Accounting Project Topics

Application of Forensic Accounting Skills and Detection of Financial Crimes in Nigeria (The Study of Quoted Manufacturing Firms)

Application of Forensic Accounting Skills and Detection of Financial Crimes in Nigeria (The Study of Quoted Manufacturing Firms)

Application of Forensic Accounting Skills and Detection of Financial Crimes in Nigeria (The Study of Quoted Manufacturing Firms)

Chapter One

Statement Of The Objectives

The general objective of this study is to inculcate the knowledge of forensic accounting skills in preventing and detecting corporate fraud in Nigeria. Though the main objective of forensic accounting will vary according to the purpose of hiring an individual or entity, the essence of this study is to employ the new knowledge to uncover fraud, crimes, and evasions of financial obligations or malpractices committed through manipulation of accounting records. The specific objectives of this study are as follows;

  • To investigate how the incidence of fraud, encourages or leads to business failures
  • To examine the reason behind investors’ loss of confidence in investing or depositing in financial institutions;
  • To ascertain how forensic accounting has been a useful tool in the prevention and detection of fraud in our financial institutions .




Much have been said and written on the role of forensic accounting in combating corporate fraud in Nigeria. In this chapter, efforts are made to assemble experts opinions on the role of forensic account in an organization.


According to the institute of forensic accountancy (IFA) of Nigeria, forensic accounting is the specialty practice of accounting that describes engagement that results from anticipated disputes or litigations. Forensic accounting to the webster’s dictionary means’ belonging to use in or suitable to court to jurisdiction or to public discussion debate. Forensic audit or forensic accounting can be used interchangeably forensic accountants often have to give expert evidence at the eventual trial. All of the larger accounting firms, as well as many medium sized and boutique firms,  have specialist forensic accounting department, within this groups, there may be further sub-specialization for example, some forensic accountant may just specialize in insurance claims, personal injury claims, fraud construction or royalty audit (Timbee, 2011).

Forensic accounting is that aspect of accounting that provides analysis that is suitable to the court which will form the basis for discussion debate and ultimately disputes resolution (Wallace, 1991).

Further more, forensic accounting comprises the use of accounting, auditing and investigative skills to assist in legal matters and the application of specialized body of knowledge to the evidence of economic transaction and reporting suitable is the purpose of establishing accounting or valuation of administrative proceedings, it consists of two major components;

Litigation support and service, which recognized the role of the accountant as an expert consultant.

Investigative service, That use a forensic accountants skills and many requires possible custom testimony.

However, Forensic accounting is different from the old debit and credit accounting as it provides an accounting analysis that is suitable to the organization which will help in resolving the disputes that arises in the organization Mohammed,2008.

A forensic account has a unique job because of the responsibilities involved in the integration of accounting, auditing and investigative skills. Using all these skills, a forensic accountants is evidently, a true investigator and is trained beyond the numbers and deals with the business reality of the situation (WALLACE, 1991).

Forensic audit involves examination of legalities by blending the techniques of property (VFM audit), regulate the investigative and financial audits. The objectives is to find out whether or not true business value has been reflected in the financial statements and in the course of examination to find whether any fraud has taken place, forensic audit are  performed by special class of financial experts known as forensic accountants, this class includes certified fraud examiners people with bachelor’s degree or equal professional experience who have a background in accounting, persecuting fraud, loss prevention or criminology/ sociology who pass the (CFE test); CPA’s or chattered accountant. Forensic audits begin by taking all the accounts, inventories, assets, capital and other economic elements and determining how they should work together. To use a hypothetical example, if an auditor sees that a business grosses $10million a year, he assumes that the profits, cash, new capital, inventories, taxes, payroll, cash  and checks how they ought to interact (e.g. in some cases, there is a systematic overlap between certain values, which the accountant would make note of as not over count), once he had collected all of the reported values (as well as caveats), he would establish an ideal model for how  each side of the balance sheet should read. Once completed, the report is sent to the appropriate authorities and recorded as evidence while its completeness and objectivity are certainty important, a forensic audit report’s most useful attribute is the summary of result. Forensic is a highly technical discipline, to accommodate this complexity, accountancy as adopted a precise lexicon.





This chapter is concerned with a more critical and fundamental question of the methods and procedures the resource employed to bring the subject matter into the scope of the research setting in order to yield result. It also explain the method of administering questionnaires, design of the study and tool used in analysis and how the findings are finally reported.


The research design adopted in this research is survey design method which comprises the use of oral interview, questionnaire, and personal observation. The data collected was presented, analyzed and interpreted in chapter 4 by the use of tables.


The data used in this study were both primary and secondary data. The primary data were obtained direct form field study include questionnaire, personal observations, and interviews.

The secondary data were obtained from the bank’s journal reports, textbooks, ICAN and ANAN journals, newspaper, library, seminar reports etc.


There of this research study is two selection manufacturing firm in Enugu state comprising Nasco and Indomie noodles


This statistically is the totality of all the possible elements observed or outcome to be studied or examined for the purpose of a research work. The total population of the study is 50. In carrying out this research study, population was drawn from professional accountant, auditors, and both the senior in management and junior level staff and managers of the manufacturing firms. However, the population is restricted to those in practicing manufacturing firm selected in Enugu metropolis.




This chapter deals with the systematic presentation and analysis of data obtained from the questionnaire.

Simple percentage method of data analysis would be used to analyze the respondents data while the hypothesis would be tested using analysis of variance (ANOVA) statistical technique. In all, 50 questionnaires were administered to the respondent, out of which 46 were completed and returned. This gave a response rate of 92%. The response and percentage of respondents are as follows:





Forensic accounting does not necessary need an understanding of the legal issues of business activities before carrying out his duties but can thus be of assistance in combating corporate fraud in various ways that includes investigation, accounting and litigation support services. It is a very special type of management which requires highly skilled team members who have experience not only in accounting and auditing techniques, but also of the relevant legal frame work. There are numerous different types of fraud that a forensic accountants could be asked to investigate. The investigation is likely to ultimately lead to legal proceedings against one or several suspects and members of the investigative team must be comfortable with appearing in court to explain how the investigation was conducted and how the evidence has been gathered forensic accountants must therefore receive specialist training in such matters to ensure that their credibility and professionalism cannot be undermined during the legal process. The empirical analysis of data. In the study revealed the following. Which were in line with the previous studies reviewed earlier on, in the study.

  • That there is a significant relationship between frequent occurrence of fraud and loss of confidence in financial institutions
  • That forensic audit is a useful method of fraud detection and prevention in financial institutions.
  • That fraud is a general phenomenon, which exist in almost every organization.
  • That the incidence of fraud affects every management and staff worker of an organization when it occurs.
  • That there is a relationship between fraud and business failures.
  • Most fraudulent activities that lead to bank failures are done by insiders. That is people within the organization.
  • More that 70% cases of bank failure are caused by fraudulent activities.
  • Most times employees of an organization, fail to report fraudulent activities when they occur
  • Committing of fraud in banks accounts to a general decline in depositors/investors confidence in the system.
  • Forensic audit seeks to bridge the gap between accounting and law professions in relation to fraud detection and prevention.
  • Forensic audit when used in place of conventional audit will yield a positive result.
  • Most banks loss their customers/investors due to fraud committed by another bank.
  • With the use of forensic auditing techniques, fraud detection and prevention has become easier.


There is a need to provide a comprehensive framework involving the use of forensic auditing methodology particularly in the areas of audit planning and execution, and for a uniform reporting practice that would spread out the implementation control failures including failure of senior management in implementing prescribed controls.

Fraud and white collar crime have increased considerably over the past years, and experts believe that the trend is likely to keep on growing if adequate measures are not taken to curb this perfidy. So in the quest to combat this economic monster (fraud), the concept of forensic auditing was introduced. After carrying out this research study, the following conclusions were arrived at, that:

  • Fraud gave birth to forensic auditing and the incessant occurrence of fraud in our financial or banking sector has become the major reasons behind bank failures in the country and that the effects of the fraud cuts across every sector is the economy, because the financial sector is the custodian and engine house of every nations economy.
  • Nigerian investors have lost confidence in the Nigerian system, thereby having preference to making their investments abroad rather than risking their resources in the country where fraud perpetration is seen by most people as the easiest way to get rich and undue advantage quickly.
  • Forensic audit has been playing a vital role in fraud detection and prevention and also been regarded as a useful technique in unearthing and prevention of fraud in the business world.

Based on my findings, the researcher hereby concludes that forensic accounting is a better way to combat fraud in Nigeria. It will enhance Nigerians professionals’ success in their fight against corporate fraud and corruption


After a thorough considerations, consultations and meditation on the facts and findings of the study, the following recommendations are proffered.

  • The internal control system of every institution must be strengthened so as to be able to check fraud occurrence. An example of such internal control system is the segregation of duties so that one person does not have total control over an area of the institution.
  • Employees training should be encouraged so as to equate the over-increasing complexity in technologies over the years.
  • Employees at various levels should be allowed to be involved in decision making process. This is so because most employees are generally honest and willing to help fight against fraud if they are allowed
  • The fight against corruption and fraud must be sincere and purposeful. In this regard, there should be no sacred cows in the punishment of culprits and the government and management of firms most stop paying lip-services to the campaign against fraud and corruption.
  • The budget monitoring and implementation mechanic must be put in place with appropriate sanctions. Such sanctions must be applied against any misappropriation or misapplication of the appropriated funds of budgetary provisions
  • Organizations should have clear lines of authority. Employees should know who they report fraud suspicions to who is next person on the chain of command. Let employees know how you handle complaints about suspicious behaviors.

These recommendations may now be reduced to three (3) comprehensive headings.

  • Create effective policies and procedures: the heart of fraud prevention is the institutions policies and procedures proactive fraud prevention procedures are at the heart of the institutions internal control systems. While compliance with current regulations is important, having substantive control that actually prevents fraud is more important.
  • Hire the right employees: bringing on the right employees for an institution means two(2) things.
  • Finding the people with the right skills and disposition to do well in the organization
  • Finding people with an ethical history. Background study/checks are easy to conduct and relatively inexpensive. An important part of background check includes; verification of past employment, contacts with reference to fraud occurrence.
  • Educate employees: studies have shown that employees can be institution’s best watchdogs. As you may expect, most employees are generally honest, and they do not like to see someone else stealing. If management wants employees to help in detecting fraud, they must educate them on what fraud looks like, feels like and cost.


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