Usefulness of Forensic Audit in the Detection and Prevention of Fraud
CHAPTER ONE
OBJECTIVES
The general objective of this study is to inculcate the knowledge of forensic auditing in preventing and detecting corporate fraud in Nigeria. Though the main objective of forensic auditing will vary according to the purpose of hiring 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 establish the reason for the loss of customer/depositors
- To investigate how incidence of fraud, encourages or leads to business/bank failures
- To examine the reason behind investors loss of confidence toward investing or depositing in financial institutions
- To ascertain how forensic audit has been a useful tool in prevention and detection of fraud in our financial institutions
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
WHAT IS FORENSIC ACCOUNTING.
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, 2021). 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, 2021). 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.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine usefulness of forensic audit in the detection and prevention of fraud. Elected Bank in Uyo, Akwa Ibom state form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain usefulness of forensic audit in the detection and prevention of fraud. 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 an usefulness of forensic audit in the detection and prevention of fraud
Summary
This study was on a critical usefulness of forensic audit in the detection and prevention of fraud. Three objectives were raised which included: To establish the reason for the loss of customer/depositors, to investigate how incidence of fraud, encourages or leads to business/bank failures, to examine the reason behind investors loss of confidence toward investing or depositing in financial institutions and to ascertain how forensic audit has been a useful tool in prevention and detection of fraud in our financial institutions. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected Banks in uyo, Akwa Ibom state. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In conclusion, this study highlights the critical role of forensic audit in both detecting and preventing fraud within organizations. Through meticulous examination of financial records, transactional data, and internal controls, forensic auditors are equipped to uncover irregularities and fraudulent activities that may otherwise go unnoticed. By employing advanced techniques and methodologies, such as data analysis and forensic accounting principles, organizations can proactively mitigate the risks associated with fraud and safeguard their assets and reputation. Moreover, the findings underscore the importance of fostering a culture of transparency, accountability, and ethical conduct within the organization to complement the efforts of forensic auditors effectively. As fraud continues to evolve in complexity and sophistication, it is imperative for organizations to recognize the indispensable value of forensic audit in safeguarding their financial integrity and operational sustainability.
Recommendation
Based on the findings of this study, several recommendations can be proposed to enhance the effectiveness of forensic audit in detecting and preventing fraud:
- Implement a regular schedule of forensic audits, rather than just relying on periodic audits, to ensure continuous monitoring of financial transactions and internal controls.
- Provide comprehensive training programs for forensic auditors to equip them with the latest tools, techniques, and methodologies necessary for uncovering fraud effectively.
- Invest in advanced technological solutions, such as data analytics software and artificial intelligence, to enhance the efficiency and accuracy of forensic audit procedures.
- Continuously assess and strengthen internal control mechanisms to mitigate the risk of fraud occurrence. This includes implementing segregation of duties, enhancing access controls, and enforcing strict approval processes.
References
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