Application Of Foresic Accounting A Study Of Companies In Nigeria
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Application of Foresic Accounting: A Study of Companies in Nigeria
Aribaba, Foluso Olugbenga
Centre for Distance Learning
Obafemi Awolowo University, Ile-Ife, Nigeria.
[anonimizat]
Doi:10.5901/ajis.2013.v2n2p447
Abstract
This paper examined the application of forensic accounting to companies in Nigeria using the basis of whether those saddled
with the responsibility of maintaining accountability in both the public and private sector really appreciate its importance. The
results show that forensic accounting in Nigeria is still new and that its impacts are not well felt.
Key words: Forensic accounting, Forensic accountant, Fraud investigation, Forensic accounting services
1. Introduction
Forensic accounting is becoming one of the strongest growth areas in the accounting profession all over the world.
Maurice Peloubet coined the phrase "forensic Accounting" in 1946. At that time Peloubet and co. in New York Peloubet
stated that, during the War both the public accountant and industrial accountant have been in existence and are now
engaged in the practice of forensic accounting. Peloubet suggested that until recently, forensic accounting is only
practiced in the courtroom, and that the preparation of financial statements has some of the features of forensic
accounting.
Forensic accounting as defined in the forensic accounting directory of the Florida Atlantic University (FAU) is "the
practice of utilizing accounting, auditing and investigative skills to' assist legal matters. It encompassed two main areas:
Litigation support represents the financial presentation of economic issue related to existing or pending litigations.
Investigation is the act of determining whether criminal matters such as employee theft; fraud (including falsification of
financial statements), identify theft and insurance fraud have occurred.
In the western world, forensic accounting and investigation is gaining widespread awareness and acceptability in
both the public organization and the private one. The collapse of Enron corporation, which is perhaps one of the most
significant business events that has occurred in the last 50 years, has significantly awaken the need for a forensic
accountant in fraud detection, using a forensic accounting techniques. Enron, which is ranked number 7 on the fortune
500 list doing 100 billon of business in year 2000 had its stock drop from more than $90 to $.25m 14 months. The Enron
debacle has had a devastating effect on the business environment.
Stockholders and lenders have lost tens of billions of dollars and Enron’s 20000 employees have seen their
retirement savings evaporate. Come back home, Cadbury Nigeria will likely record a loss of $15million on the year
2006(Shen-Hoorver, 2006).
The collateral damage in case of Enron continues to reverberate and
Punish those directly and indirectly involved. Enron's external auditor, Arthur Anderson, along with the accounting
profession itself has been dealt with a crushing blow. Besieged by lawsuits from all sides and its reputation was
shattered, its survival is very much in doubt, this is a big crisis in accounting profession today.
As a result, genuine effort is being made in focusing attention on fraud detection and the use of forensic
accountants and fraud examiners to be on increase and diploma courses are available in most schools in U.S.A and
Canada. Forensic accountants search for financial Shenanigans by using a mix of accounting law, computer technology,
ethnics and criminology. An external auditor is expected to perform an assessment in accordance with generally
accepted auditing standard for the purpose of rendering an opinion that the financial statements have been prepared in
accordance with Generally Accepted Accounting Practices (GAAPS). A forensic accountant takes a more proactive
approach to examining the books of a company. He is a specialist, who makes no assumption of management integrity
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and brings to evaluation process, less concern than an auditor with whether the report conform to generally accepted
accounting practices (GAAP) and more interest in exposing any possibility of fraud. Since a forensic accountant often
faced legal issues, an accountant practicing in the forensic area needs to have an understanding of the legal environment
in which the business operate. This is because the evidence the forensic accountant derives from an investigation may
require his or her testimony as an expert witness. The demand for the services of forensic accountants has increased in
recent years. A United State News and world report cover story entitled “Sherlock Holmes, Meet Enron on February 18,
2002, ranked forensic accounting as the number one most secured career trade. The increasing cases of disputes in
business environment and the growing incidence of fraud have contributed to the demand of litigation support services.
Unfortunately, few accountants in the Nigeria economy have necessary knowledge of forensic accounting.
No doubt, forensic accounting is yet to be developed; only few auditors in the international audit firms have carried
out any serious forensic accounting assignments for clients. The increasing cases of fraud in Nigeria and around the
world in the recent past has been alarming, emphasizing the invisibility of forensic accounting services. Sadly enough
most of the fraud cases are not reported in Nigeria and there is a little statistics to show the trend.
The globalization of economics and information technology, such as electronic money transfers, have also eased
the path of the fraudsters and complicated "the task of the investigators.
Nigeria, as a nation, operates in the same global economics and information technology arena. As a developing
economy, the growths trend of the banking industry and the just concluded capitalization issue in the industry, there may
be need for the services of the forensic accountant in the nearest future. As the industry expands, with the use of latest
state- of – the art technology, the incidence of fraud is likely to increase as well. There will be growing need for the
services of a forensic accountant. Hence the need for this research works.
In this work, the meaning' of forensic and investigative accounting will be examined. This will help creates the
awareness of the significant use of a forensic accountant; and how he can help to prevent possible fraud in the nation's
financial and non financial systems.
2. Meaning of Forensic Accounting
The Webster's dictionary defined 'Forensic" as belonging to use in, or suitable to a court of judicature of to the public
discussion or debate. While Accounting is commonly defined as "the art of recording, classifying, summarizing and
interpreting monetary transaction and event of a financial character". Izedomi (2000), defines auditing as an "Independent
examination and expression of the financial statements of an enterprise prepared by the management of that enterprise,
by an appointed person, called auditor, other is express a professional opinion whether financial statement show a true
and fair view position of the enterprise as at the end of the financial period. Also, Oladipupo (2005), defines investigation
as an "examination of the record and accounts of an organization for special purpose". The integration of accounting,
auditing and investigation yield the specially known as forensic accounting.
Forensic accounting is viewed as the especially area of accounting that described engagement that result from real
or anticipated litigation, (Wikipedia Encyclopedia, 2006). In holistic view, "these engagements fall into one of the four
categories, economic damages, fraud and other forms of economic crime", as the use of investigative techniques,
integrated with accounting to develop information and opinion for evidence in court and for use by expert witness. Also,
forensic accounting is simply the process of interpreting, summarizing and presenting complex financial issues clearly of
law as an expert witness. (Howard and Sheetz, 2006).
3. The Forensic Accountant
The forensic accountant could be called the "Bloodhounds" of the accounting profession, the nose -to-the – ground
financial investigator who sniffs out complex fraud plots and other fiscal Shenanigans that often go undetected by the
other 'breads' within the accounting field (Voght, 2003). A forensic accountant can be defined as someone who is
applying financial skills and an investigative mentality to resolve issues, conducted with the context of the rules of
evidence (Bologna and Linguist, 1995). His knowledge encompasses financial expertise, knowledge of fraud and a
strong knowledge and understanding of business reality and the working to the legal system (Thornhirr, 1995).
Robert (1990), describe a forensic accountant as someone who can look behind/beyond their face, not accepting
the· record at their face value, someone who has a suspicious mind that the document he or she is looking at may not be
what they purport to be, or someone who has the expertise to go out and conduct every detailed interviews of individuals
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to develop the truth. Forensic accountants search for financial Shenanigans by using a mix of accounting law, computer
technology, ethics and criminology (Voght, 2003). Companies in Nigeria, even" Government ministries and parastatals
operate in the same global economy and information technology environment, and as a result of the growth trend of the
banking industry especially, there is therefore the need for services of the forensic accountant. The forensic accountant
can be engaged in public practice or retain by lawyers, banks and insurance companies, the law enforcement agency, the
court and the business community. A capable forensic accountant should, nevertheless possess certain characteristics,
these include: independence, confidence, sound professional judgment, thoroughness, creativity and sensitive (Hills,
2004).
Forensic Accounting Services
Accounting to KPMG, (1995), the forensic accountant is often involves in the following activities;
1. Fraud Awareness Workshop
The workshops allow the forensic accountant to interact with a large member of people, in addition to this; client specific
workshops are also conducted.
2. Investigation
The fraud, forensic accountant most likely encounters will depend on the nature of business and the way it is managed.
Expenses and purchase are principal area of fraud, with false reporting of financial information and siphoning of ·funds
are also relatively frequent. The most frequently frauds by employee involve the theft of cash or inventory, or submission
of false expenses claims; cheque’s forgeries are also very common. Due to the increased sophistication of fraud and the
requirement of prior experience in conducting fraud investigation, organization have been able to realize that it is best for
an expert who is independent and unbiased to conduct an investigation.
3.Asset Tracing
Tracing and identifying client assets that are the unlawful possession or control of third parties, gathering intelligence on
the third parties and recovering of asset through civil remedies.
4.Litigation support
Forensic accounting services provide opinion on technical question of audit, accounting, taxation, or other areas.
Litigation support involved quantification of losses in the context of fraud, disputed business valuation, loss of profits,
insurance claims, intellectual property disputes and in many other situations.
5.Business / Employee Fraud Investigations
Business fraud investigation can involve funds tracing, asset identification and recovery, forensic intelligence gathering
and due diligence reviews. Employee fraud investigations often procedures to determine the existence, nature and extent
of fraud and may concern the identification of a perpetrator. These investigations often entail interviews of personnel who
had access to the funds and a detailed review of the documentary evidence.
6. Mediation and Arbitration.
Because of their familiarity and comfort with legal issues and procedures, some forensic accountants have sought out
special training and become involved in alternative dispute resolution (ADR). ADR services include both mediation and
arbitration and are designed to help individuals and businesses resolve disputes with minimal disruption and in a timely
fashion.
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4. Approaches to a Forensic Accounting Assignment
Each forensic accounting assignment is unique. Accordingly, the actual approach adopted and the procedures performed
will be specific to it. However, in general, much forensic accounting assignment will include the steps detailed below:
1. Meeting with the client
It is helpful to meet with the client to obtain an understanding of the important facts and issues at hand.
2. Perform a conflict check
A conflict check should be carried out as soon as the relevant parties are established.
3.Perform an initial investigation
It is often useful to carry out a preliminary investigation prior to the development of a detailed plan of action. This will,
allow subsequent planning to be based upon a more complete understanding of the issues.
4. Obtain the Relevant Evidence
Depending on the nature of the case, this may involve locating documents, economic reformation, assets, a person or
company, another expert or proof of the occurrence of an event.
5. Develop an Action Plan
This plan will take into accounts the knowledge gained by meeting with the client and carrying out the initial investigation
and will set out the objective to be achieved and the methodology to be utilized to accomplish them.
6. Perform the Analysis
The actual analysis performed will be dependent upon the nature of the assignment.
5. Research Methodology
The research design for this research work takes the form of a descriptive survey, as it uses one time only observation
but involve as many variables as are necessary for the study. Both primary and secondary data were sourced for the
purpose of answering and testing the hypotheses as well as building up literature review of the study. Primary data were
sourced from professional accountant, professional auditors, financial analyst and captain of industries across every
sectors of the economy in respect of the subject matter of study through the issue of 100 questionnaires on a judgmental
sampling basis. Secondary data were also sourced from journals, textbooks and the internet.
Data generated from the administered questionnaires were analyzed verbally using descriptive statistical analysis, the
mass information generated in this study was summarized in form of table and ratios. While the hypothesis were tested
using inferential statistical, the chi square models.
5. Results
This study examines the application of forensic accounting to Nigerian Companies. The relevant data presented,
analyzed and interpreted reflect the views of professional accountants, professional auditors and financial analysts.
100 questionnaires were administered, out of which 70, representing a response rate of 70% were responded to and
returned, while 30 representing, 30% of the total questionnaire administered were not responded to.
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Table 1: Reliability, Transparency and Uniformity of the Financial Reporting Process
Strongly disagree Disagreed Undecided Agree Strongly agreed Total
Response 8 15 7 17 23 70
Percentage 12 21 10 24 33 100
Source: Field Survey, 2013
Table 1 shows that, 12% of the respondents strongly disagreed, 21% were disagreed, 10% were undecided while 24%
and 33% agreed and strongly agreed respectively. This indicates that the respondents are of the opinion that forensic
accountant / forensic accounting can restore the reliability, transparency, and uniformity of the financial reporting process
of Nigeria companies.
Table 2: The Need for Quality Service Delivery in Audit through Forensic Accounting
Strongly Disagree Disagreed Undecided Agreed Strongly Total
Response 15 13 7 17 18 70
Percentage
(%) 21 19 10 24 26 100
Source: Field Survey, 2013
From table above, 21% of the respondents strongly disagreed, 19% were disagreed, 10% of the respondents while 24%
and 26% were agreed and strongly agreed respectively. This indicates that there is a need for quality service delivery in
the audit services in Nigeria companies through forensic accounting.
In the interpretation of the chi- square result, the chi- square test is one of the most popular non – parametric tests in
statistics. It is also referred to as distribution free test statistics. The terms "distribution free" and non-parametric are used
to describe the best because unlike other tests of hypothesis, it does not depend on some a prior assumptions about the
parameters of the population from which samples 3re drawn. It offers comparisons between an observed frequency and
the expected frequency obtained. Null hypothesis (Ho) is the one that stands to disqualify the testing hypothesis while
alternate hypothesis (Hi) confirms and accept~ the positive positions of the hypothesis.
Hypothesis 1
Ho: Forensic accountants does not provide wide range of services
Hi: Forensic accountants provide wide range of services Responses
S/N Strongly
disagree
Disagreed Undecided Agreed Strongly agreed Total
1 8 15 7 17 23 70
2 15 13 7 17 18 70
3 2 5 18 16 29 70
4 4 1 6 39 20 70
Total 29 34 38 89 90 280
Source: Field Survey, 2013
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We obtain the X2 by obtaining the difference between the observed and expected frequencies, square each of these
differences, divide each squared -differences by the expected frequency, and sum up all the foregoing to obtain its value.
From the chi- square table, we compare this observed value of X2 = 59.153 with the table value for V degree of
freedom. We determine the degree of freedom from the responses table as follows: V =df = (number of rows – 1)
(Number of column – 1) from our table, V = df = (4-1) (5-1), V = 3 x 4 = 12 degree of freedom.
Thus, we have calculated and found the degree of freedom to be 12, we look up the X2 table at the 5% significance level
and V = 12 degree of freedom. The relevant value is 21.026. This is the table value of X2
The Decision Rule
Accept Ho if the observed / calculated is less than the table value of X2. Otherwise, reject it and accept Hi.
Since the calculated value of X2, the Ho is rejected, and Hi is accepted. This shows that forensic accountants
provide wide range of service in Nigeria.
Hypothesis 2
Ho: No challenges available in providing forensic accounting services in Nigeria.
Hi: There are challenges available in providing forensic accounting services in Nigeria.
Responses
S/N Very little extent Little extent Some extent Great extent Very great extent Total
5 15 13 7 17 18 70
6 9 25 17 11 8 70
7 17 16 25 7 5 70
8 8 15 7 17 23 70
9 2 5 18 16 29 70
Total 51 74 74 68 83 350
We obtain the X2 by obtaining the difference between the observed, and expected frequencies, square each of these
differences, divide each squared differences. By the expected frequency, and sum up all the frequency to obtain its value
in (Appendix B)
From the chi- square table in (Appendix 6), we compare this observe value of X2 = 74.34 with the table value for V
degree of freedom. We determine the degree of freedom from the responses table as follows:
V =df = (number of rows – 1) (Number of column – 1) from our table, v = df = (4-1) (5-1), V = 4 x 4 = 16 degree of freedom.
Thus, we have calculated and found the degree of freedom to be 16, we look up the X2 table at the 5% significance. Level
and V =16 degree of freedom. The relevant value is 26.296. This is the table value of X2 .This is table of X2
Decision Rule
Accept the Ho if the observed /calculated is less than the table value of X2 otherwise, reject it and accept Hi. Since, the
calculated value of X2 in (Appendix B) is greater than table value of X2, the Ho is rejected, and Hi is accepted. This shows
that there are challenges available in proving forensic accounting services in Nigeria.
Hypothesis 3
Ho: No need to engage forensic accountants in some legal proceedings.
Hi: There are needs to engage forensic accountants in some legal proceedings.
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S/N Strongly disagree Disagreed Undecided Agreed Strongly agreed Total
15 2 3 8 29 28 70
16 1 1 9 18 41 70
17 3 – 6 27 34 70
Total 6 4 23 74 103 210
We obtain the X2 by obtaining the difference between the observed, and expected frequency is square each of these
differences, divide each squared differences by the expected frequency, and sum up all the frequency to obtain its value.
From the chi- square table, we compare this observe value of X2 = 77.09..1 with the table value for V degree of freedom.
We determine the degree of freedom from the responses table as follows:
V =df = (number of rows – 1) (Number of column – 1) from our table,
v = df = (3-1) (5-1), V = 2 x 4 = 8 degree of freedom.
Thus, we have calculated and found the degree of freedom to be 8. We look ~P. the X2 table at the 5% significance.
Level and V =8 degree of freedom. The relevant value is 15.507. This is the table value of X2.This is table of X2
The Decision Rule
Accept the Ho, if the observed /calculated is less than the table value of X2. Otherwise, reject it and accept Hi.
Since, the calculated value of X2 is greater than table value of X2, the Ho is rejected, and Hi is accepted. This shows that
there are need to engage forensic accountant in some legal proceedings.
6. Conclusion
Summary of Findings
This study was carried out to look at the applicability of forensic accounting services in Nigeria. After a careful analysis of
the information gathered from the various source of information used, the following findings were evident.
i. The services of forensic accountant are of great relevance to the development of the nation, the need to ensure
credible financial reporting.
ii. A lot of potentials exist for forensic accountant services in Nigeria, as the economy is becoming a global village,
increase in financial crime and others social vices.
iii. The forensic accountant requires innovative and creature skills. The need to be proactive and stay relevant to the
recent development in the world is essential.
iv. The services of forensic accountant are really in abeyance in Nigeria. The reason given for this situation is that the
various provisions of our laws are not strictly followed. Moreover, forensic accountants and lawyers do not really farewell
in Nigeria. This is because they may not be able to reach a compromise on the fee payable for the services of forensic
accountant.
In conclusion, it is obvious that the impact of the services of forensic accountants in Nigeria is not well felt. However, the
professional accountants and the legal practitioners are advised to Utilize this new opportunities to the fullest salvage our
nation for the future generation. Also, the performance on the witness box is key to the success in forensic accounting.
Therefore, we need to develop this area in students of professional institutes knowing full well that they might be called
upon one day to defend opinions given in their report.
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Forensic Accounting Skills and Techniques in Fraud Investigation in the
Nigerian Public Sector
Gbegi, D. O
Department of Accounting, Kogi State University, Anyigba,Kogi State, Nigeria
[anonimizat]
Adebisi, J. F. Ph.D
Director General, Nigerian College of Accountancy, Jos, Nigeria
[anonimizat]
Doi:10.5901/mjss.2014.v5n3p243
Abstract
The research is designed to examine Forensic Accounting Skills and Techniques in fraud investigation in the Nigerian public
sector. The population of this study comprised of 129 senior staff of the three Anti-Corruption Agencies in Nigeria (EFCC,
ICPC, and CCB). The study methodology includes both primary and secondary sources of data collection; questionnaire was
used in collecting primary data while secondary data were obtained from EFCC, ICPC and CCB. The data generated for this
study were used for the testing of hypotheses using Analysis of variance (ANOVA) and time series analysis with the aid of
SPSS version 17.0. Our findings show that, first, forensic accounting skills and techniques have significant effect on
uncovering and reducing fraud in the Nigerian public sector. The research recommends that, first, anti-corruption agencies in
Nigeria should establish forensic units and forensic laboratories to allow room for more effective and efficient investigation of
suspected and confirmed fraud cases. Second, the public sector (government) should develop interest in forensic accounting
by making sure that forensic accounting is institutionalized in all ministries, extra-ministerial departments and parastatals to
build up effective internal control system that will enhance more effective performance in the Nigerian public sector.
Keywords: Forensic Accounting, Skills, Techniques, fraud investigation,public sector.
1. Introduction
Fraud is a severe problem of concern globally. It is a major concern in developing nations. It is so endemic that fraud are
gradually becoming a normal way of life in both public and private sectors, from the presidential cabinets, down to the
political officer, to the ward councilors, from managing directors of companies, through middle management cadre and to
lower managers. Individuals perpetrate fraud according to the capacity of their offices. Although fraud affects the whole
world, the magnitude of fraud in Nigeria and the extent to which the economy is affected is a call for alarm (Abiola, 2009).
Fraud has been associated with human organization from recorded history. The eradication of which has remained
elusive in most parts of human society and civilization. It is an act of deception intended for personal gain or to cause a
loss to another party. Seetharaman, Sentivelmurugan and Periyanagam (2004) observed that an analysis of the
characteristics of perpetrators showed that the fraud influencing factors include age, gender, position education
background and existence of motive for collusion. The growth of digital computer technology procreates fraud and
generates additional risks of swindling and illicit activities.
There has been an increased concern about fraud in Nigeria and beyond. For instance the oil subsidy probes in
Nigeria which reveals that between 2007 and 2009, the Nigerian National Petroleum Corporation (NNPC) over deducted
funds in subsidy claim to the tune of N28.5billion naira calls for concern (Oboh, 2012).
However, the Auditor-General of the Federation admitted some anomalies in the operations of Federal Inland
Revenue Services (FIRS). According to him, the audit examination of the accounting records maintained for the
Federation Account of FIRS revealed that the collecting banks were in the habit of late remittance of actual collection to
the CBN thereby contravening the agreement between FIRS and collecting banks. Also, there was no documentary
evidence to authenticate the payment of the penalties and interests amounted to N172, 655 million to the Federation
account in 2009. The Auditor-General added that some money generated from over recovery was not remitted to the
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Federation (Oboh, 2012).
In the case of Nigeria Custom Services (NCS), the report states “audit examination of the records maintained for
the Federation Account as the NCS revealed discrepancies between the figures of revenue obtained from the customs,
and the figures of revenue remitted to the federation account by NCS” (Orkura, 2009). The discrepancies arose from
figures of nine months, which indicated that NCS remitted less than the revenue collected during the period to the
government. While the figures for the three months March, October and November indicated that NCS remitted more
than the revenues collected during the period to the Federation Account, which gave a total net difference of N11.122
billion, the report stated (Orkura, 2009).
The fraud cases mentioned above and some other corporate financial accounting scandals such as Enron,
WorldCom, Global Crossing, Tyco, Cadbury and financial scams by some Nigerian Government officials as reported by
Economic and Financial Crimes Commission (EFCC) have continued to increased concerns about fraud, wiped out
billions of dollars of shareholders value and led to the erosion of investors’ confidence in financial markets and reduced
public trust in government.
Fraud has had severe negative consequences on Nigeria, ranging from negative economic impact to negative
national image (Ribadu, 2003). Looking at the recent frauds in Nigeria, in each case the perpetrators are the people at
the helm of affairs, for example the aviation scam of N5.6 billion in 2009 was perpetrated by the then Minister of
Aviation(Ojeme, 2010). The N2 billion Bayelsa State frauds in 2010 were perpetrated by the then Bayelsa state
Commissioner of Finance, the state accountant general, the state’s Director of Treasury, and the Director of Finance
(Ojeme, 2010). The Kogi State’s N1.9 billion scam was committed by commissioners for Local Government and
Chieftaincy Matters and Agriculture respectively, and Local Government Chairman (Ojeme, 2010). The capital market
fraud (share cloning) which started in 2002 was perpetrated by the executives of Bankolans investment limited and so on
(Ojeme, 2010).
From 2009-2010, Nigeria lost N13.8 billion to various financial scams (Onyeje, 2009; EFCC media report, 2010
adopted from Oboh, 2012). What all these tend to expose is that there is a management or operational problem in the
Nigeria public sector in the area of financial or accounting control. Thus, one needs not wonder much to see how
devastatingly frauds have compromised the administrative competence, performance capacity and general credibility of
the public sector. Initial estimates of major projects become little fractions of ultimate costs paid; original cash projections
produce less than half of the benefits expected and projects which seemed technically feasible and economically viable,
turned out “while elephant” if not abandoned, with serious implications for growth and development.
Literature reviewed that forensic accounting has helped to uncovered and reduced fraud in countries such as
Britain, Canada, Germany and United State where it is in use but no research has been done in Nigerian public sector. It
has become pertinent 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;
including money laundering by organized criminals. It is against this background that this study seeks to examine the
forensic accounting skills and techniques to see whether or not fraud can be uncovered and reduced in the public sector
in Nigeria.
2. Research Questions
i. How do the Forensic Accounting Skills and Techniques help in uncovering fraud in the public sector?
ii. What is the influence of Forensic Accounting Skills and Techniques in reducing fraud in Nigerian public
sector?
3. Objectives of the Study
The general objective of this study is to determine whether or not the forensic accounting skills and techniques can help
in fraud investigation in the Nigerian public sector.
The specific objectives of this study are to:
i. Examine the use of Forensic Accounting Skills and Techniques in uncovering fraud in the Nigerian public
sector
ii. Ascertain the influence of Forensic Accounting Skills and Techniques in reducing fraud in the Nigerian public
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sector.
4. Statement of the Hypotheses
– H01: Forensic Accounting Skills and Techniques have no significant effect on uncovering fraud in the Nigerian
public sector.
– H02: Forensic Accounting Skills and Techniques have no influence on reducing fraud in the Nigerian public
sector.
5. Theoretical Framework
Experts over time have attempted to formulate theories that explain the mind set of fraudsters. Unless Forensic
Accountants understand the way the fraudster thinks, they will not be able to keep one step ahead of the fraudster. The
theory that will guide this study is the Theory of Fraud Diamond by Wolf and Hermanson (2004).
5.1 Theory of the Fraud Diamond
Wolf and Hermanson (2004) proffer the Theory of the Fraud Diamond, in place of the triangle. They argue that the
diamond offers a better view of the factors leading to fraud. They add a fourth variables, capacity, to the three-factor
theory of Cressey. Capabilities mean that, the fraud perpetrator must have the necessary traits, abilities, or positional
authority to pull off his crime.
Figure 1: The Fraud Diamond
Source: Wolf and Hermanson (2004)
Theory of fraud Diamond offers a better view of the factors to fraud. The theory adds fourth variable, capabilities, to the
three factor theory of fraud triangle. Wolf and Hermanson believed many frauds would not have occurred without the right
person with the right capabilities implementing the details of the fraud. They also suggested four observation traits for
committing fraud; First, authoritative position or function within the organization, Second capacity to understand and
exploit accounting systems and internal control weakness, Third, confidence that he/she will not be detected or if caught
he/she will get out of it easily, Fourth, capability to deal with the stress created within and otherwise good person when
he or she commits bad acts.
Reviewing the literature shows that researchers classified the motive side of the fraud diamond differently. Some
researchers classified them as personal, employment or external pressure, while other classified it as financial and nonfinancial
pressure. However, it can be noticed that both classifications are interrelated. For instance, personal pressure
can come from both financial and non-financial. A person’s financial pressure in this case could be gambling addiction or
a sudden financial need, while a personal non-financial pressure can be lack of personal discipline or greed. By the same
token, employment pressure and external pressure can come from either financial or non-financial pressure. Thus,
Forensic Accountants have to keep in mind that pressure/motive to commit fraud can be either a personal pressure,
employment pressure, or external pressure, and each of these types of pressure can also happen because of financial
and non-financial pressure. Forensic Accountants also need to understand the opportunity for fraud to help them in
identifying which fraud schemes an individual can commit and how fraud virus occurs when there is an ineffective or
missing internal control.
However, it can be criticized that even though the fraud diamond added the fourth variable capability to the fraud
triangle and filled the gap in other theories, the model alone is an inadequate tool for deterring, preventing or detecting
fraud. This is because, the two sides of the fraud diamond (incentive/pressure and rationalization) cannot be observed,
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and some important factors like national value system are ignored.
Our present National Value System is not good, little or no premium is put on things like honesty, integrity and
good character. The society does not question the source of “wealth”. Any person who stumbles into wealth is instantly
recognized and honoured. It is a fact of our time that fraud has its root firmly entrenched in the social setting where
wealth is honoured without questions. Ours is a materialistic society which to a large extent encourages fraud. The desire
to be with the high and mighty caliber of the society extreme want that is often characterized by need, cultural demands
or cultivation of a life too expensive for the legitimate income of the individual. The research believes that, it is important
for Forensic Accountants to consider all the fraud models to better understand why fraud occurs. Therefore all other fraud
models should be regarded as an extension to wolf and Hermanson’s fraud diamond and should be integrated in one
model that include national value system. This should help them in effectively investigating and assessing fraud risk.
6. Conceptual Framework
Joshi (2003) sees forensic accounting as the applications of specialized knowledge and specific skills to stumble up on
the evidence of economic transactions. Zysman (2004) puts forensic accounting as the integration of accounting, auditing
and investigative skills. Simply put, forensic accounting is accounting that is suitable for legal review offering the highest
level of assurance and including the now generally accepted connotation of having been arrived at in a scientific fashion
(Crumbley, 2006). Coenen (2005) states that forensic accounting involves the application of accounting concepts and
techniques. It demands reporting, where the accountability or the fraud is established and the report is considered as
evidence in the court of law or in the administrative proceedings (Joshi, 2003). It provides an accounting analysis that is
suitable to the court, which will form the basis of discussion, debate and ultimately dispute resolution (Zysman, 2004).
This means that forensic accounting is a field of specialization that has to do with provision of information that is meant to
be used as evidence especially for legal purposes. The persons practicing in this field (i.e. Forensic accountants)
investigate and document financial fraud and white-collar crimes such as embezzlement and investigate allegations of
fraud, estimates losses damages and assets and analyses complex financial transaction. They provide those services for
corporation, attorneys, criminal investigators and the Government (Coenen, 2005). Their engagements are usually
geared towards finding where money went, how it got there, and who was responsible. They are trained to look beyond
the numbers and deal with the business reality of the situation (Zysman, 2004).
Previous studies indicate that auditors are able to identify Management Fraud Risk factors, but may not be able to
translate this knowledge into an audit plan that effectively takes them into account and enhances chances of detecting
Management Fraud if it exists. Forensic accountants may be able to compensate for such limitations. Academics and
practitioners may be over-estimating what Forensic accountants can contribute to the effectiveness of an audit plan.
They may be able to investigate a known fraud, but may not be able to design audit tests to detect a hypothesized fraud
as well as auditors can.
Oliver (2004) is of the opinion that, because the complexity and scope of commerce has expanded throughout the
world, the need to track money and financial information has grown. There has been a corresponding increase in illegal
financial activity, according to separate surveys by the U.S department of Justice, Price Water House Coopers, and the
Association of Certified Fraud Examiners (ACFE). Ironically, illegal businesses and perpetrators of financial crimes also
need to keep track of their cash flow and manage their operational performance to generate profits, fund activities and
avoid detection and seizure of their assets.
Forensic accounting also called investigative accounting or fraud audit is a merger of forensic science and
accounting. Forensic science according to Crumbley (2003) “may be defined as application of the laws of nature to the
laws of man.” He refers to forensic scientists as examiners and interpreters of evidence and facts in legal cases that also
requires expert opinions regarding their findings in court of law. The science in question here is accounting science,
meaning that the examination and interpretation will be of economic information. Zysman, (2004) the forensic
accountant’s engagements are usually geared towards finding where money went, how it got there, and who was
responsible. They are trained to look beyond the numbers and deal with business reality of the situation.
According to the Black’s law Dictionary, (1979) fraud (sometimes referred to as fraudulent act) includes all the
multifarious means human ingenuity can devise that are resorted to by one individual to get an advantage over another
by false suggestions or suppression of the truth. It includes surprises, tricks, cunning or dissembling and any unfair way
by which another is cheated. Dandago (1997), fraud is an intentional misrepresentation of financial information by one or
more individuals among management, employees or third parties. It involves the use of criminal deception to obtain an
unjust or illegal advantage. It is a deliberate cheating or deception intended to gain an undue advantage. Michael, (2004)
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sees fraud as different from error, which refers to “unintentional misstatements or omissions of amount or disclosures
from an entity’s accounting records or financial statements.”
7. Review of Empirical Studies
7.1 Modeling fraud detection and the relevance of forensic accountants in the audit process
Occupational Fraud has had a big impact on the audit and the destruction of its reputation. Koh and Woo (1998), argue
that there is a widespread belief that a person who has interest in a company (Shareholders, potential investors, takeover
bidders, creditors, etc) should be able to rely on its audited accounts as a guarantee of its solvency, propriety and
business viability, hence, if it transpires, without any warning that the company is in serious financial difficulty, it is widely
felt that somebody should be made accountable for these financial difficulty, it is widely felt that somebody should be
made accountable for these financial disasters, and this somebody is always perceived to be the auditor. Even though
the statements “is always perceived” can be understood as an overstatement, having in mind that fraud detection is
management’s responsibility. Association of Certified Fraud Examiners (ACFE) states in its 2010 report to the nations on
occupation fraud and abuse that medium losses coursed by the occupation fraud was $160.000, which is about a 5%
loss of the typical organization annual; revenue (ACFE, 2010), the public still expected that auditors will be the ones to
detect fraud. Public expectation of the work required to be done by auditors and regulatory requirements for the audit
activity (known as “expectation gap”) have changed over the years.
Fraud detection was considered as the primary role in the audit until approximately 1940 and later on it changed to
be an ordinary examination that was not designed to disclosure defalcations, which increased public dissatisfaction with
the audit activity. To narrow the “expectation gap”, the American Institute of Certified public Accountant (AICPA) issued
series of Statement of Auditing Standard (SAS). Growing concern and expectations from the public culminated in the
advent of the Sarbanes – Oxley of 2002 and the adoption of the SAS No. 99 (as the response to the SAS No. 99 in
2004). International Federation of Accountants (IFAC) revised International Standard on Auditing (ISA) No. 240),
(Singleton et al., 2006). Since those documents were put into force more attentions has been paid to the issue of auditors
detecting fraud, and more technical guidance has been presented to them. Nevertheless, new standards and
requirements have reduced but not eliminated the “expectation gap”. Hence, it is still important to research the possibility
to improve fraud investigation and detection in the audit process through the forensic accounting skills and techniques.
8. Research Design
The research design for this study was based on non-experimental descriptive/survey design of collecting and analyzing
data. Survey design was adopted in the study because it allows data to be collected from a sample with the aim of
discovering the relationship or interactions among variables (Adefila, 2008, Izedonmi, 2005). Both primary and secondary
sources of data were used. The targeted populations of this study were the senior staff of Economic and Financial
Crimes Commission (EFCC), Independence Corrupt Practices and other related offences Commission (ICPC) and Code
of Conduct Bureau (CCB). The elements of the population considered in this research were the staff of Finance and
Accounts units, audit unit, legal and prosecution unit, general investigative unit, financial intelligence unit and forensic
unit. The senior staff of these units constituted the population for the study. The total population of the senior staff for the
three agencies is one hundred and ninety (190). The study considered all the staff that falls within the above categories
in these agencies qualified as members of the population because of their good knowledge and understanding of the
application of forensic services in the agencies.
Table 1: Distribution of the population
S/No Units EFCC ICPC CCB Total
1 Finance and Accounts 15 15 15 45
2 Audit 15 15 11 41
3 Legal and Prosecution 10 10 10 30
4 General Investigation 10 10 07 27
5 Financial Inteligence 10 10 07 27
6 Forensic 10 05 05 20
Total 70 65 55 190
Source: Field Survey, 2012
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9. Sample Size and Sampling Technique
In determining the sample size, we used Yamane (1968) formula to select our sample from the population. The formula is
given thus by Adefila (2008):
Where:
n = Sample Size
N = Total population (190)
1 = Constant
e = Allowable margin to error. In this case, we consider 5% (0.05) error margin adequate
(e)2 = (0.05)2 = 0.0025
190
= 129
The sample size n = 129
After selecting the sample, we stratified this proportionately to the agencies depending on the proportion of the
entire population that comes from each of the units in the agencies using Kurnar (1976) proportional allocation formula as
cited by Adefila (2008), thus:
Where:
NH = Population of the stratum
n = The overall sample size
N = The overall population
Table 2: Distribution of sample among selected units in the agencies
S/No Units EFCC ICPC CCB
No. of Staff Administered No of Staff Administered No. of Staff Administered
1 Finance and Accounts 15 10 15 10 15 10
2 Audit 15 10 15 10 11 07
3 Legal and Prosecution 10 07 10 07 10 07
4 General Investigation 10 07 10 07 07 05
5 Financial Inteligence 10 07 10 07 07 05
6 Forensic 10 07 05 07 05 03
Total 70 48 65 44 55 37
Source: Field Survey, 2012
From table 3.2 above, we have a total of 48 staff from EFCC, 44 staff from ICPC, and 37 staff from CCB has filled the
questionnaire.
10. Method of Data Analysis
Data from the questionnaire administered were used in testing the hypotheses of the study using Analysis of Variance
(ANOVA), and Time Series Analysis with the aid of SPSS version 17.0.
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11. Results and Discussion
11.1 Test of Hypothesis One
H01: Forensic Accounting Skills and Techniques have no significant effect on uncovering fraud in the Nigerian public
sector.
Table 3a: Observed Frequency Table
Variables Question 9 Question 16 Question 18 Question 19 Question 20 Total
S.A 72 48 30 40 43 233
A 35 69 77 69 69 319
S.D 13 – 5 5 5 31
D – 3 8 3 3 17
TOTAL 120 120 120 120 120 600
Source: Adopted from questionnaire, (2013)
11.1.1 Analysis of Variance (ANOVA)
Table 3b: Descriptive Sample
N Mean Std. Deviation Std. Error
95% Confidence Interval for Mean
Minimum Maximum
Lower Bound Upper Bound
strongly agree 5 46.60 15.646 6.997 27.17 66.03 30 72
Agree 5 63.80 16.468 7.365 43.35 84.25 35 77
Strongly disagree 5 6.20 4.764 2.131 .28 12.12 0 13
Disagree 5 3.40 2.881 1.288 -.18 6.98 0 8
Total 20 30.00 28.698 6.417 16.57 43.43 0 77
Source: SPSS Version 17.0
Table 3c: ANOVA
Sample
Sum of Squares Df Mean Square F Sig.
Between Groups 13460.000 3 4486.667 32.809 .000
Within Groups 2188.000 16 136.750
Total 15648.000 19
Source: SPSS Version 17.0
The result of data analysis in table 3b and 3c reveals that the mean is statistical significant at 5% level of significance.
The F (3, 16) = 32.809 is greater than the F(tab) = 3.24, therefore the estimated parameters are statistically significant.
This means that the Null Hypothesis is rejected while accepting the alternate hypothesis because the F (3, 16) = 32.809
is greater than the F(tab) = 3.24. We therefore concluded that Forensic Accounting Skills and Techniques have
significant effect in uncovering fraud in the Nigerian public sector.
11.2 Test of Hypothesis II
H02: Forensic Accounting Skills and Techniques have no influence on reducing fraud in the Nigerian public sector.
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Table 4a: Created Series (showing case number of Non-missing values)
Cases Number of Non-Missing Values
Series Name First Last N of Valid Cases Creating Function
1 Fraund_1 2 10 9 Diff(Frauds,1)
Source: Spss Version 17.0
Table 4b: Time Series Analysis Table.
S/no Years Frauds Frauds_1 Si
1 2002 374732395.00 – –
2 2003 778695657.98 403963262.98 403963262.98
3 2004 44316186.07 -734379471.91 -734379471.91
4 2005 41201500.00 -3114686.07 -3114686.07
5 2006 25583745.00 -15617755.00 -15617755.00
6 2007 20320940.00 -5262805.00 -5262805.00
7 2008 6539801.98 -13781138.02 -13781138.02
8 2009 3254438.86 -3285363.12 -3285363.12
9 2010 1379758.47 -1874680.39 -1874680.39
10 2011 1084400.00 -295358.47 -295358.47
Source: SPSS Version 17.0
The above table shows a downwards movement over the period, apart from year 2002 and 2003 where there was an
upward movement in fraud cases with a difference of N403963262.98. The difference occurred when the Anti-Corruption
Agencies were not seriously applying Forensic Accounting Skills and Techniques in their fraud investigation. After 2003,
there was a consistent downward movement up to 2011. However, the downward movement became more from 2009 to
2011 when Forensic Accounting was fully in place by Anti-Corruption Agencies particularly EFCC and ICPC. Also the
negative sign on the movement indicated that fraud has been reduced overtime. The implication here is that the uses of
Forensic Accounting Skills and Techniques have helped Anti-Corruption Agencies in reducing fraud in the Nigerian public
sector.
From the above result the null hypothesis has been rejected while accepting the alternate hypothesis. We
therefore concluded that Forensic Accounting Skills and Techniques have influence on reducing fraud in the Nigerian
public sector.
12. Discussion of Results
The findings from the test of hypothesis one revealed that, forensic accounting skills and techniques have significant
effect on uncovering fraud in the Nigerian public sector. This is in line with the view of Abiola (2009) who stated that the
involvement of forensic accounting has raised the hope of uncovering fraud globally. He attested that forensic accounting
has helped to uncovering fraud and corruption in countries such as Britain, Canada, Germany and United States where it
is in use.
The findings from the test of hypothesis two revealed that, forensic accounting skills and techniques have
influence on reducing fraud in the Nigerian public sector. This is supported by the view of Abiola (2009) who state that
the involvement of Forensic Accounting Skills and Techniques in fraud investigation has raised the hope of reducing
fraud globally. He attested to the fact that Forensic Accounting has reduced fraud and corruption to the bearest minimum
in developed countries using their service
13. Conclusion
The study analyzed why attention has to be given to the question of fraud investigation in the public sector of Nigeria by
Anti-Corruption Agencies with the aid of Forensic Accountants. It should be emphasized that whether within the business
world or in the public sector, the ultimate responsibility for investigating fraud cases rests with Anti-Corruption Agencies
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while discouraging and preventing fraud and corrupt practices rest with the government and management.
Above all, result of the study revealed forensic accounting skills and techniques have significant effect on
uncovering fraud in the Nigerian public sector and forensic accounting skills and techniques has influence on reducing
fraud in the Nigerian public sector .
We conclude as follows;
Forensic accounting practice is neither new to the developed nor is it in developing nations. That fraud in the
Nigerian public sector is alarming and is not only crumbling the economy but also affecting innocent nation standard of
living and image. That the Applications of Forensic Accounting Skills and Techniques have contributed greatly to Anti-
Corruption Agencies in Nigeria in the investigation of complex fraud cases particularly EFCC and ICPC as more money
has so far been recovered.
14. Recommendations
Consequent upon several revelations from the research conducted, there is need to make some recommendations, as
follow:
i. Information technology: As fraud is becoming more sophisticated on daily basis and need sophisticated tools
to uncover, forensic accountants , the public sector and Anti-corruption Agencies should take advantage of the
modern accounting and auditing soft wares to enhance efficiency and smooth operation of the tasks of
detection prevention and recovering through the application of relevant information technology. To further
enhance the performance of forensic accountants on the performance of the public sector, the code of
conducts should be put in place and properly monitored. The institute of chartered accountings of Nigeria
(ICAN) and the Association of National Accountants of Nigeria (ANAN). Should encourage formalization and
specialization in the field of forensic accounting in their curricula and the academia should emphasize skills
development in the field of forensic accounting through teaching and research in the area of forensic
accounting at BSC, MSC, PhD, HND and ND levels.
ii. Government should establish a Public Recovery Fund (PRF) where money recovered through forensic
accounting should be kept and this money should be properly used to enhance efficient and effective
performance in the public sector. Training and guidance are vital in maintaining the effectiveness of the
strategy for the detection, prevention and investigation of fraud and its general credibility. The government
needs to support induction and work related training, particularly for employees involved in internal control
system, accounting units and those in investigative units of all Anti-Corruption Agencies, to ensure their
responsibilities and duties are regularly highlighted and reinforced and that best practices are followed across
the nation services. Significant forensic accounting or any Anti-Fraud strategy can only work if heads of
departments and senior managers or staff are committed to it. The Anti-Corruption Agencies like the EFCC,
ICPC and CCB should ensure they have their technical, investigative and accounting staff trained in the field
of Forensic Accounting and the public sector (government) should develop interest in Forensic Accounting by
making sure that Forensic accounting is institutionalize in all ministries departments and parastatals to build
up effective internal control system that will enhance more effective performance in the public sector in
Nigeria. Adequate structures and mechanism such as Forensic laboratories must be improved open in all Anti-
Corruption Agencies in Nigeria.
References
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Examiners (ACFE). London: McGraw Publishers.
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Dandago K.I. (1997). ‘‘Fraud Detection and Control at Local Government Level.’’ Journal of the Association of National Accountant of
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Oliver, R. (2004). What is Transparency? New York: McGraw-Hill
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Seetharaman, A. Sentivelmurugan M. and Periyanayagam, R. (2004). ‘‘Anatomy of Computer Accounting Fraud’’. Managerial Auditing
Journal, Vol.19 No. 8 pp 1055-1072.
Singleton, T., Singleton, A., Bologna, G.J., & Lindquist, R. (2006). Fraud Auditing and Forensic Accounting.(3rd ed) Hoboken, New
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Accounting Engagements.
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An International Multidisciplinary Journal, Ethiopia
Vol. 6 (4), Serial No. 27, October, 2012
ISSN 1994-9057 (Print) ISSN 2070–0083 (Online)
DOI: http://dx.doi.org/10.4314/afrrev.v6i4.9
Forensic Accounting and Financial Crimes: Adopting the Inference, Relevance and Logic Solution Approach
(Pp. 125-139)
Izedonmi, Famous, Prof (FCA) – Department of Accounting, Faculty of Management Sciences, University of Benin, Benin City, Edo State, Nigeria
E-mail: [anonimizat]
Ibadin, Peter Okoeguale (MBA, M.Sc. ACA.) – Department of Accounting, Faculty of Management Sciences, University of Benin, Benin City, Edo State, Nigeria
E-mail:[anonimizat]
Abstract
This study examines some basic and common financial crimes in corporate organizations, situating the focus on Nigeria, and by extension, the developing world. No doubt, financial crimes have affected individuals and corporate organizations negatively. Some instances of corporate scandals, occasioned by financial crimes, have put accounting professional bodies into a new perception and paradigm that go beyond statutory audit. This study discusses financial crimes and some basic and common financial crimes in corporate organizations. The review indicates that the motivations for financial crimes are built around some risk factors, which include the incentive (or pressure), opportunity and rationalization surrounding the Copyright © IAARR 2012: www.afrrevjo.net 126 Indexed African Journals Online: www.ajol.info
financial criminals. This paper canvasses for the intervention of forensic accounting to solve the vexed problems of financial crimes with a further recommendation that the forensic accountant adopts the inference, relevance and logic solution approach (IRLS) in dealing with financial crimes in corporate organizations in Nigeria.
Key words: Forensic Accounting, Financial Crimes, Inference, Relevance, Logic.
Vol. 6 (4) Serial No. 27, October, 2012 Pp.125-139
Introduction
The true and fair view opinion on the financial statements by the statutory auditors is designed to give credibility to such financial reports. This, in turn, is expected to induce confidence in the users of financial statements that wish to make an investment decision. But going by the growing spate of corporate scandals and collapse of corporate organizations, one has had to argue the relevance and the credibility-building clause of the true and fair view opinion of the statutory auditor .Today; modern organized financial crimes have appeared. Financial crimes such as embezzlement, bribery, bankruptcy, security fraud (EFCC, 2004), among others, have taken the centre stage in the scheme of things; and on the scale of governmental preference. Quite unfortunately, too, is the inability of the statutory auditor constrained by the relevant statutes and standards, to deal with financial crimes (Uwojori and Asaolu, 2009).
Financial crimes today have grown wild, and the emergence of computer software coupled with the advent of internet facilities has compounded the problem of financial crimes. Besides, the detection or minimization of these crimes are made more difficult and committing these crimes much easier. The size and complexity of accounting services and the inability of the statutory auditors further constrained by the related clauses in the company laws and standards, present very visible and poor show of the fight against financial crimes in corporate organizations.
While varied financial crimes in the organizations take different dimensions, some basic and common financial crimes have raised issues and find expression in employee theft, payroll frauds, fraudulent billing systems, management theft, corporate frauds, and insurance fraud, among others. All these, no doubt, remain outside the ambit of the statutory auditor to report on except he is placed on inquiry. The statutory auditor is not primarily bound to detect fraud and errors. His responsibility is defined by Sec. 359 (CAMA, Copyright © IAARR 2012: www.afrrevjo.net 127 Indexed African Journals Online: www.ajol.info
2004) and the relevant auditing standards. Therefore the consequences and the effects of financial crimes in corporate organizations are very grave where no one else acts.
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. Manning (2002) defines it as the combination of accounting, auditing and investigative skills to standard by the courts to address issues in dispute in the context of civil and criminal litigation.
Forensic Accounting & Financial Crimes: Adopting the Inference, Relevance & Logic Solution …
In the light of the problem of financial crimes discussed above, this study aims at appraising how the investigative area of forensic accounting can minimize financial crimes in corporate organizations. By investigation, it is meant the act that determines whether or not certain financial criminal matters like, employee theft, management theft, payroll fraud, corporate fraud, insurance fraud, fraudulent billing schemes, insurance fraud, among others, have occurred.
Literature review
Financial crimes
Financial crimes (FCs) have been variously described in literature. No one description suffices. Wikimedia dictionary on financial crimes describes FCs as crimes against property, involving the unlawful conversion of property belonging to another to one‘s own. Williams (2005) incorporates corruptions to his description of financial crimes. Other components of FCs cited in William‘s (2005) description include bribes cronyism, nepotism, political donation, kickbacks, artificial pricing and frauds of all kinds.
The array of components of financial crimes, some of which are highlighted above, is not exhaustive. The EFCC Act (2004) attempts to capture the variety of economic and financial crimes found either within or outside the organization. The salient issues in EFCC‘s (2004) definition include ―violent, criminal and illicit activities committed with the objective of earning wealth illegally… in a manner that violates existing legislation… and these include any form of fraud, narcotic drug, trafficking, money laundering, embezzlement, bribery, looting and any form of corrupt malpractices and child labour, illegal oil bunkering and illegal mining, tax evasion, foreign exchange malpractice including counterfeiting, currency, theft of intellectual Copyright © IAARR 2012: www.afrrevjo.net 128 Indexed African Journals Online: www.ajol.info
property and piracy, open market abuse, dumping of toxic waste and prohibited goods, etc. This definition is all-embracing and conceivably includes financial crimes in corporate organization and those discussed by provision authors (William, 2005 and Khan, 2005).
At the level of corporate organizations, FCs, were known to have led to the collapse of such organizations. Cotton (2003) attributes the collapse of Enron, WorldCom, Tyco, Adelphia, to corporate fraud. $460 billion was said to have been lost. In Nigeria, Cadbury Nig Plc whose books were criminally manipulated by management was credited to have lost $15 million (15 billion Naira). The cases of nine commercial banks were fraudulent and constituted financial crimes. About one trillion naira was credited to have been lost through different means. This is still being investigated by EFCC under the EFCC Act (2004).
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Generally, FCs are varied and committed by individuals and institutions. These include:
Employee theft
Silverstone and Sheetz (2004) assert that cash is the favourite of fraudsters; and this accounts for about 77.8% of asset misappropriations in the U.S. According to them, much of cash is taken by outright cash larceny and skimming .Larceny occurs when cash is taken or stolen after it has been recorded. Skimming occurs when theft of cash takes place before cash is recorded. However, majority is done through a more elaborate cash disbursement schemes. This includes some manipulation of the billing of payroll system, fabrication of expenses, reimbursements and cheque tampering. The Association of Certified Fraud Examiners (ACFE)(1996) describes larceny, skimming and elaborate cash disbursement as cash theft fraud.
According to the ACFE‘s (1996) findings, the process of committing this financial crime by the employee begins when it is realized that the cash produced from accounting transactions into the accounting cycle has two destination points – as petty cash and demand deposit, inclusive of interest-bearing account. Petty cash is stolen by forging authorized signature or creating false vouchers, for reimbursement. For cash met for demand deposit, receipts are forged or prepared and false cheques written. This particularly occurs in a small organization where controls are loose. Besides, where a Copyright © IAARR 2012: www.afrrevjo.net 129 Indexed African Journals Online: www.ajol.info
long term trusted employee creates an atmosphere of incentive, opportunity, and rationalization, he can engage in cash theft.
At other situations, where the money is so available for the long term trusted employee, he becomes an opportunity taker. With the incentive and opportunity, the employee rationalizes the theft; he sees nothing wrong in taking some money in the pretext of borrowing and to return it later. Since the cash is easier to take than to return, the accrued amount becomes too large to replace and the employee is locked up into an endless round of theft and cover up. The schemes adopted by the employee to execute the planned cash theft fraud could go undetected by the statutory auditor who is not primarily commissioned to detect fraud.
Forensic Accounting & Financial Crimes: Adopting the Inference, Relevance & Logic Solution …
Management thefts
These financial crimes are committed when management over-rides the controls instituted by themselves to prevent the thefts they now commit. These thefts are usually difficult to detect. Shackell (2000) reports the pervasiveness of this type of crime in corporate organizations and concludes that management thefts are difficult to detect. Silverstone and Sheetz (2004) opines that the effects of management misconduct can also have severe consequences for the company‘s overall morale and set a negative model for employees further down the company‘s ladder.
Payroll fraud
Payroll departments in organizations could be linked with payroll fraud. The financial crime of payroll fraud is usually fast tracked by a payroll clerk, internet facility or through the connivance and collusion of another staff. The instruments of payroll fraud include ghost employees, inflating hours of work and overtime, as well as overstating expense accounts or medical grounds.
The financial crime of payroll is committed when the payroll clerk uses various criminal practices to avoid being caught in the fraud. Ghost workers could be included on the payroll and salaries paid out to the payroll clerk who forges the signature of the ghost worker and obtains value through third party transactions. Hours of work and overtime could be inflated in connivance with other fraudulent staff of the organization and payment made on the basis of this is shared. A usual case is when medical bills are inflated, and sometimes where employees do not attend hospitals, such bills can even feature at regular or irregular interval and cash or value received by the fraudulent employees. The latter description of financial crime is a common Copyright © IAARR 2012: www.afrrevjo.net 130 Indexed African Journals Online: www.ajol.info
feature in an organization that accredits on private clinic or hospital for the treatment of its staff. Most times, the statutory auditors constrained by their statutory functions plan their audit procedures to have reasonable expectation of material fraud and errors.
Corporate frauds
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Senior management of companies are at the centre stage of this financial crime. Usually, corporate frauds are intended to benefit the company. Categories of these frauds include financial statement fraud, anti-trust violation; securities frauds, tax evasion, false advertising, environmental crimes and the production of unsafe product, corporate frauds against the company deprives the company of its assets especially when the senior management attempts to deceive, conceal and misrepresent materially the financial statements. Financial statement fraud is committed in order to improve earnings. As earnings improve, the stock price also increases. Private organization boosts their loan covenants by artificially and criminally improving the earnings of the organization.
Various methods have been used to achieve this. one such method is window dressing and creation of hidden reserves. The law does not specifically employ the statutory auditor beyond the expression of a ‗true and fair view‘ pinion on the financial statements. Additionally, the relevant auditing standards such as the International Statement on Auditing No 240 (ISA 240),Statement of Auditing Standard No. 110 ( SAS 110) and Nigerian Statement of Auditing Standard No 5 (NSAS 5), only empowers the auditors to maintain an attitude of professional scepticism during auditing planning and evaluation of audit evidence. Besides, the auditor‘s emphasis on fraud and error of material effect is of significance.. This again puts the statutory audit at a log jam to deter fraud let alone financial crimes whose tactics and jimicks are more difficult to unearth that ,to say the least, intentional errors or mistakes.
Money Laundering
This is a financial crime of concealment in the flow of fund. It represents the illegal flow of funds across the borders. Corporate organizations could be victims. The Money Laundering (Prohibition) Act, 2004 (―the Money Laundering Act‖) makes various provisions prohibiting the laundering of the proceeds of a crime or of any criminal or illegal activity, and provides for appropriate penalties for money laundering infringements. According to the Copyright © IAARR 2012: www.afrrevjo.net 131 Indexed African Journals Online: www.ajol.info
provisions of the Money Laundering Act, no person or corporation or organisation is allowed to make or accept cash payments of a sum in excess of N500,000.00 or its equivalent in the case of an individual, and N2,000,000.00 or its equivalent in the case of a corporation, unless such cash payment or acceptance is undertaken through a financial institution.
Also, a transfer of funds or securities to or from a foreign country in excess of US$10,000 or its naira equivalent must be reported to the Central Bank of Nigeria (―CBN‖) or the Securities and Exchange Commission (―SEC‖) in the case of a public corporation. The mandatory reporting of all monetary transfers to or from outside the country must indicate the nature of the transfer, the amount of the transfer, the names and addresses of the sender and the receiver of the funds or securities that were transferred, and the ultimate beneficiary of the transfer if different from the latter persons. The Nigerian Custom Service (―NCS‖) is also mandatorily required to forward all monetary declarations it collates to the Central Bank of Nigeria.
Forensic Accounting & Financial Crimes: Adopting the Inference, Relevance & Logic Solution …
The Money Laundering Act (Prohibition) (2004) of Nigeria is an attempt to arrest the illegal flow of funds into and out of Nigeria including funds from corporate organizations. Top management and opportunist ride on the back of the organization to embezzle funds met for the organization. Joseph (2002) estimates that funds laundered across the globe are between $300 and $500 million worldwide. In the context of fund flowing from the organization and committed by staff from within, it is a financial crime from within. The law specifies what constitutes money laundering offences and the liability of directors of financial institutions in the event of money laundering offences. Even though the Act provides that any movement of cash in excess of N500,000.00 or its equivalent in the case of an individual( now one million for individuals, and N2,000,000.00 or its equivalent in the case of a corporation (now ten million for corporate organizations) beyond a certain amount be reported to CBN; this has in most cases not been the case because of the sophistication in the act of committing the crime
Credit Cards and Insurance Fraud
These financial crimes are committed against the company or organization. According to the article on ―the growing toll of identity theft retrieved from www.aba.com/industry + issue, the impact of credit card or insurance fraud can be devastating to small retailers. Insurance fraud is committed when insurance claims are inflated; and do no reflect the value of assets for which Copyright © IAARR 2012: www.afrrevjo.net 132 Indexed African Journals Online: www.ajol.info
the claims are sought. Instances exist where assets such as inventory are burnt up in order to put up insurance claims (Silverstone and Sheetz, 2004).
In Nigeria where the insurance industry is still at infancy, this type of financial fraud is relatively uncommon. However, in the U.S. and some other developed countries, this financial crime is a big issue. In an article retrieved from www.insurancefraud .org/new/study, it was reported that bogus property and casualty claims alone account for 10% of all property and casualty claims.
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However, credit cards fraud has assumed a frightening dimension especially with the advent of internet facility or technology. This financial crime is committed when credit cards are misused and accounting records manipulated. The good intention of a corporate policy could be abused. This occurs when a corporate policy that allows personal items to be charged to advance accounts is abused by employee who now charges his or her personal expenses to corporate expense account. Credit cards scams occur where staff of I.T. department ingeniously manipulates the I.T. to allow not-easily noticed fraction of staff salaries to be credited to an account created and set up for the special purpose.
Motivations for financial crimes
1. Corrupt Corporate Culture
The history of criminology has been an attempt to identify the characteristics that distinguish criminals from non-criminals and then to find a theory that explains and predicts criminal behaviour. No general theory exists why there are crimes, and by extension, financial crimes. Fortunately however a body of information exists on criminal behaviour. While arguments are rift on the possibility of settled theory on the predictability of criminal behaviour, it has been submitted logically that financial crimes, just like any other criminal behaviour, is the inevitable outcome of the competitive ethic of capitalism. According to this theory, the world is constantly facing images of successes and wealth achieved through the recognition of the economic inequality of winners and losers. The urge to be winners remains the driving force and motivation to commit any crime-financial or otherwise (Wheeler, 1992).
2. Corrupt corporate culture
According to Silverstone and Sheetz (2004), financial crimes are motivated by factors which include a corrupt corporate culture. According to them, Copyright © IAARR 2012: www.afrrevjo.net 133 Indexed African Journals Online: www.ajol.info
when a corrupt culture is lived and practised every day at the workplace, this would constitute enormous pressure to financial crimes: a bad corporate, cultural value leads to the inversion of good corporate values. Loyalty could slip to complicity; criminal behaviour to normal behaviour; team-playing to conspiracy. Sutherland (1949) contends that the fear of dismissal or ostracism in losing the favour of superior could lead to financial criminal behaviour. Moreover, this criminal behaviour could be exhibited in association with those who define such financial criminal behaviour and make it more favourable.
3. Conventionality
Forensic Accounting & Financial Crimes: Adopting the Inference, Relevance & Logic Solution …
In addition, Sutherland (1949) further argues that a white-collar crime or any other financial crime favours conventionality: the white-collar criminals live conventional lives. Such conventionality is their toast and camouflage. Conventionality and stability give the financial crimes the foundation of the trust. Such trust creates the opportunity to commit financial crime. Thus, conventionality(C) and stability(S) leads to opportunity (O) to commit financial crime which is then rationalized(R). This can be expressed, in a model suggested by Sutherland (1949), thus:
I +O + R=Crime or fraud –––––––––––equ i
But I=C+S, such that
C+S+O+R=Crime or fraud–––––––––––equ ii
But according to the above process, commission of fraud ,including financial crimes, is possible when the elements of incentive (pressure) (l), opportunity (O) and rationalization (R) are present and unbroken.
4. Pressure, opportunity and rationalization
By pressure, it is meant anything that causes a person to commit fraud. Opportunity is the ability to commit fraud. Opportunity is created by weak internal controls, poor management oversight, among others; while rationalization involves a person reconciling the act of committing crime with the common notions of decency and trust. The issues (or variables) on the left land of equation must be broken to prevent the commission of financial crime. This remains the role of the forensic accountant. Copyright © IAARR 2012: www.afrrevjo.net 134 Indexed African Journals Online: www.ajol.info
Forensic accounting and Irls approach
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Forensic accounting has been variously defined and the scope differently stated. According to Manning (2002), forensic accounting is the combination of accounting, auditing and investigative skills to a standard that is required by a court of jurisdiction to address issues in dispute in the context of civil and criminal litigation. The import of this definition is appreciated when the context of civil and criminal litigation is emphasized. It can further be appreciated that forensic accounting utilizes accounting, auditing and investigative skills to assist in legal matters.
According to an article extracted on-line from www.buzzle.com/articles, forensic accounting essentially encompasses three major areas of investigation, dispute resolution and litigation support. Today, the horizons of forensic accounting have been broadened to include litigation support, investigative accounting, criminal matters, corporate investigation regulating compliance, insurance claims, matrimonial dispute and expert witnessing. Forensic accounting, as documented in literature is an offshoot of forensic science and accounting (Zysman, 2004). Forensic science is the application of natural laws to the laws of man (Gumbley 2002). In investigation, the forensic accountant determines whether or not certain criminal matters, including financial crimes, such as securities frauds, employee theft, insurance fraud, management theft, payroll fraud, corporate fraud, among others have occurred. A major part of a forensic accountant is to investigate and then recommend certain action that can be taken to minimize any future occurrence. For the purpose of this paper, we are interested in investigation of financial crimes.
In litigation support, the forensic accountant presents factual evidence of economic issues that are related to any pending or existing litigation. The forensic accountant quantifies damages that could be sustained by all parties to a dispute. The implication is that any value arrived at in any damages must meet the satisfaction of parties to any legal dispute. Issues of dispute during courtroom proceedings can be resolved by the forensic accountant. He does play the role of an expert witness when he testifies in court.
In financial crimes scenarios, the forensic accountant must appreciate the seriousness of a situation and look beyond the game of numbers. It must go beyond being a detective or regular accounting. The field of forensic accounting is the product of forensic science and accounting, Crumbley (2003) describes forensic scientists as the examiners and interpreters of Copyright © IAARR 2012: www.afrrevjo.net 135 Indexed African Journals Online: www.ajol.info
evidence and facts in legal matters. The science as used have according to Sadiq (2008) involves the examination and interpretation of economic information. Forensic accountant provides information that is used as evidence in the court of law. He investigates, appraises and documents financial fraud and white-collar crimes (such as embezzlement and frauds) by employees, management and other frauds or crimes in the organization. He estimates losses, damages and assets misappropriation and any other complex financial transaction. The whole process ends in the production of report which is tendered to assist in legal adjudication. The forensic accountants, in their investigation, use some investigative techniques in financial crimes. We canvass for the integrated connections of the Inference, relevance and logic solution approach.
The process of inference
Forensic Accounting & Financial Crimes: Adopting the Inference, Relevance & Logic Solution …
The forensic accountant, in the investigation of financial crimes, must undertake preliminary investigation and preliminary advice on amount of damages based on an initial pleading and evidence available at the start of the proceedings. The forensic accountant must identify the key documents that should be made available as evidence. This is because financial crimes are known to be complex and requires more mass of physical and documentary evidence than any other crimes. Therefore, managing evidence of this magnitude especially as it relates to financial crimes in corporate organization is possible through an effective organization. Effective organization is possible when the system in the organization is favourably disposed towards the variables of effectiveness of the organization.
To this end, the forensic accountant as an investigator of financial crimes should have a mastering to marshal the evidence relating to the financial crimes in a way that proves the guilt or the innocence of the fraudsters. In doing this, the forensic accountant must combine the science of judicial proof with a system of visual analysis that sorts, classifies and catalogues every piece of evidence. The forensic accountant could draw from inference in order to prove the guilt or the innocence of the financial criminals. Inference is a critical element in defining guilt or innocence. Inferences must rely on the chain of logic. There should be logical linear sequence of proof of evidence inferred from the mass of physical and documentary evidence. According to Silverstone and Sheetz (2004), however, legal proof must conform to a narrow framework or rigorously enforced rules. Copyright © IAARR 2012: www.afrrevjo.net 136 Indexed African Journals Online: www.ajol.info
Process of relevance
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The forensic accountant must not only infer and expound upon the rules of evidence and their admissibility in financial crimes scenarios, he must ensure that such evidence must be confined to what is relevant. Evidence is relevant if and only if it lends credence to proof or disproof of an issue in contention. Where a piece of evidence in a financial crime leads to a proof or otherwise, then the relevancy clause is proved otherwise it is not. To this end, the forensic accountant must address the confusion over the relevance-versus-non-relevance clause. This confusion arises because cases of financial crimes or other crimes are rarely proven under a singular line of logic. The issue the forensic accountant most contend with is that the relevance and non-relevance of physical and documentary evidence should not be taken on the face value unless the ultimate question to which the fact is directed in de-aggregated and components examined.
The logic rule
The logic rule applied in proof of evidence in the commission of financial crimes could be deductive or inductive. The deductive argument clause provides that the forensic accountant, in an attempt to evidence the process of commission of financial crime, must work from the general proven evidence to the specific. The deductive argument logic has two or more assertions that lead to the conclusion. These assertions could constitute the three parts of deductive argument logic. They have been identified as the major premise, the minor premise and the conclusion. The forensic accountant faced with the choice of deductive logic must weigh the attached assertions on the scale of correctness and verity (Siverstone and Sheetz,2004). According to Schaeken et al (2000), the line of deductive argument should logically lead to a conclusion.
Therefore forming a conclusion, using deductive argument reasoning, in financial crimes investigation, the forensic accountant must relate the minor premise to the major premise and weight their correctness soundness and strength. Where the statements in the major and minor premises are sound, correct and strong, the conclusion reached should be adjudged correct otherwise conclusion becomes a fallacy.
On the other hand, the inductive argument reasoning presupposes a bottom-up reasoning, which works from the specific observations to the broader and more general. This approach is seen as scientific in its methodical approach Copyright © IAARR 2012: www.afrrevjo.net 137 Indexed African Journals Online: www.ajol.info
to resolving financial crimes. The forensic accountant relies on a series of previous observations to reach a conclusion. While the forensic accountant should rely on both deductive and inductive reasoning in resolving financial crimes, however, in offering evidence in the legal system, the forensic accountant may be exposed to inductive logic which provides more scientific approach on the provision of evidential proof. Additionally, in the process of proof, it is common to allege and prove specific isolated facts and build to a general conclusion.
It is factual that the law and the legal resolution of disputes and crimes are concerned with probabilities and not certainties. Deductive argument is designed to lead to mathematical certainty but the realm of probabilities is within the ambit of inductive reasoning. On account of this, the forensic accountant, in search of proof of evidence of financial crimes in organizations, would stretch from specificity to generalization, from a series of previous observations to reach a conclusion.
Forensic Accounting & Financial Crimes: Adopting the Inference, Relevance & Logic Solution …
However, the forensic accountant should not be carried away with or dragged into the fallacies of hasty generalization and exclusion associated with inductive argument logic. These fallacies, however, could be reduced when the forensic accountant carefully analyse the line of argument transposed over the specific legal elements towards the ultimate proposition of guilt or innocence.
Conclusion and remarks
This study x-rays financial crimes in corporate organizations and how forensic accounting can minimize them. To this end, and in line with the investigative skills of the forensic accountant, the IRLS approach of investigating financial crimes was canvassed. The investigative accounting skills of the forensic accountant empower him to address the problem of financial and any other crimes. it was acknowledged that motivation for financial crimes beside being corrupt organizations culture cultivated and practiced daily, the ethic of capitalism and ―the-end-justified-the-means‖ syndrome (Wheeler, 1996),is boosted by the unbroken interaction of the three integrated elements of incentive (also called pressure), opportunity (modified to include conventionality and stability) and rationalization. To deter the commission of financial crimes, the accountant must sever the chain of risk factors suggested by Sutherland‘s (1946) model. One way is to infer from the mass of judicial proof and relate it to visual analysis of evidence which should rely on the chain of logic. Besides, the evidence so drawn must be Copyright © IAARR 2012: www.afrrevjo.net 138 Indexed African Journals Online: www.ajol.info
adjudged relevant as well as meet the test of deductive and inductive argument reasoning. Moreover, the evidence most be free from all fallacies when transposed against legal elements towards the ultimate proposition of proving either quilt or innocence.
Meanwhile, it is suggested that future study should address inference network analysis and inference model in order to prove that an ultimate fact rests solely on the strength of the inferences and not just the evidence. Perhaps, too, future empirical study on this area is advised. This will enable a clear picture of the linkage between IRLS approach by the forensic accountant and in resolving financial crimes in Nigeria.
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References
Anderson, T. and Twining, W. (1991). Analysis of Evidence: How to Do Things with Facts Based on Wigmore‟s Science of Judicial Proof, Evanston IL: North-western University Press.
Companies and Allied Matters Act (CAMA) (2004). Lagos: Government Printers
Crumbley,D.L.(2003). ―What is Forensic Accounting‖. Retrieved September 24th ,2009 from http://www.edwardspub.com
IFAC (2002). IFAC Discussion Paper on Anti- Money Laundering, New York: IFAC.
Johnson, R.M. (2002). Fundamentals of Reasoning, Belmont, CA: Wadsworth / Thomas Learning
Joseph, L.M. (2002). Money Laundering Enforcement: Following the Money Economic perspectives, Vol. 6. Retrieved May 5th 2009 from http://us.gov/journal
Khan,S.A.(2005).―Corruption and Professional Practice: Issues and Challenges‖, The Nigerian Accountants,Vol.38,No.4,Pp.60.
Owojori, A. A. & Asaolu, T.O. (2009). ―The Role of Forensic Accounting in solving the vexed problem of corporate world‖, European Journal of Scientific Research, Vol. 29, No. 2. Retrieved May 10th 2009 from journals.com./ejst.htm. Copyright © IAARR 2012: www.afrrevjo.net 139 Indexed African Journals Online: www.ajol.info
British Journal of Arts and Social Sciences ISSN: 2046-9578, Vol.6 No.1 (2012) ©BritishJournal Publishing, Inc. 2012 http://www.bjournal.co.uk/BJASS.aspx
37
Economic and Financial Crime in Nigeria : Forensic Accounting as Antidote
Dr.Adegbie, Folajimi Festus
(Bsc,Mba,Phd,Fca,Acib,Acti)
Covenant University
Department Of Accounting
[anonimizat]
Dr.Fakile,Adeniran Samuel
(Bsc,Msc,Phd,Acti)
Covenant University
Department Of Accounting
Ota,Ogun State.Nigeria
Abstract
Corruption and other financial and economic crimes are the bane of Nigerian development efforts. All these crimes harm Nigerian economy in no small measure. We observe the non-availability of the appropriate litigation support services in the court leading to misjudgment, poor corporate governance, weakness in traditional auditing and battered image of Nigeria in international community as major problems. The objective of this paper is to evaluate forensic accounting as antidote to economic and financial crime in Nigeria. The paper is empirical with the testing of four hypotheses. The statistical model applied is Chi-Square and Statistical Package for Social Statistics (SPSS) was applied to compute the data. The results show that Forensic Accounting is a financial strategy to curb and resolve economic and financial crimes in Nigerian economy. The alternate of the four hypotheses were accepted. We recommend among others that the government of Nigeria should enact an Act that will make forensic accounting a practice in Nigeria so that economic and financial crimes can become history. British Journal of Arts and Social Sciences ISSN: 2046-9578
38
Introduction
Corruption and other financial and economic crimes are the bane of Nigerian development efforts. Corruption bestrides the lives of the citizens. The judgment of Transparency International is a reflection of what the nation has given to the world-419, money laundering, inflated contracts, scam mails, illegal oil bunkering, disappearance of ships etc.All these crimes harm Nigerian economy in no small messure.Ribadu (2004) stated that all these crimes continued in the system inspite of Government‟s landscape steps to address them, because many people in power want the old dispensation to continue. He reiterated that there are those whose lives thrive on corruption, while there are those even though they are paid to check the activities of the culprits, yet are willing to share in the proceeds with the event that they themselves become culprits.
These economic and financial crimes are the greatest threat to national economic and development as the nation has nothing to show for its huge earnings from oil.Waziri (2009) stated that corruption afflicts virtually all parts of the Nigerian society. It has eaten deep into Nigeria value system and is now threatening to spread to the culture as public adulation for wealth has increased. The society no longer asks questions as to how people came by their questionable wealth. In its 2004 report on worldwide corrupt practices, transparency International survey covered 146 countries, which rated Nigeria as the third most corrupt country, beating Haiti and Bangladesh to the second and last positions respectively. The focus of the Transparency International 2004 report was more on the oil sector as a revenue source for most oil producing countries. According to Owolabi(2007) Peter Eigen, chairman of Transparency International Board of Directors observed in 2004 that in oil producing countries, public contracting in the oil sector is plagued by revenue vanishing into the pockets of western oil executives, middlemen and local officials. He suggested that oil companies could help fight corruption by making public details of payments made to government and state-controlled oil firms. That access to vital information will minimize the opportunity for the payment of kickbacks to secure oil tenders, a practice that has blighted the oil industry in transition and post war economies. That Eigen said further that reconstruction will be wrecked by a wasteful diversion of resources to corrupt elites unless there are strict anti-bribery measures.
The long years of military rule had entrenched corruption in Nigeria; almost becoming institutionalized. Corruption reached its zenith during the reign of General Abacha who was acknowledged to have stolen between 4 and 5billion USD between 1994 and 1998, surpassing all records of state thieving within such a short period. Law and order collapsed and the rule of law took a back seat in the face of tyranny, despotism and impunity. All law enforcement and other watchdog institutions were so compromised that they now served the needs of the corrupt than those of the society they were set up for. (Akomaye, 2007). Nigeria was assessed by many risk rating agencies as too risky a jurisdiction for quality investment. Foreign Direct Investment (FDI) took flight inspite of ceaseless flow of petrodollars, the economy plummeted, witnessing double digit inflation and poverty became pervasive particularly in the Niger Delta giving rise to crises that severally threatened state security.
Akomaye (2007) reiterated bold steps taken to address the problem like the expression of strong political will at the highest level. President Umaru Musa Yar‟Adua and his vice president publicly declared their assets upon assumption of office. That anti-corruption programme must not be approached in an ad hoc manner but addressed as part of a national economic reform programme.This was addressed under its National Economic Empowerment and Development Strategy (NEEDS).Appropriate legislation was enacted to criminalize all corrupt conducts including unjust enrichment, provision for interim restraints, forfeiture of tainted property, special or designated courts/judges were instituted to expeditiously try corrupt cases. Key institutions like Independence Corrupt Practices Commission (ICPC), Economic and Financial Crime Commission (EFCC) were established to fight corruption. All British Journal of Arts and Social Sciences ISSN: 2046-9578
39
theses could not work effectively because of various challenges like politicization and blackmail, constitutional immunity as stated in section 308 of Nigerian constitution, public apathy and doubtful attitudes towards anti-corruption work, and slow justice.
Focus of Paper
Corruption and financial crimes are non-violent and committed in most cases by those who are in the first place, entrusted with the responsibility of taking care of funds or their collaborators. Those who should have first hand information in these matters are those who are usually investigated. Nuhu (2004) stated that in the circumstances, either the information/evidence is destroyed or watered down in such a manner that it will not be useful to law enforcement agencies. It is often the case that whole files containing incriminating materials disappear or relevant parts of them cannot be found. The Economic and Financial crime commission (EFCC) was established in the year 2004 by EFCC establishment Act 2004, with the mandate to combat financial and economic crimes and also to prevent, investigate, prosecute and penalize economic and financial crimes. After establishment, the commission came out with a mission statement in quote” the EFCC will curb the menace of the corruption that constitute the cog in the wheel of progress; protect national and foreign investments in the country; imbue the spirit of hard work in the citizenry and discourage ill-gotten wealth in both public and private sectors of the economy and contribute to the global war against financial crimes. However the EFCC has met with obstacles to effect prosecution of corruption and financial crimes cases in Nigeria. There are incompetent investigators to handle the case assigned to him.Nuhu (2004) asserted that corruption and economic crime cases are usually very complex and complicated. Some involve document or subjects that are very technical requiring a well-schooled investigator to unravel. He further stated that there is poor quality of prosecuting counsel, and that good case can be destroyed by the incompetence of a prosecuting counsel, who either is professionally incompetent or again has compromised himself in order to defeat the counsel.
This paper therefore is to address all the deficiencies outlined by looking at Forensic Accounting as the best antidote to curbing financial and economic crime. That the trained forensic accountants should fill the gaps discovered in the efforts of EFCC and other agencies to put an end to the problem in Nigerian economy.
The problems indentified in Nigerian economy in area of financial and economic crimes are explained thus:
1. Non-availability of the appropriate litigation support services in the court has led to misjudgment or incorrect submissions by lawyers and judges. It has been discovered that offenders are not given appropriate punishment because the gravity or extent of economic loss or damages cannot be adequately determined.
2.The increasing rate of crime and corruption in the economy most especially in the area of economic governance and in public corporations have eroded public confidence and trust in matters regarding transparency and financial probity. Four pillars of corporate governance which are transparency, accountability, independence and fairness are totally missing.
3. There is weakness in traditional auditing style in curbing this socio-economic evil (economic and financial crimes) in the Nigerian economy. Auditors are watchdogs and fraud detectors. Regular auditors focus on errors, omissions, exaggerated assertions, misstatements of facts.
4. There is problem of battered image of the nation both locally and internationally. Nigeria has recorded huge loss of fund. Because of the bad image, Nigeria has not been able to attract Foreign Direct Investment (FDI) expected of a developing economy. British Journal of Arts and Social Sciences ISSN: 2046-9578
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The main objective of this paper is to evaluate the curbing and eradication of economic and financial crimes in Nigerian economy through forensic accounting as antidote.
Other specific objectives are:
1. To assess the relationship between forensic accounting and provision of litigation support services in the Nigerian courts.
2. To assess if forensic accounting will curb economic and financial crimes and institute better governance that will enhance Nigeria public image.
3. To evaluate how forensic accounting can provide professional investigation and litigation support services.
4. To determine the role of a forensic accountant in fraud investigation to curb economic crimes and repair the battered image locally and internationally.
The pertinent questions that this paper is set to answer are:
a. How can a forensic accountant play an important role in fighting economic and financial crimes through litigation support services?
b.To what extent can public confidence and trust be restored through the practice of forensic accounting?
c.Can forensic accountants (fraud auditors) perform better than regular auditors in forensic crimes eradication in Nigeria economy?
d.To what extent can the practice of forensic accounting in Nigeria economy restore the nation‟s image locally and internationally?
The study hypotheses are stated in null forms
(1). Litigation support services by forensic accounting cannot lead to appropriate judgment for economic and financial crime eradication in Nigerian economy.
(2). Forensic accounting has no relationship with good corporate governance for public confidence and eradication of crime and corruption in Nigerian economy
(3).Forensic accounting cannot fill the gap created by traditional auditing style in curbing the socio-economic evil of economic and financial crimes
(4) Forensic accounting has no positive relationship with Nigerian battered image and Foreign Direct credit in Nigerian economy.
LITERATURE REVIEW
Concept of Forensic Accounting
According to Webster‟s Dictionary, forensic accounting means “Belonging to, used in or suitable to court, of judicature or to public discussions, debate and ultimately dispute resolutions. It is also defined as an accounting analysis that is suitable to the court which will form the basis of discussion, debate and ultimately dispute resolution. Forensic accounting is the practice of utilizing accounting; auditing and investigative skill to assist in legal matter and the application of specialized body of knowledge to the evidence of economic transaction and reporting suitable is the purpose of establishing accountability or valuation of administrative proceedings. It can be said that is the integrity of accounting auditing and investigative skill to obtain a particular result.
Gray (2008) analyzed forensic accountants as a combination of an auditor and private investigators. Knowledge and skills include the following investigation skills, research, law, quantitative methods, finance, auditing, accounting and law enforcement officer insights. Gray confirmed that forensic accountants have been employed by the Federal Bureau of Investigation(FBI),Central Intelligence Agency(CIA),Internal Revenue Service(IRS),Federal Trade Commission(FTC) and other government agencies.Owojori and Asaolu(2009) analyzed that forensic accounting through forensic accountants British Journal of Arts and Social Sciences ISSN: 2046-9578
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provide litigation support service which is the provision of assistance of an accounting nature in a manner involving existing or pending litigations in the areas of quantification of economic damages, calculating economic loss resulting from a breach of contract. Litigation support service provides real value to the client-attorney relationship because forensic accountants help win lawsuits and earn settlements.
Forensic accounting is the application of investigative and analytical skills in a manner that meets standards required by courts of law .Forensic accounting provides investigative accounting in economic crimes in financial statements. The forensic accountants must clinically review the financial statements and the related footnotes in spite of their complexity.Businesess are often clever in hiding accounting tricks and gimmicks in form of creating accounting. So investigations must be ever to the signs of outright financial manipulations. Financial manipulations are acts of omission intended to hide or distort the real financial performance or financial conditions of an entity.
Nigerian Experience in Combating Corruption:
Akomaye(2007) narrated the extent of economic crime during the military era which became institutionalized. One of the head of states General Abacha was acknowledged to have stolen between $4miilion and $5million between a994 and 1998, which surpassed all records of state thievery within such a short period. There was total breakdown of law and order and the rule of law took a back seat in the face of tyranny, despotism and impunity. Transparency International rated Nigeria as the most corrupt country for several years. He stated further that Nigeria was assessed by many risk rating agencies as too risky a jurisdiction for quality investment. Foreign Direct Investment took a flight. The government took a very bold step to eradicate the evil in the society like the enactment of appropriate legislations to criminalize all corrupt conducts including unjust enrichment. The following laws were enacted to correct the situation:
1. Independence corrupt practices commission (ICPC) Act, 2000.
2. Economic and Financial Crimes Commission (EFCC) Act, 2004.
3. Money laundering (Prohibition) Act, 2004.
4. Public Procurement Act,2007.
5. Fiscal Responsibility Act,2007.
Over 200 convictions for corruption, money laundering, bank fraud, advance fee fraud were recorded. Assets worth over$5 billion was recovered by EFCC in less than five years. Despite all these efforts to fight crime, there were politicization and blackmail regarding the cases taken to court. Section 308 of the Nigerian constitution grants immunity. There were public apathy and doubtful attitudes towards anti-corruption work. Slow justice system, insufficient commitment by other arms of government, International assets recovery frustration was recorded. Nevertheless the problem has grown geometrically in the economy. Alipius (2009) stated that EFCC efforts to fight crimes and its achievements were proved by the 2008 annual report by the United Nation office on Drugs and Crime (UNODC) which rated the commission as the most successful anti-corruption agency in Africa and Nigeria. Transparency International ratings had moved from 142 in 2006 to 121 in 2008.Despite all these achievements,Alipius stated further that the commission is faced with a lot of accusations and criticisms from some quarters. That the commission has been a political tool of the presidency, that their actions and activities are not on rule of law, hence should be scrapped. They further accused the commission on focusing more on enforcement rather than prevention measures and the issue of selective investigations. He concluded that criticisms can go along way in emboldering their efforts capabilities
Corruption, A threat to Nigeria’s Economy
Waziri (2009) urged Nigerians to be more prudent and transparent in managing its economy, as it cannot afford to filter its resources through corruption in the fight of the global economic meltdown. That if British Journal of Arts and Social Sciences ISSN: 2046-9578
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Nigerians continue to filter the economy through corruption in the face of the global economic crises, then there is an imminent catastrophe which it may not be able to recover from for a long time. She was of the opinion that poverty could be used as a weapon in fighting the scourge. She concluded that EFCC was not going to abandon nor slow down on its primary responsibility of investigating and prosecuting offenders for corruption and economic crimes.
Obstacles to Effective Prosecution of Corrupt Practices and Financial Crimes in Nigeria
Ribadu (2004) stated that corruption and other economic crimes are the bane of Nigeria Economic Development efforts. All the crimes harm the economy in no small measures. That those who are saddled with the responsibility of fighting crimes will do well to rejects to be compromised. If they do, corruption becomes a little monster to be crushed with ease.However; he outlined the following factors that affected the prosecuting of criminals: (a)Cooperation from persons/institutions who should furnish relevant information.(b) the quality of evidence gathered at the investigation stage.(c) the transparency of investigation of the case itself.(d)the prosecutorial competes of the prosecuting counsel.(e) the transparency and fairness of the presiding judge in the trail.(f) gaps in the law guiding prosecution. The greatest tragedy to any prosecution is when a judge has even before taking and analyzing evidence has made up his mind that the accused is not guilty as charged.(g) inadequacy of existing procedural and evidence laws.(h) congestion and slow pace of court proceedings.(i) Jurisdiction problems.(j) cost of investigation and prosecution. He concluded that the commission has a lot of bottlenecks as regards investigation and prosecution of cases. That with the support of the judiciary, there will be speed to the trial cases.
When Economic Crime Becomes Organized: The Role of Information Technologies. A Case Study.
Nicola and Scartezzini (2000) stated the accepted fact that globalization of the market has introduced more, and new forms of opportunity for criminals. Globalization has given those interested in fraud, for instance, the opportunity to act on an international level by taking advantage of the lack of regulations in the commercial and financial markets of some countries. They use the latest technologies to provide themselves with links between criminals all over the world without concrete need for physical contact. The success of many crimes demonstrates how criminal organizations can easily build international connections for the planning and the perpetration of crimes, with the use of new technical know-how and equipment. They explained further that specialization, professionalism and organization characterize economic crime. The more complex the context in which criminals operate, the more professional experience they require, and the broad organizational structures they need in order to commit their crimes. This is the reason why large-scale economic offences need organization to better achieve their results and to reduce risks. Economic criminals need detailed information on laws, techniques and practices in order to assess opportunities and risk. Economic crime is influenced by information revolution in two ways. First as a valuable and contained factor of production, information itself is a direct and indirect object of crimes committed by white-colar criminals. Information means profit. It can be a direct target when it represents the primary goal of an economic crime (i.e. industrial espionage) where economic crime focuses on stealing information, sabotage of information system, and other criminal offences related to the security of information. The strategic role for which information is increasingly acquiring leads to the commission of these crimes. The growing relevance of information has a second important influence on economic crimes. In order to commit them, criminals need to adopt new instruments and new form of organization. Information is expensive and well protected. White-collar criminals know, because of their business background, that only with a flexible and organized British Journal of Arts and Social Sciences ISSN: 2046-9578
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structure it is possible to manage the complexity of information flow. They concluded that economic crime is characterized by the constant interrelation between legal and illegal activities. The fight against economic crime, which is increasingly trafficking in information, can be won only through better management of information.
Economic Crime in a Globalized Society: Its Impact on the Sound Development of the State-An Indian Perspective.
Mehta (2009) stated that economic crime occurs as a deviation from the violator‟s occupational role. Also most of the laws involved or violated are not part of the traditional criminal code. Such crimes are corruption, corporate fraud, public fraud, tax evasion, goods smuggling, stock manipulation, currencies forgery, credit card fraud, environmental crime, intellectual property infringement and the more recent phenomenon of Cyber crime. A criminal committing an economic crime steals large sums of money and employs technology and communication to carry out unlawful commercial transactions, disturb database or orchestrate massive frauds. Another characteristic of economic, commercial, corporate or white-collar crimes is that they are often perceived as good business: and good business often requires „cutting corners‟. Legal violations by corporations are often viewed as part of the business system, much like industrial spying or psychologically suggestive marketing techniques. Those activities are considered as an extension of the capitalist system based on profit and a technical adherence to the letter rather than the spirit of the law. Economic crimes affect society as a whole. For instance, false advertising induces the public to invest in products that do not have the desired effect. Unsafe drugs, pesticides and food additions affect the health of thousands. Exposure to industrial hazards such as unsafe equipment and poisonous materials and emissions have an adverse effect on workers longetivity.She further analyzed that a significant proportion of transnational organized crimes assume the nature of global economic crime. Proceeds of transnational crimes such as drug trafficking, extortion, corruption, tax evasion, arms smuggling, terrorism, and fraud have to be laundered. The international economic threat, posed by global organized crime, in an increasingly global economy is among the major “new” threats to national security. Global Economic Crime does not just affect a select group of financial institutions or regional areas; it affects international financial networks and economies at a national level. Laundering billions of dollars in organized crime money worsens national debt problems because the large sums of money are then lost as tax revenue to that country‟s government. Global organized crime can have a damaging effect on political structures, especially fragile democracies and developing economies. As people feel that the government is powerless to stop organized crime, they turn to crime leaders for protection and political institutions begin to deteriorate. She analyzed corruption,smuggling,invoice manipulation, bogus imports,Crber crime,counterfeiting,credit card fraud, drug trafficking,trafficting in persons,terrorism,trafficking in Arms, and money laundering as major crimes in India. She concluded that there is presently legislation to deal with such offenders specifically intended to deprive offenders of the proceeds and benefits derived from the commission of offences against the law of the country. It provides for the confiscation or forfeiture of the proceeds or assets used in connections with the commission of certain crimes.
Combating Economic Crime
Council of Europe (2005) stated that economic crime has been of major concern to European societies for decades, and in 1981,the council adopted a recommendation listing 16 specific and non-specific offences as economic crimes. The recommendation was based on the assumption that economic crime has adverse impact beyond individual victims and the material damage in that: (a) it affects a large number of persons, society and the state in general, (b) it damages the functioning of the national or British Journal of Arts and Social Sciences ISSN: 2046-9578
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international economy, and (c) it causes a loss of trust and confidence in the economic system. They said an increasing number of European countries report on different forms of economic crime in their assessment of the organized crime situation. That economic crime and organized crime appear to be linked in particular with regard to value added tax, public procurement, privitisation, counterfeiting of commercial products, investment fraud, environmental crime, and fraud against the European Union financial interests. Economic crime is thus one of the main markets of organized crime. They asserted that corruption in its various forms (embezzlement, kickbacks, conflicts of interests, trading in influence etc) appears to be a frequent pattern when serious cases are uncovered by the judicial authorities, the media and other watchdogs. They said illegal profits need to be dissimulated, which makes money laundery also closely related to different forms of economic crime.
Causes of Economic Crime and the Impact of Values: Business Ethics as a Crime Preventive Measure.
Bussman (2003) stated that economic crime in companies poses an enormous challenge to today‟s economy and society. The emerging global and networked economy increases the scope and scale of risks that organizations face from economic crime. He stated further that the most frequent economic crimes against businesses are, above all, fraud, asset misappropriation, false accounting, bribery and corruption as well as Cyber Crime and insider trading, less common are industrial espionage and money laundering. According to him, a survey in 2003 showed that, over the last two years prior to 2003, 34% of all polled companies in Western Europe had been victims of an economic crime with an average loss of around two million Euros. The amount of understated damage is up to five times as high. That a study by KPMG in 1999 revealed that 57% of the companies surveyed suspected that economic crime costs them an unconformable amount of damage valued at less than 1million DM, whereas 29% considered the unconfirmed losses to be up to 10million DM. In this study, he stated it is easy to think that economic crime will be tackled best by criminal law through careful controls and regular criminal charges. He said criminal charges are generally not advisable because they will normally not lead to the desired effect because of the following reasons (a) the inefficiency of economic crime law (b) the weak deterrent effect of severe punishment (c) Risks and disadvantages of prosecution. He analyzed the following as causes of economic crime: impact of criminal personality, impact of opportunity structures, impact of corporate identity, the impact of values on crime, and impact of business ethics. He recommended a holistic approach to crime prevention that takes the firm as a whole into consideration, that intensive controlling measures should be handled cautiously and with awareness, that there must be communication in the system and acceptance of ethical values and moral orientations that play the decisive preventive role.
From all the literature reviewed, it is apparent that crime is a global problem that every country affected is still battling with how to find solutions to the menace. All the adopted recommendations have not yielded positive results thereby creating a gap for continued search for solution to the problem. This paper is focused to fill the gap discovered.
Methodology
This study is empirical and descriptive .The population is the government parastatals.The sample representatives the following key government institutions: Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices Commission(ICPC), Lagos State Ministry of Finance, Power Holding Company of Nigeria(PHCN) and Federal Inland Revenue Service(FIRS).100 questionnaires were administered to the sampled population with 20 distributed to each of them.86questionnaires were retrieved back which represents 86% and is sufficiently alright to complete the study. The questionnaire British Journal of Arts and Social Sciences ISSN: 2046-9578
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is close ended with five likert scales of Strongly Agree, Agree Disagree Strongly Disagree and Undecided. Relevant questions relating to the hypotheses were stated for the respondents to pick the options relevant to the practice in their various organizations.
Hypotheses tested: The following four hypotheses were tested for this study:
(1).H0 Litigation support services by forensic accounting cannot lead to appropriate judgment for economic and financial crime eradication in Nigerian economy.
(2).H0 Forensic accounting has no relationship with good corporate governance for public confidence and eradication of crime and corruption in Nigerian economy
(3).H0 Forensic accounting cannot fill the gap created by traditional auditing style in curbing the socio-economic evil of economic and financial crimes
(4)H0 Forensic accounting has no positive relationship with Nigerian battered image and Foreign Direct credit in Nigerian economy
Data Analysis and Findings of Primary Data
Table 1 Hypothesis 1 Data Analysis: HI Litigation support services by forensic accounting can lead to appropriate judgment for economic and financial crime eradication in Nigerian economy.
Test Statistics:
Chi-Square=50.167
Degree of freedom =4
Asymp.Sig= .000
Level of Significance=0.05
With the level of significance of 0.05,degree of freedom 4,the computed value by Statitiscal Package for Social Sciences (SPSS) is 50.167 compared with the tabulated value of 9.49.With this result, we reject the null hypothesis and accept the alternative which says Litigation support services by forensic British Journal of Arts and Social Sciences ISSN: 2046-9578
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accounting leads to appropriate judgment for economic and financial crime eradication in Nigerian economy.Therefore Forensic Accounting will provide litigation support service that support the eradication of economic and financial crime in Nigerian economy.
Hypothesis 2:HI. Forensic accounting has strong relationship with good corporate governance for public confidence and eradication of crime and corruption in Nigerian economy
Test Statistics.
Chi-Square= 82.00
Degree of freedom=4
Asymp.Sig=.000
Level of Significance=0.05
With the level of significance 0.05, degree of freedom 4,the computed value using Statistical Package for Social Sciences(SPSS) is 82.0,while the tabulated figure is 9.49 meaning that the computed figure is higher than the tabulated. Hence we reject the null hypothesis and accept the alternate which says that Forensic accounting has strong relationship with good corporate governance for public confidence and eradication of crime and corruption in Nigerian economy
Hypothesis 3 HI Forensic accounting can fill the gap created by traditional auditing style in curbing the socio-economic evil of economic and financial crimes
Test Statistics British Journal of Arts and Social Sciences ISSN: 2046-9578
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Chi-Square= 43.176
Degree of Freedom= 4
Asymp.Sig.=.000
Level of Significance=0.05
At the level of significance of 0.05 and degree of freedom 4, using Statistics Package for Social sciences (SPSS) the computed value is 43.176 which higher than the tabulated value of 9.49.With this result, we reject the null hypothesis and accept the alternate which says Forensic accounting can fill the gap created by traditional auditing style in curbing the socio-economic evil of economic and financial crimes.
Hypothesis 4. HI Forensic accounting has positive relationship with Nigerian battered image and Foreign Direct Investment(FDI) in Nigerian economy British Journal of Arts and Social Sciences ISSN: 2046-9578
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Test Statistics
Chi-Square=65.64
Degree of Freedom =4
Asymp. Sig. .000
Level of Significance=0.05
With level of significance 0.05, degree of freedom 4, and using Statistical Package for Social Sciences (SPSS), the computed figure is 65.64 which is higher than the tabulated figure of 9.49.With this result, we reject the null hypothesis and accept the alternate which says that Forensic accounting has positive relationship with Nigerian battered image and Foreign Direct Investment (FDI) in Nigerian economy. If forensic accounting helps to curb economic and financial crime in the economy, this will repair Nigerian soiled image in the international economic community and enhance foreign direct investment.
CONCLUSION:
The government of the federal republic of Nigeria agreed that anti-corruption programme must not be approached in an ad hoc manner, but addressed as part of a national economic reform programme.They have enacted appropriate legislation to criminalize all corrupt conducts including unjust enrichment. They enacted ICPC Act, 2000, EFCC Act, 2004, Money laundering (Prohibition) Act, 2004, Fiscal Responsibility Act, 2007.With all these, economic and financial crime remain unabated. The issue of crime is politicized, there is constitutional immunity, there is public apathy and doubtful attitudes towards anti-corruption work, there is slow justice system because of poor documentation and representations, there is insufficient commitment by other arms of government to curb crimes in the system. All these have created a gap in the resolution to financial crime in Nigeria .With the result of the research work, the gap can be filled by introducing and adapt forensic accounting as financial strategy to British Journal of Arts and Social Sciences ISSN: 2046-9578
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curb economic and financial crime: (i)Forensic Accounting will provide litigation support service with appropriate provision of professional services in the law courts (ii)Forensic Accounting will institute good corporate governance in the public sector which will instill public confidence in the government and the entire system.(iii) The traditional auditing has limitation in detecting fraudulent practices which the forensic accountants will effectively fill. They have the professional ability back up by law to break into the organization system and examine the books, make discoveries and present the documentary evidences in the law courts. (iv) The image of Nigeria in the international community has discouraged foreign direct investment because of economic and financial crime. This has effect on development, employment and the standard of living of the people. Eradication of economic and Financial crime through the adoption of forensic accounting in the system will improve the image of Nigeria. Crime free environment will attract foreign direct investment.
RECOMENDATIONS
In view of the desire of the government and Nigerian citizens to have economic and financial crime free economy, the following are the factors for the way forward:
(i)The government should enact a law (an Act) which will make forensic accounting a practice in Nigeria such that Forensic Accountants will have practicing licence like other advance countries like USA, United Kingdom, Canada, Japan etc where they work tirelessly and professionally to eradicate crime through litigation support and representations in the law courts.They compute economic damages and make professional recommendations to the court as to seizure of properties, foreclosure of acquired properties through fraudulent means.
(ii) It should be a compulsory course to be taught in all Nigerian Universities.
(iii). The Institute of Chartered Accountants of Nigeria (ICAN) should it as compulsory course in their professional examinations.
(iv)The Economic and Financial Crime Commission (EFCC) should be strengthened technologically for effectiveness in their services to the nation, and for effective utilization of their resources both human and capital. They should employ or collaborate with forensic accountants for professional discovery of evidences which will support litigation in the courts.
(v) The lawyers and the courts should employ the services of forensic accountants which help in understanding the technicalities of some cases and the quick dissemination of judgment British Journal of Arts and Social Sciences ISSN: 2046-9578
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