Effect of Forensic Accounting in Fraud Detection
Chapter One
Aim and Objectives of the Study
This study is aimed at ascertaining the effect of forensic accounting in fraud detection, while specific objective of the study include:
- To determine the chances of fraud discovery through forensic accounting in the petroleum sector.
- To ascertain the extent to which motive evidence stem the tide of unlawful withdrawal of fraud.
- To ascertain how audit trail has reduced inconsistency in entries.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
The concept of fraud in itself disordered. But scholars vary significantly in their expressions about fraud. The cause is sometimes confused with effect. Defining fraud is as difficult as identifying it. Fraud is defined by EFCC (2004:46) as the non-violent criminal and illicit activity committed with objective of earning wealth illegally either individually or in a group or organized manner thereby violating existing legislation governing the economic activities of government and its administration . . .” Nwaze (2012) defined fraud as a predetermined as well as planned tricky process or device usually undertaken by a person or group of persons with the sole aim of cheating another person or organisation to gain illgotten advantage which would not have accrued in the absence of such deceptive procedure. (Onuorah and Appah, 2012) as cited in Bello (2001) and quoting Russel (1978) remarks that the term fraud is generic and is used in various ways. Okafor (2004) added that fraud embraces all the multifarious means which human ingenuity can devise, which are resorted to by an individual to get advantage over another in false representation. No definite and invariable rule can be laid down as a general proposition in defining fraud as it includes surprise, trick, cunning and unfair ways by which another is cheated fraudulently. Ojaide (2000) Ramamoorti (2007) argued that fraud is a human endeavor, involving deception, purposeful intent, intensity of desire, risk of apprehension, violation of trust, and rationalization. It is therefore important to understand the psychological factors that might influence the behavior of fraud perpetrators. The rationale for drawing on behavioral science built on evident from the intuition that one needs to think like a crook to catch a crook. Karwai (2002), Ajie and Ezi (2000) are of the view of fraud in organizations vary widely in nature, character and method of operation in general. Fraud may be classified into two broad ways: nature of fraudsters and method employed in carrying out the fraud. On the basis of the nature of the fraudsters, fraud may be categorized into three groups, namely; internal, external and mixed frauds. Internal fraud relates to those committed by members of staff and directors of the organizations while external fraud is committed by persons not connected with the organization and mixed fraud involves outsiders colluding with the staff and directors of the organization. Karwai (2002) reported that the identification of the causes of fraud is very difficult. He stated that modern day organizations frauds usually involve a complex web of conspiracy and deception that often mask the actual cause.
CONCEPT OF FORENSIC ACCOUNTING
The term “forensic accounting was coined by Peloubet in 1946, he said, forensic accounting is the application of accounting knowledge and investigative skills to identify and resolve legal issues. It is the science of using accounting as a tool to identify and develop proof of money flow. These tools and/or techniques, skills and knowledge can be invaluable for fraud and forensic accounting investigators.” Forensic accounting is the integration of accounting, auditing and investigative skills (Dada, Owolabi & Okwu, 2013), (Zysman, 2004). Dhar and Sarkar (2010) define forensic accounting as the application of accounting concepts and techniques to legal problems. It demands reporting, where accountability of the fraud is established and the report is considered as evidence in the court of law or in administrative proceedings.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to investigate the effect of forensic accounting in fraud detection.
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment, the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the study effect of forensic accounting in fraud detection. 200 staff of selected audit firm was random selected by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the effect of forensic accounting in fraud detection.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenge of forensic audit in Nigeria.
Summary
This study examines the usefulness of forensic audit in the prevention and detection of fraud. It has discussed the Forensic Accounting approach or procedure necessary for detection, prevention of fraud and the type of control to be established in order to control the incidence of fraud in the state. It should be emphasized that whether within the business world or in the public sector, the ultimate responsibility for discouraging and preventing fraud and corrupt practices rests with management. the study revealed that the use of Forensic Accounting do significantly reduces the occurrence of fraud cases in the public sector, as it equally showed that there is significant difference between Professional Forensic Accountants and Traditional External Auditors in terms of skills and techniques applied in Fraud detection and prevention.
Conclusion
The role of a forensic accountant under contemporary conditions no doubt is very important because they help lawyers, courts, the police, regulatory bodies and other institutions in investigating and documenting frauds. The increasing occurrence of fraud in modern day business environment requires the services of forensic accountants to unearth fraudulent activities within and outside an organization. Also, continued audit failures over the last five decades have prompted a paradigm shift in accounting. It is generally accepted that an auditor has the duty to perform tests to detect material defalcation and errors if they exist. However, fraud detection experts called forensic accountants are now been hired in developed economies to investigate cases of fraud.
Recommendations
The study recommend that professional bodies in Nigeria like the Institute of Chartered Accountants, Association of National Accountants, and the National Universities Commission should encourage the formalization and specialization in the field of forensic accounting. In addition, government should develop more interest in forensic accounting for monitoring and investigating suspected culprits in fraud cases as evidenced in the examples earlier cited. Also, our laws should be up to date with latest advancement in technology to ensure admissibility of evidence in a law court for successful prosecution of criminal and civic cases. Government should have an effective plan with other countries in extraditing run away fraudsters from anywhere around the globe. Finally, it is also recommended that government should ameliorate the expenses involved in engaging the services of a forensic accountant. It is hoped that if these recommendations are implemented and culprits treated without favouritism; the occurrence of fraud will reduce drastically within the Nigerian Society which ultimately should impact on our global rating by transparency international.
Reference
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- Ajie, H.A., &Ezi, C.T. (2000).Financial Institutions and Markets.Owerri: Corporate Impression.
- Albrecht, C.C. (2001). “ Proactively Detecting Fraud”. (Financial Post, July 2001), 13- 15.
- Albrecht, C.C. and Denn, J.G. (2001). Can Auditor Detect Fraud? (Dec. 2001), 213- 219.
- Albrecht, W.S. and Albrecht, C.C. (2002). Root out Financial Deception. Journal of Accountants, pp. 30 – 33.
- Albrecht, C.C. and Albrecht, C.O. (2009). “Datadrisen Fraud Detection Using Detectless”.Journal of Forensic and Investigation Accounting, Vol. 1 No. 1, pp. 1 – 24.
- Apostolou, B., Hassel, J.M., & Webber, S.A. (2002).Forensic Expert Classification of Management Fraud Risk Factors.Journal of forensic Accounting, Vol. 1, 181 – 192 .
