local government council in Lagos State.

1.8 LIMITATION OF THE STUDY

The investigation was limited by the management’s unwillingness to share some information that they deemed confidential and their concern of publications that would harm their business.

The need to go a great distance and pay a high travel expense in order to gather the data for this study was another significant obstacle. The study’s short time frame, which did not allow for full research, is another problem. As a result, it is exceedingly challenging to acquire sufficient information.

Finally, there aren’t enough resources available. This is novel in Nigerian forensic accounting for the purpose of fraud detection and prevention. In order to gather the necessary materials or information from the company under study through the administration of a questionnaire, the researcher decided to make an effort to be cordial.

1.9. Terms And Acronyms Defined

FORENSIC ACCOUNTING: Forensic accounting, as described by Manning (2002), is the use of financial accounting and investigation abilities to resolve disputed problems in the course of civil and criminal litigation at a level acceptable to the courts.

According to Frank Wood and A. Sangster (2005), accounting is the act of identifying, measuring, and conveying economic information to enable users to make educated decisions.

Accounting fraud is the deliberate falsification of accounting records, such as sales or cost records, to increase net income or sales figures. It is illegal and can result in civil lawsuits against the company and the executives involved (Arokiasamy and Cristal, 2009).

Fraud is defined as an intentional act or course of deception used against another person in order to achieve an unfair or illegal advantage (Anyanwu, 1993).

DETECTIVE CONTROLS: According to Adeniji (2004), these controls are made to recognize and report when an error, omission, or malicious conduct occurs.

PREVENTIVE CONTROLS: According to Adeniji (2004), these controls identify possible issues ahead of time and take appropriate action.

CORPERATE FRAUD: This refers to actions conducted by an individual or business that are dishonest or illegal and intended to benefit the perpetrator individual or business (Investopedia, 2015).