Key Features:
No of Chapters: 5
No of Pages: 110
Methodology: Chi Square
Introduction:
The driving force of any developing economy is the public and the private sector which are considered the two most important and vital sector in developing any economy. These two sectors of the economy though similar in most areas yet are contrasted in some areas especially in their approach and methodology to the detection and prevention of fraud. (Salau, Dodo & Aladesunkanmi. 2012).
The private sector is the segment of the national economy owned, operated, controlled and managed by private individuals or enterprises. The private sector main objective is the maximizing of profit, creation of wealth for its shareholders and minimizing of cost. The Public sector on the other hand is the part of the economic system that is controlled by the national, state, provincial or local government. It is the part of the economy concerned with providing various governmental services as well as basic amenities in other to make the standard of living affordable to it citizens (Schacter, 2000).
The unending distortion of economic and social development in Nigeria due to various financial scandals and fraudulent practices calls for the need to eliminate fraud (Salau, Dodo & Aladesunkanmi. 2012). It has been generally observed that government spending has always been big business but it has become so massive and extravagance today that the public through its legislators is demanding to know whether the huge outlays of money are being spent effectively or whether they should be spent at all on the project the government claim these funds are spent on.
Financial fraud can generally be defined as an intentional act of deceit involving financial transactions for the purpose of personal gain at the expense of a system, an entity or a person. What then is the role of the forensic accounting in curbing the drastic growth of the fraudulent financial practices in the public sector as well as its negative impact on developing economy and its regular citizen?
The fundamental role of the forensic accountant is to ensure proper investigation in other to detect fraudulent practice in the business environment, According to Manning (2002), forensic accounting is the combination of accounting, auditing and investigative skills to a standard that is required by a court of jurisdiction to address issues in dispute in the context of civil and criminal litigation. This has its own tangible role in the process of fraud control because in the course of investigating the financial statement of the organization the forensic accountant reveal the fraudulent practices concealed in the financial statements as well as those involve in these practice and also go ahead to advise the management of the measures to be taken in order to forestall the recurrence and continuity of these acts. By monitoring the operation of public power and how public resources are used, forensic accounting can reduce the abuse of power and public resources. The Association of Certified Fraud Examination (ACFE), in agreement with the separate surveys carried out by the U.S department of Justice, Price Water House Coopers identified three main categories of fraud that affects organizations; the first of these is asset misappropriations, which involves the theft or misuse of an organizations asset. Examples include theft of inventory or cash, false invoicing, accounts receivable fraud and payroll fraud. The second category of fraud is fraudulent financial statements which are the most costly with median loss of $2million among the 99 financial misstatements included in the 2008 ACFE study carried out in the United States America. The final of the three fraud categories and most common is fraud due to corruption occurring in 27 percent of all fraud cases (AICPA, 2009).
Rabiu and Noorhayati (2015), expressed their grief that fraud has not only distressed the Nigerian economy but also impacts on the personal life and behavior of the ordinary citizens. It therefore should be made mandatory that good risk management skills, professional prevention and detection measures as well as well designed internal control mechanisms be installed in every public sector organization by the public authority.
One of the pivotal mechanisms for fighting financial fraud especially in the public sector is forensic accounting. Irrespective of the strategies, reporting mechanisms, best practices and other effective internal control measures used. However, it is important to note that without the professional roles of auditors in the public sector, the forensic paraphernalia to curb the extant fraud and its increasing impact in the public sector are not complete.
Forensic accountant are experts in detecting fraud due to their application of accounting and investigating skills, which makes them very important in fighting the underlying financial frauds in the public sector of developing economy. Ribadu. (2004) stated that accurate record keeping of government income and expenditure by the public sector accountants is a key importance of tackling financial fraud in the Nigerian public sector.
Forensic accountant are not without challenges as they have some environmental factor limiting the discharge of their duties as a result of the challenges they encounter. Challenges such as testifying as an expert, obtaining evidence which can serve as a litigation support in the court, to mention a few over detecting of financial fraud (Izedonmi F. 2011).
1.2 STATEMENT OF RESEARCH PROBLEMS
The negative effects of the fraudulent practices in developing economy such as Nigerian and their impact on the lives of ordinary citizen call for great concern. It has been observed that in developing economy, huge amount of money is lost through fraud which drains the nation’s meager resources with their far-reaching and attendant consequences on the development of the nation. Thus, like Kamaludeen (1991) observes “billions of naira is lost in the public sector every year through fraudulent means” this he argues represents only the amount that is ferreted out and made public. Khan (2006) opines that the loss or inaccessibility of documentary evidence results in the increased opportunity for corruption and fraud. Hence, as a result of the above problems and others (theft of inventory or cash, false invoicing, accounts receivable fraud and payroll fraud, fraudulent financial statements, tax fraud) the following research questions have arisen:
1. How does forensic accounting as a fraud detection method enhance fraud control in Nigerian economy?
2. Is there any relationship between forensic accounting and detection of fraud in the Nigerian economy?
3. Is forensic accounting a solution to fraudulent practices in the Nigerian economy?
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