PROBLEMS AND PROSPECTS OF FORENSIC ACCOUNTING IN THE FINANCIAL PERFORMANCE OF NIGERIA BUSINESS ENTERPRISES

Abstract

With an upsurge in financial accounting fraud in the global economy, forensic accounting has become an emerging topic of great importance for academic, research and industries. The objective of the study is to examine forensic accounting and financial fraud in Nigeria. Specifically, the study examined if there is significant agreement amongst stakeholders on the effectiveness of forensic accounting in financial fraud control, financial reporting and internal control quality Fraud is a universal problem as no nations is resistant, although developing countries and their various states suffer the most pain. The increasing sophistication of financial fraud requires that forensic accounting be added to the tools necessary to bring about the successful investigation and prosecution of those individuals involved in criminal activities.

CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

Forensic accounting provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution. It encompasses litigation support, expert witnessing and investigative accounting. Akintoye (2008) said forensic accounting is accounting that is suitable for legal review, offering the highest level of assurance, and including the new generally accepted connotation of having been arrived at in a scientific fashion and providing the needed findings in settling disputes. He said the primary orientation of forensic accounting is explanatory (cause and effect) analyses of phenomena including the discovery of deception (if any) and its effects introduced into an accounting system. Crumbley et al. (2009) define forensic accounting as the action of identifying, recording, settling, extracting, sorting, reporting and verifying past financial data or other accounting activities for settling current or prospective legal disputes or using such past financial data for projecting future financial data to settle legal disputes. Mehta and Mathur (2007) posited that forensic accounting involves a financial detective with a suspicious mind, a financial bloodhound, someone with a „sixth sense‟ that enables reconstruction of past accounting transactions and an individual who looks beyond the numbers. Bhasin (2007) noted that the objectives of forensic accounting include: assessment of damages caused by an auditors‟ negligence, fact finding to see whether an embezzlement has taken place, in what amount, and whether criminal proceedings are to be initiated; collection of evidence in a criminal proceedings; and computation of asset values in a divorce proceedings. He argues that the primary orientation of forensic accounting is explanatory analysis (cause and effect) of phenomenon including discovery of deception (if any), and its effects introduced into the accounting domain. Forensic accountant may apply certain examination techniques similar to those used in financial audits but the objective of these procedures is quite different. The forensic accountant may examine a trail of paperwork to corroborate the calculations needed to meet the specific goal of the engagement. This could be a useful instrument to prosecute cases of corruption in Nigeria too

1.2   Statement of Problem

This project is to address some of the deficiencies by looking towards a forensic accountant as the best antidote to curbing financial and economic crimes, and also to prevent and reduce misappropriation of corporate funds. Also, the failure of statutory audit to prevent and reduce this misappropriation of corporate funds and increase in corporate crimes has put pressure on professional accountant and legal practitioners is to find a better way of exploring fame in business world. A nation-wide study conducted by Kessler international showed that 39% of organizations have considered the need for a forensic accountant.

1.3    Objectives of the Study

1.       To examine if there is any relationship between forensic accounting and corporate performance in Nigeria.
2.       To evaluate how the practices of forensic accounting could play an important role in solving the vexed problems of a company’s corporate performance.
3. To evaluate how forensic accounting and corporate performance can provide professional investigative and litigation support services in Nigeria.
4.       To ascertain the level of awareness of forensic accounting practices in Nigeria.
5.       To determine the extent at which forensic accounting practices detect and minimize computer related fraud or e-crimes in Nigeria companies.
6.       To determine whether the application of forensic accounting services in Nigeria quoted companies can detect fraudulent activities.
7.       To ascertain whether audited financial statement in quoted Nigeria companies are being undermined.

1.4    Research Questions

The following research questions are raised in order to achieve the objectives of this study.

1.       Is there any relationship between forensic accounting and corporate performance in Nigeria?
2.       How can the practices of forensic accounting play an important role in solving the vexed problems in a company’s corporate performance?
3.       To what extent can public confidence and trust be restored through the practices of forensic accounting and corporate governance in Nigeria?
4.       To what extent is the level of awareness of forensic accounting practices in Nigeria?

1.5    Statement of Hypotheses

The following null and alternative hypotheses have been formulated to serve as a base for this research.

Hypothesis One

Ho: Forensic accounting is not relevant in the development of Nigerian business enterprises.

H1: Forensic accounting is very relevant in the development of business enterprises in Nigeria.

Ho: Forensic accounting does not have any impact on the financial performance of business enterprises in Nigeria.

Hypothesis Two

Ho: Forensic accounting practices cannot assist in the detection or minimization of computer fraud or electronic related fraud.

HI: Forensic accounting practices can help eradicate computer fraud or e-crimes in Nigeria quoted companies.

1.6     Significance of the Study

The significance of this study is to corporate companies, investors, Nigeria government, and the general public. The study will educate these groups on the importance of a forensic accountant and corporate performances among them thereby help to restore the lost confidence by the public and the government as regard forensic accountant and corporate performance in Nigeria. The study will also be beneficial to academicians and other future researchers/users in similar subject matter.

1.7   Scope and Limitations of the Study

The area of coverage is restricted to Nigeria situation by the use of questionnaire and direct interview. Also covers a survey of quality corporate management and control in forensic accounting services in Nigeria. This study is undertaken to evaluate the impact of forensic accountant and corporate governance within Nigeria geographical states. The study limit itself to some quoted firms in the Nigeria stock exchange (NSE), with special emphasis on the impact it can have on restoring the credibility of audited financial statements of companies, as well as fight against corruption and computer related frauds in Nigeria and it is between the period of 2010-2013.

 1.8   Organization of the study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.

1.9     Definition of Terms

Investigation: The use of specialized investigative skills in carrying out an inquiry conducted in such a way that the outcome will have application of the law.

Forensic Accounting: Is defined as the practice of vigorous data collection and analysis in the area -of litigation support consulting, expert witnessing, and fraud examination.

Forensic Audit: This refers to the examination of all evidence regarding an assertion to ascertain its correspondence to establish criteria carried out, in a manner suitable to a law court.

Litigation: This simply means the judicial process of, carrying out legal context.

Electronic Crimes: Are crimes committed through the use of information technology (I.T)

Related Project Topics :