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The growth of public liability companies and large increase in the number of investors owing share and the separation of ownership from control of companies has called for regular auditing of corporate financial records (Owojori and Asaolu, 2009). According to the American Institute of Certified Public Accountants (AICPA), the objectives of the ordinary audit of financial statement by independence auditor is the expression of an opinion on the fairness or otherwise in all materials with respect to financial position, results of operation and its cash flows in controlling with generally accepted accounting principles. Such statutory audits cannot prevent and reduce mis-appropriation of corporate fund. Moreover, modern organized corporate frauds are sophisticated and the need to respond to this changing criminal threat calls for the skills of non traditional experts like accountants and legal practitioners.
Fraud losses impact virtually every sector of the economy. Despite significant advances in fraud detection technologies, fraud losses continue to pose a significant problem to many in both the private and public sectors of the economy. The catastrophic business failures of the last decade have been revealing in many levels (Golden, et. al, 2006). But the present decade is not very different. Most people seemed to be struggling. How could these massive frauds have occurred? How can such events be deterred, if not completely prevented in the future? Who is responsible for deterrence and investigation? What methods are effective? Nevertheless, there are far more questions than answers, and all the questions are difficult.
Frauds are committed in all spheres of human activities, not only in business, but also in public and financial sectors (Ratlift et. al., 2006). Fraud is a strategy to achieve a personal or organizational goal or to satisfy human needs. It is any action, behaviour or oral expressions deliberately aimed at deception and /or misinformation. It is usually defined as a sequence of activities perpetrated to obtain money, property or services, to avoid payment or loss of services or to secure personal or business advantages. These acts are not dependent upon the application of threat of violence or of physical force (International Standards for Professional Practice of Internal Auditing, 2002). However, a goal or need can be satisfied by honest means.
Fraud has always been present since the times reached by human memory extending up to our days and is likely to continue to be committed in the future. It produces detrimental effect not only upon the financial status and performance of the establishment or nation, but may ruin its image and damage its competitiveness. Fraud specifically creates obstacles to the development of foreign investment.
According to Webster (1997), investigation is defined as "to investigate; a careful search or systematic inquiry; to follow up or make research by patient inquiry, observation and examination of facts. In the fraud arena, the definition of investigation could be expanded to include the importance of co-ordination activities with law enforcement entities, hence the term forensic. Investigation consists of activities aimed at obtaining enough evidence and information to stop fraudulent activity, to obtain recovery of assets or restitution and to provide information and support for the successful prosecution and conviction of the fraudster(s).
Mounce and Frazer (2002) have noted that forensic accounting is one emerging career available to accounting professionals. According to Enyi (2008), forensic investigations look beyond the figures in financial records and deals directly with the business reality of the situation at hand. Broadly, forensic accounting is the specialty that involves the integration of accounting, auditing and investigative skills. It provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately assists in dispute resolution. It therefore encompasses both litigation support and investigative accounting.
In Nigeria, fraud in public and private sectors of the economy has been seen as one of the major factors of the dwindling economy. The Transparency International in their Corruption Perception Index in early 2002, pronounced Nigeria as one of the most corrupt nations in the world. This was in spite of the fact that democratic institutions had been introduced and the Independent Corrupt Practices and Other Related Offences Commission (ICPC) established. Even as at today, Nigeria occupies the last but one position down the ladder among nations adjudged to be corrupt by Transparency International Corruption Perception Index. Again in 2003, the Economic and Financial Crimes Commission (EFCC) was established to investigate financial crimes such as advance fee fraud and money laundering (EFCC Act 2004 and Ribadu, 2006). This anti-graft Commission was established partially in response to pressure from the Financial Action Task Force (FATF) on Money Laundering which named Nigeria as one of 23 countries non-cooperative in the international community's efforts to fight money laundering. Since then, how has the two anti-graft agencies fared with curbing the menace of fraud in Nigeria? While there may be some success stories, including the recent recoveries of funds acquired in fraudulent ways from bank executives, a lot still needs to be done.
This research seeks to examine the application of forensic accounting techniques in fraud prevention and detection in Nigeria.
1.2 Statement of the Research Problem
Fraud has always been present since the times reached by human memory extending up to our days and is likely going to continue to be committed in the future. It produces detrimental effect not only upon the financial status and performance of the establishment or nation, but may ruin it image and damage it competitiveness. Fraud specifically creates obstacles to the development of foreign investment.
Fraud is the number one enemy of the business world. No company is immune to it and it is in all works of life (Nwankwo, 1991). From time to time, fraud disclosures result in huge financial scandals and bankruptcies of even large international corporations. Corporations like Enron and WorldCom have not been spared its effect. MackeviÄius and KazlauskienÄ- (2009) have noted that fraudulent accounting has bought about absolute detrimental losses to such global operators as Xerox, Kmart, GlobalCrossing, Adelphia Communications and a number of others.
No money is entirely free, but has its legal use. It therefore means that the misuse of any amount will impact negatively on where it should be legally used. The effect of such can be on the organization or the whole nation. If the effect is not direct, it may be indirect as it may affect facilities and infrastructure that is supposed to be beneficial to the concerned
Many experts agree that there is an inverse relationship between the economy and fraud (Domzalki and McGladrey, 2009). In Nigeria, the perennial infrastructural decay and general systemic collapse that have often held back the country's development has been linked to corruption (Thisday, 2009). Even though fraud and corrupt practices is globally endemic (Adefila et. al., 2006), the rate at which it is perpetrated in Nigeria is dangerously alarming. Even though the Nigerian government had set up two agencies- The Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and other related offences Commission (ICPC) to fight fraud and corruption in the Country, it is worrisome that incidences of graft and other forms of fraud have become so widespread that it is fast assuming an epidemic proportion. Equally worrisome is the culture of shamelessness on display as it is a common sight in Nigerian court premises for arraigned corrupt officials to appear in court rooms beaming with broad smiles and back slapping one another instead of showing some sobriety. Some of them would even hire crowds in a common dress code who hail them outside court rooms as if they were some kind of heroes. It is the belief of the present researcher that the effective application of forensic accounting can deal with some of these excessive.
It is in view of the above submissions and endemic nature of fraud in Nigeria and the necessity of specialize skills to unveil such frauds that it becomes imperative to advocate for the introduction of forensic accounting techniques into the curriculum of the undergraduate programmes in accounting. Education is has a formative effect on the mind, character or physical ability of an individual through the dissemination of knowledge. Educational institutions provide the avenue through which the knowledge is disseminated. They provide the barometers to measure the potential for dissemination of new concepts and indeed its future development. Educational institutions can become an avenue for setting free a people from ignorance. This is because knowledge is easily passed through the students who are forming future values and ethos. Of course, students represent the future manpower potential of any country and should be empowered with knowledge.
As would be seen from the literature review in the next section, forensic accounting education continues to receive high priority attention in curriculum development in developed countries. But this is certainly not the case with many developing nations, like Nigeria, yet fraudulent activities are common phenomena in the country. It was only very recently (May, 2010) that the first set of sixteen (16) graduates completed a forensic accounting certificate course that was developed by the Institute of Chartered Accountant of Nigeria (ICAN). They were also inducted into the Institute as forensic experts in a ceremony that could be described as a milestone, not only in the history of the Institute but that of the entire country at large. Also, most of the studies on forensic accounting education where carried out on academicians and practitioners. It is however, important to garner the views of also from student in this important discourse. Accounting students are part of the mechanisms through which curriculum change could be actualized. It should therefore be interesting to appreciate their views on this issue. This study seeks to fill the current void in the literature by examining the level of awareness of forensic accounting by accounting students in a number of universities in Nigeria.
Forensic accounting being a very young branch of the accounting profession all over the world is relatively younger in Nigeria. It is even doubtful if there is significant awareness of this branch of accounting among practitioners, students and academics in Nigeria, nonetheless the use of its techniques in fraud investigation. With forensic accounting, it is anticipated that cases of fraud will drastically reduce in Nigeria. This research therefore seeks to examine the application of forensic accounting techniques in fraud prevention and detection in Nigeria
1.3 Aim of the study
The aim of this study is to examine the application of forensic accounting techniques in fraud prevention and detection in Nigeria.
1.4 Objectives of the study
1. To investigate the mechanisms of fraud prevention and detection, and their levels of effectiveness in Nigeria.
2. To identify the major factors that hinder the application of forensic accounting techniques in fraud prevention and detection in Nigeria.
3. To examine practitioners' opinions and behavioural intention to use forensic accounting techniques in fraud prevention and investigation in Nigeria.
4. To explore the level of awareness of forensic accounting techniques in Nigeria.
5. To examine the readiness of Universities in taking up forensic accounting courses.
1.5 Research Questions
1. What are the common fraud prevention and detection mechanisms and their level of effectiveness in Nigeria? Is there any significant difference?
2. What are the major factors that hinder the application of forensic accounting in fraud prevention and detection in Nigeria?
3. What influence will educational activities of universities have on practitioners' awareness in forensic accounting techniques?
4. What influence will awareness in forensic accounting service have on the perceived benefits of using forensic accounting techniques?
5. What influence will awareness in forensic accounting service have on the perceived risks of using forensic accounting techniques?
6. To what extent will the perceived benefits of using forensic accounting techniques in fraud prevention and detection influence practitioners' intention to use forensic accounting services in Nigeria?
7. How will the perceived risks of using forensic accounting techniques for fraud prevention and detection influence the practitioners' intention of using forensic accounting techniques in Nigeria?
8. What will be the influence of perceived susceptibility to financial fraud on practitioners' intention to use forensic accounting services?
9. What will be the influence of perceived severity of financial fraud on practitioners' intention to use forensic accounting services?
10. What will be the effect of perceived benefits, perceived risks, perceived susceptibility to and perceived severity of fraud on practitioners' intention to use forensic accounting services in fraud prevention and detection in Nigeria?
11. What is the level of awareness of forensic accounting techniques among the undergraduate in Nigeria?
12. How ready are universities in taking up forensic accounting courses?
1. Educational activities of Nigerian Universities will positively influence awareness in forensic accounting techniques.
2. Awareness of forensic accounting techniques will positively influence the perceived benefits of using it in fraud prevention and investigation in Nigeria.
3. Awareness of forensic accounting techniques will negatively influence the perceived risks of using it in fraud prevention and investigation in Nigeria.
4. The perceived benefits of using forensic accounting techniques will positively influence the intention to use it as major fraud prevention and investigation method in Nigeria.
5. The perceived risks of using forensic accounting techniques will negatively influence the intention to use it as major fraud prevention and investigation method in Nigeria.
6. The perceived susceptibility to fraud will positively influence practitioners' intention to use forensic accounting techniques in fraud prevention and investigation in Nigeria.
7. The perceived severity of fraud in will positively influence practitioners' intention to use forensic accounting techniques in fraud prevention and investigation in Nigeria.
1.7 Scope of the study
This study was conducted on students, academics and practitioners of accounting profession in Nigeria. However, it was conducted on students who were in their third and final years of study in Federal universities that were selected as samples. Third and final year students are more likely to have higher appreciation of the relationship between their course of study and reality of employment than first and second year students. The choice of Federal universities was based on the fact that they are generally perceived to be better resourced than their state and private counterparts. The resource advantage could therefore affect their curriculum content in terms of teaching forensic accounting. Since there is no state in the country with more than one federal university, the states where the sampled universities were selected also served as samples from where practitioners were selected. This was to allow for quick and easy collection of data. The practitioners were those auditors and accountants at leadership positions in their departments, ministries and units.
1.8 Significance the study
The initial conception of the idea to study forensic accounting was borne out of the need to enhance fraud prevention and detection in Nigeria. Fraud and corrupt practices have slowed down the pace of the country's development. While most countries have been able to reduce the occurrence of financial fraud in both the private and public sectors, the menace is rather on the increase in Nigeria, despite the establishment of agencies to deter such occurrences.
Firstly, this study is significant in the sense that it has shown that current fraud prevention and detection mechanisms in use are not the most effective. On the other hand, it has suggested the use of forensic accounting techniques which is one on the most effective methods in combating the menace.
Secondly, the findings of this study should provoke Nigerian Universities to begin to introduce forensic accounting courses in their undergraduate curriculum. The study has revealed the urgent need for forensic accounting education in creating awareness on the use of forensic accounting techniques. The National Universities Commission (NUC) now has information in her hands through which she could insist on accounting departments to include forensic accounting education in their curriculum before such departments are accredited.
Thirdly, the public service, private organisations and policy makers now have information on the state of forensic accounting in Nigeria for their decision making. Forensic accounting can thus be use as a tool in the prevention and detection of fraud in Nigeria, as being done elsewhere.
1.9 Contribution to knowledge
In view of the nature of fraud and its effect on business, organisations, government, etc, studies on how to prevent or detect fraud are of global relevance. Although many studies have been conducted on forensic accounting in many parts of the world, especially in the United States of America, no comprehensive study has been done in developing economies as Nigeria. Where any information exists, they are only piecemeal. This is therefore the first attempt of such. Hence, the findings of this study are contributions from developing economies.
The present study has added to the growing body of literature in forensic accounting techniques. However, previous empirical studies have focused exclusively on the views of practitioners and academics, in assessing the demand for forensic accounting. But the present study presents afresh and distinctive evidence from accounting undergraduates, in addition to those of practitioners and academics from the developing world.
This study has further strengthened the findings of the Muthusamy et al (2010) on the organizational intention to use forensic accounting services. However, while their findings were based on managers and chief executive officers in private organisations in Malaysia, the present study made use of directors of accounts and auditors public service in Nigeria. This has further supported research model.
1.10 Organisation of the thesis
This thesis is organised into six chapters. Chapter one is the general introduction and background information. It presents the research problem, aims and objectives of the study, significance of the study, and so on. Chapter two is the literature review. Chapter three is on theoretical underpinning and development of the research propositions. The methodology for the study is set out in chapter four. Chapter five presents the results of this research as well as discussion of the finding. The study is summarized in chapter six, where we also have recommendations and conclusion