Impact of Cyber Security and Forensic Accounting Techniques on Fraud Detection in Nigeria
CHAPTER ONE
OBJECTIVES OF THE STUDY
- To examine the effect of financial crimes in financial institutions.
- To ascertain the reasons of, and solutions to fraudulent practices.
- To analyze the relevance of forensic accounting in the face of increasing fraudulent practices in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
AN OVERVIEW OF THE TRADITIONAL ACCOUNTING, AUDITING AND INVESTIGATIONS
Accounting
In the free online encyclopedia, accounting is defined as classification, analysis and interpretation of the financial, or book keeping, records of an enterprise. In his book, titled, ‘principles of Accounting’, Inanga (1985) defined accounting as “a process by which data relating to economic activities are measured, recorded and communicated to interested parties for analysis and interpretation”. The America Institute of Certified Public Accountants defined in 1961, accounting as “the art of recording, classifying and summarizing in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof”.
Accounting in the view of Peter B. Essien (2004) is the process of measurement, analysis and classification of financial transactions, computation of sums and ratios, presentation and communication of the information obtained in appropriate form to the user groups, for the purpose of financial decision making.
By both the Companies and Allied Matters Act, 1990 and the statements of Accounting Standards, Numbers 1 and 2, the financial information referred to above, are expected to be contained in:
- The balance sheet
- The profit and loss account
- The value added statements
- The cash flow statements (until 1997, the statements of sources and application of funds).
- Notes to the accounts
- Five-year financial summary.
Loosely and broadly speaking, accounting can be said to have the following branches, namely; Financial Accounting Cost Accounting, Management Accounting, Auditing and Investigations, Taxation Laws and Accounts.
Auditing
In the free online encyclopedia, auditing is defined as the examination and statement of accounts and of other documents connected with accounts by persons who have had no part in their preparations. Perhaps, this explains why the external auditor can be likened to a High Court Judge or a Court Magistrate who listens to all parties to a case and gives an objective judgment/verdict. Broadly speaking, audit is divided into two, namely; external and internal.
The auditing standards define external (statutory) audit as the independent examination of and expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment. Internal audit on the other hand, is an independent appraisal activity within an organization for the review of operation as a service to management.
Aguolu (2008) defines auditing simply as the independent examination of the financial statements of an organization with a view to expressing an opinion as to whether these statements give a true and fair view and comply with the relevant statutes and the International Financial Reporting Standards. This opinion must be expressed in the form of a report. The definition of auditing that appeared in a Statement of Basic Auditing Concepts, published in 1973 by the American Accounting Association (AAA) Committee on Basic Auditing concepts, embraces both the process and purpose of auditing; “Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.” (p. 2).
In order to have an initial understanding of the meaning of auditing, the simple processes necessary for an audit are explained. Financial statements are usually summarized reports of the transactions and affairs of an organization. To be able to carry out a meaningful examination as required for the purpose of his report, the auditor goes behind the financial statements and carries out a skillful and careful examination of the records of the organization in order to ensure that the financial statements are a reflection of the affairs of the organization as appear in these records. Since these records are also a summary of the transactions of the organization for a specified period of time, the auditor also goes behind these records to the source documents in order to confirm the accuracy, completeness and validity of the recorded transactions.
An audit will therefore involve four distinct procedures viz:
- Ascertaining the validity of the original transactions
- Confirming the completeness and accuracy of the recording of these transactions.
- Ensuring that the financial statements have been prepared from and in agreement with the records.
- Confirming that the financial statements confirm with the relevant statutes and the accounting standards.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
Research methodology deals with the various methods used in the research. In this chapter, the researcher clearly specifies the procedures of data collection that was used and the research design, sampling procedures and methods, data collection method and the data analysis technique.
RESEARCH DESIGN
Design simply means the plan or blue-print on how to go about data collection and analysis, all aimed at providing solutions to the problem under investigation. In particular, research design seeks to answer the questions about the what, where, when, how and by what means data would be generated to provide the solutions under investigation (Eboh, 2009).
The basic methodology employed to generate data relevant to the objectives of this study was a combination of structured interview and tailored questionnaire.
SAMPLING PROCEDURE AND TECHNIQUE
The sample survey method was adopted because it is likely to generate the kind of information required as well as providing good basic for generalization of findings.
The population of the study is the twenty-five (25) banks in Nigeria and the Economic and Financial Crimes Commission (EFCC). The researcher drew a random sample including a total of twenty (20) representatives as a sample of the population.
A total of thirty (30) questionnaires were administered and returned; structured into twenty (20) questionnaires for three (3) selected financial Institutions comprising Oceanic Bank Plc, First Bank of Nigeria Plc and Intercontinental Bank Plc, and ten (10) questionnaires for the Economic and Financial Crimes Commission.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
DATA PRESENTATION
In this chapter, the researcher presents and analyses the data collected from the respondents. The data is presented in tables and percentages and tested with the chi-square test.
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSIONS
SUMMARY OF FINDINGS
- In the course of this work, forensic accounting was defined in various ways. Forensic accounting is sometimes called investigative accounting, though it involves the application of accounting concepts and techniques.
- The study revealed that, very few people know much about forensic accounting and also that there are very few professionals in the field and these professionals obtained their certificates outside the country. Though professional bodies in the country are conducting examinations relating to it in a sketchy way, an institute of forensic accounting is hoped to be established soon to coordinate the practice in the country.
- In the course of the study, it was discovered that the Financial Intelligence Unit of the EFCC is a unit that put into practice forensic accounting principles and fraud investigations, even though there are no forensic accountants among the members. It is clear that forensic accounting has entered the corporate organizations and its concepts are being used in financial institutions and law enforcement agencies even though there are only but few professional forensic accountants.
- The study has been able to establish that forensic accounting and fraud investigation has made a positive impact and will make more impacts positively in the country if given proper attention.
CONCLUSIONS
From the foregoing, one would easily agree that Forensic Accountants, Auditors and Investigators are experts, in their own rights. Their services, broadly speaking, are divided into two, namely, Litigation Support and Investigative Accounting. These services, to a very reasonable extent, have impacted positively particularly on corruption/fraud-related cases.
To harness the benefits of these new frontiers to the fullest, Forensic Accountants must adopt a multi-disciplinary approach in their fraud investigations. This is because the questions posed to the forensic financial expert are increasingly more complex, requiring skills set beyond a typical understanding of financial records and General Accepted Accounting Principles (GAAP). For example, the logistics of finding data in numerous locations such as tape drives, personal computers and Blackberry wireless devices require forensic technology specialists who are familiar with electronic data systems and who can identify and ferret through electronic storage devices to find case critical documents (Neumann and O’Conner, 2008).
RECOMMENDATIONS
- The study of forensic accounting and fraud investigations should be encouraged. They should be introduced into the curricula of tertiary institutions and their principles taught and made part of the training of cadets in the Economic and Financial Crimes Commission. The Government and also the EFCC should sponsor those who want to specialize in the field.
- Banks and other Financial Institutions should set up strong internal control and put measure in place to control fraud and other financial crimes. They should also create alliance with law enforcement agencies for effective results. Measures should be put in place to educate the public to enhance their understanding in matters relating to economic and financial crimes, money laundering and financing of terrorist activities.
- There is need for Financial Institutions and law enforcement agencies to employ professionals with the knowledge of forensic accounting and also send some of their staff to train in the field abroad pending when the training can be done in the country.
- Professionals, especially in Accounting and legal matters should be encouraged to maintain good ethical standards. They should protect and stand by their ethics strictly.
BIBLIOGRAPHY
- Aguolu, O. (2008). Fundamentals of Auditing, Enugu, Institute for Development Studies, University of Nigeria, Enugu Campus.
- American Institute of Certified Public Accountants (AICPA). Forensic and Litigation Committee (2001), Responsibilities for Litigation Services, Proposed Statement, No. 1, New York, NY; AICPA
- Aruwa, S.A.S. (June 2009). “Forensic Accounting and Fraud Investigation in Nigeria,” Journal of Finance and Accounting Research, Volume 1, No. 2.
- Association of Certified Fraud Examiners. Fraud Examiners Manual: Investigative Accounting. (US and Canada Editions).
- Bhattacharya (2010). Forensic Accounting Careers Information and Forensic Accounting Directory, Florida Atlantic University.
- Gray, D. (2008). “Forensic Accounting and Auditing: Compared and Contrasted to Traditional Accounting and Auditing,” American Journal of Business Education – Fourth Quarter, Volume 1, No. 2, Pp. 115-126.
- Heitger, L.E. and Heitger, D.L. (2008). “Incorporating Forensic Accounting and Litigation Advisory Services into the Classroom,” Issues in Accounting Education, Volume 23, No. 4, Pp. 561-572
- Howard, S. and Sheetz, M. (2006). Forensic Accounting and Fraud Investigation for Non-Experts: New Jersey, John Wiley and Sons Inc.
