Below is a brief overview of this Project Work.
Format: MS WORD
| Chapters: 1-5
| Pages: 73
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The widespread frauds in modern organizations have made traditional auditing and investigation inefficient and ineffective in the detection and prevention of the various types of frauds confronting businesses world-wide (Onuorah & Appah, 2012). The incidence of fraud continues to increase across private and public sector organizations and across nations. Fraud is a universal problem as no nations is resistant, although developing countries and their various states suffer the most pain. Today; modern organized financial crimes have appeared.
Financial crimes such as employee theft, payroll frauds, fraudulent billing systems, management theft, corporate frauds, insurance fraud, embezzlement, bribery, bankruptcy, security fraud (EFCC, 2004), among others, have taken the centre stage in the scheme of things; and on the scale of private, public and governmental preference. Financial crimes today have grown wild, and the emergence of computer software coupled with the advent of internet facilities has compounded the problem of financial crimes. Besides, the detection or minimization of these crimes are made more difficult and committing these crimes much easier (Izedonmi & Ibadin, 2012). All these, no doubt, remain outside the ambit of the statutory auditor to report on except he is placed on inquiry. The statutory auditor is not primarily bound to detect fraud and errors. His responsibility is defined by Sec. 359 (CAMA, 2004) and the relevant auditing standards. (Uwojori & Asaolu, 2009) added that quite unfortunately, is the inability of the statutory auditor constrained by the relevant statutes and standards, to deal with financial crimes.
Okunbor and Obaretin (2010) reported that the spates of corporate failures have placed greater responsibility and function on accountants to equip themselves with the skills to identify and act upon indicators of poor corporate governance, mismanagement, frauds and other wrong doings. It has become imperative for accountants at all levels to have the requisite skills and knowledge for identifying, discovering as well as preserving the evidence of all forms of irregularities and fraud. Therefore, fraud requires more sophisticated approach from preventative to detection. One of the modern approaches that can be used from the prevention to detection is called forensic auditing.
Forensic auditing is a rapidly growing field of auditing that describes the engagement that results from actual or anticipated dispute or litigations. (Okoye & Gbegi, 2013) concur that “Forensic” means “suitable for use in a court of law”, and it is to that standard that Forensic Accountants generally work. Forensic Auditing is an investigative style of auditing used to determine whether an individual or an organization has engaged in any illegal financial activities.
Professional Forensic Accountant may work for government or public auditing firm. Although, forensic auditing has been in existence for several decades, it has evolved over time to include several types of financial information scrutiny. Forensic auditing can, therefore, be seen as an aspect of auditing that is suitable for legal review and offering the highest level of assurance (Apostolou, Hassell & Webber, 2000). Also, forensic auditing encompasses three major areas, investigation, dispute resolution and litigation support. Manning (2002) defines it as the combination of auditing, auditing and investigative skills to standard by the courts to address issues in dispute in the context of civil and criminal litigation. Ojaide (2000) noted that there is an alarming increase in the number of fraud and fraudulent activities in Nigeria, requiring the visibility of forensic auditing services. Also the recent happening in the forensic audit of the oil sector where the present government is demanding for another forensic audit exercises to be carried out after a Nigerian audit firm has presented a report to the authority. In the light of the above this study therefore looks into the relevance of forensic auditing in strengthening internal control in business performance.
1.2 Statement of Problem
In modern business environment, auditing transaction processing are done through computerized auditing software’s, for which specialized knowledge and skills is required by the operators. Internal control is becoming a challenge in business environment due to sophistication in skills and knowledge required. As a result, forensic auditing is being considered a measure to enhance efficiency of business operation.
In recent times, series of fraud have been committed both in the public sector and private sector of the economy. These in no doubt are perpetrated under the supervision of the internal auditors of the organization. Ojaide (2000) added that there is an alarming increase in the number of fraud and fraudulent activities in Nigeria emphasizing the visibility of forensic auditing services. Okoye and Akamobi (2009) Owojori and Asaolu (2009), Izedomin and Mgbame ( 2011), Kasum (2009) have all acknowledge in their separate works, the increasing incidence of fraud and fraudulent activities in Nigeria and these studies have argued that in Nigeria, financial fraud is gradually becoming a normal way of life. Modugu and Anyaduba (2013) submitted that financial irregularities have becomes the specialty of both private and public sector in Nigeria as individual perpetrates fraud and corrupt practice according to the capacity of their office. Consequently, there is a general expectation that forensic auditing may be able to stem the tide of financial malfeasance witnessed in most sectors of the Nigerian economy. However, there has not been adequate emphasis, especially survey evidence on how forensic auditing can help curtail financial and economic crimes beyond the several unreliable views that abound. Consequently, the study fills this gap of forensic auditing and fraud management evident from Nigeria.
1.3 Objectives of the Study
The general objective of this study is to assess whether forensic auditing and fraud management help in the effective reduction and control of fraudulent practices in Nigeria.
The specific objectives of this study include:
i. To examine whether effective forensic auditing significantly influence fraud reduction control.
ii. To examine the possibility of reducing the occurrence of fraud cases using Forensic Auditing.
iii. To examine the effectiveness of forensic auditing in improving financial reporting quality?
1.4 Research Questions
The central questions that this study seeks to answer are:
1. What is the extent of influence that effectiveness of forensic auditing has on fraud control and management?
2. What are the possibilities of reducing the occurrence of fraud cases using Forensic Auditing?
3. Is there significant agreement on the effectiveness of forensic auditing in improving financial reporting quality
1.5 Research Hypothesis
A hypothesis is a conjecture of a definite statement used for further investigation. It is of two types:
a) The Null H (O) Hypothesis
b) The Alternative H (I) Hypothesis.
The null hypothesis states that a conjecture in a negative form, while the alternative states a conjecture in a positive form, Izedonmi (2005). For the purpose of this study, the hypothesis testing shall be stated thus:
Hypothesis 1:
Ho: Forensic auditing does not significantly influence fraud control and management.
H1: Forensic auditing significantly influences fraud control and management.
Hypothesis2:
H0: There is no possibility of reducing the occurrence of fraud cases using Forensic Auditing.
H1: There is a possibility of reducing the occurrence of fraud cases using Forensic Auditing.
Hypotheses 3:
H0: There is no significant agreement on the effectiveness of forensic auditing in improving financial reporting quality
H1: There is a significant agreement on the effectiveness of forensic auditing in improving financial reporting quality.
1.6 Significance of the Study
This research work is very important because upon its completion, it will add intensely to existing knowledge and will be beneficial to the following:
1. Government: This work is significant to government because it enlightens government on the role of forensic auditing and how effective the forensic auditings can be in detecting and curbing fraud in all sectors especially the business performance.
2. Accountants: This work is significant to accountants because it broadens the thinking of the accountant to know that the profession has a significant role to play in combating this virus of fraud that has eaten deep into the fabrics of our economy and also realize that they are not restricted to auditing or auditing skill alone, but can become investigators in their own field of work.
3. Professional auditing bodies: To reveal emerging trends in the auditing profession (A Nigeria Perspective) especially in the rise of forensic auditing so that professional bodies can evaluate their curriculum to appropriately suit the trend as well as to keep their members abreast of new development and emerging trends in the profession.
4. Researchers: Researchers who will like to carry out further studies on this area will find this study very relevant because it will serve as a data bank for further studies.
5. Society: The society at large will have a better understanding on the effect of fraud and corruption practices on the growth and development of the nation and how it effect her public image in the world at large.
1. 7 Scope of the Study
This issue covers the relevance of forensic auditing in strengthening internal control in business performance.
1.8 Limitations of the Study
1) Time constraint: The combination of both academic activities and the writing of this project will really be a stretching task. The project was very demanding, so also is academic assignment. This wouldn't permit the use of a very large sample size.
2) Resource constraint: This research cost a lot to carry out. Expenses ranged from transportation costs, printing costs, telephone costs and some others posed a challenge on writing this project.
3) Difficulty in gathering data: The data used for this project is a combination of both primary and secondary data. The gathering of this data was really tedious especially the primary data which involves the distribution of questionnaires to various respondents.
4) Poor response to questionnaire: Most respondents were very reluctant in divulging the information needed. They refused to grant their assistance until basic requirements were met and my ability to meet such made them to respond inadequately.
5) Difficulty in gathering relevant materials: The broadness of the topic might hinder my access to specific materials such as journals and write-ups that will aid the smooth presentation of the research. Some information on various cases was not included in the research because they were not readily available.
1.9 Definition of Terms
Auditing: This is the art of collecting, analyzing, classifying and recording of financial transactions affecting the performances and financial position of any business organization.
Forensic: Forensic according to the Cambridge international dictionary of English, can be used to discover information about a crime by scientifically examining the object or substance that are involved in the crime.
INTRODUCTION
1.1 Background to the Study
The widespread frauds in modern organizations have made traditional auditing and investigation inefficient and ineffective in the detection and prevention of the various types of frauds confronting businesses world-wide (Onuorah & Appah, 2012). The incidence of fraud continues to increase across private and public sector organizations and across nations. Fraud is a universal problem as no nations is resistant, although developing countries and their various states suffer the most pain. Today; modern organized financial crimes have appeared.
Financial crimes such as employee theft, payroll frauds, fraudulent billing systems, management theft, corporate frauds, insurance fraud, embezzlement, bribery, bankruptcy, security fraud (EFCC, 2004), among others, have taken the centre stage in the scheme of things; and on the scale of private, public and governmental preference. Financial crimes today have grown wild, and the emergence of computer software coupled with the advent of internet facilities has compounded the problem of financial crimes. Besides, the detection or minimization of these crimes are made more difficult and committing these crimes much easier (Izedonmi & Ibadin, 2012). All these, no doubt, remain outside the ambit of the statutory auditor to report on except he is placed on inquiry. The statutory auditor is not primarily bound to detect fraud and errors. His responsibility is defined by Sec. 359 (CAMA, 2004) and the relevant auditing standards. (Uwojori & Asaolu, 2009) added that quite unfortunately, is the inability of the statutory auditor constrained by the relevant statutes and standards, to deal with financial crimes.
Okunbor and Obaretin (2010) reported that the spates of corporate failures have placed greater responsibility and function on accountants to equip themselves with the skills to identify and act upon indicators of poor corporate governance, mismanagement, frauds and other wrong doings. It has become imperative for accountants at all levels to have the requisite skills and knowledge for identifying, discovering as well as preserving the evidence of all forms of irregularities and fraud. Therefore, fraud requires more sophisticated approach from preventative to detection. One of the modern approaches that can be used from the prevention to detection is called forensic auditing.
Forensic auditing is a rapidly growing field of auditing that describes the engagement that results from actual or anticipated dispute or litigations. (Okoye & Gbegi, 2013) concur that “Forensic” means “suitable for use in a court of law”, and it is to that standard that Forensic Accountants generally work. Forensic Auditing is an investigative style of auditing used to determine whether an individual or an organization has engaged in any illegal financial activities.
Professional Forensic Accountant may work for government or public auditing firm. Although, forensic auditing has been in existence for several decades, it has evolved over time to include several types of financial information scrutiny. Forensic auditing can, therefore, be seen as an aspect of auditing that is suitable for legal review and offering the highest level of assurance (Apostolou, Hassell & Webber, 2000). Also, forensic auditing encompasses three major areas, investigation, dispute resolution and litigation support. Manning (2002) defines it as the combination of auditing, auditing and investigative skills to standard by the courts to address issues in dispute in the context of civil and criminal litigation. Ojaide (2000) noted that there is an alarming increase in the number of fraud and fraudulent activities in Nigeria, requiring the visibility of forensic auditing services. Also the recent happening in the forensic audit of the oil sector where the present government is demanding for another forensic audit exercises to be carried out after a Nigerian audit firm has presented a report to the authority. In the light of the above this study therefore looks into the relevance of forensic auditing in strengthening internal control in business performance.
1.2 Statement of Problem
In modern business environment, auditing transaction processing are done through computerized auditing software’s, for which specialized knowledge and skills is required by the operators. Internal control is becoming a challenge in business environment due to sophistication in skills and knowledge required. As a result, forensic auditing is being considered a measure to enhance efficiency of business operation.
In recent times, series of fraud have been committed both in the public sector and private sector of the economy. These in no doubt are perpetrated under the supervision of the internal auditors of the organization. Ojaide (2000) added that there is an alarming increase in the number of fraud and fraudulent activities in Nigeria emphasizing the visibility of forensic auditing services. Okoye and Akamobi (2009) Owojori and Asaolu (2009), Izedomin and Mgbame ( 2011), Kasum (2009) have all acknowledge in their separate works, the increasing incidence of fraud and fraudulent activities in Nigeria and these studies have argued that in Nigeria, financial fraud is gradually becoming a normal way of life. Modugu and Anyaduba (2013) submitted that financial irregularities have becomes the specialty of both private and public sector in Nigeria as individual perpetrates fraud and corrupt practice according to the capacity of their office. Consequently, there is a general expectation that forensic auditing may be able to stem the tide of financial malfeasance witnessed in most sectors of the Nigerian economy. However, there has not been adequate emphasis, especially survey evidence on how forensic auditing can help curtail financial and economic crimes beyond the several unreliable views that abound. Consequently, the study fills this gap of forensic auditing and fraud management evident from Nigeria.
1.3 Objectives of the Study
The general objective of this study is to assess whether forensic auditing and fraud management help in the effective reduction and control of fraudulent practices in Nigeria.
The specific objectives of this study include:
i. To examine whether effective forensic auditing significantly influence fraud reduction control.
ii. To examine the possibility of reducing the occurrence of fraud cases using Forensic Auditing.
iii. To examine the effectiveness of forensic auditing in improving financial reporting quality?
1.4 Research Questions
The central questions that this study seeks to answer are:
1. What is the extent of influence that effectiveness of forensic auditing has on fraud control and management?
2. What are the possibilities of reducing the occurrence of fraud cases using Forensic Auditing?
3. Is there significant agreement on the effectiveness of forensic auditing in improving financial reporting quality
1.5 Research Hypothesis
A hypothesis is a conjecture of a definite statement used for further investigation. It is of two types:
a) The Null H (O) Hypothesis
b) The Alternative H (I) Hypothesis.
The null hypothesis states that a conjecture in a negative form, while the alternative states a conjecture in a positive form, Izedonmi (2005). For the purpose of this study, the hypothesis testing shall be stated thus:
Hypothesis 1:
Ho: Forensic auditing does not significantly influence fraud control and management.
H1: Forensic auditing significantly influences fraud control and management.
Hypothesis2:
H0: There is no possibility of reducing the occurrence of fraud cases using Forensic Auditing.
H1: There is a possibility of reducing the occurrence of fraud cases using Forensic Auditing.
Hypotheses 3:
H0: There is no significant agreement on the effectiveness of forensic auditing in improving financial reporting quality
H1: There is a significant agreement on the effectiveness of forensic auditing in improving financial reporting quality.
1.6 Significance of the Study
This research work is very important because upon its completion, it will add intensely to existing knowledge and will be beneficial to the following:
1. Government: This work is significant to government because it enlightens government on the role of forensic auditing and how effective the forensic auditings can be in detecting and curbing fraud in all sectors especially the business performance.
2. Accountants: This work is significant to accountants because it broadens the thinking of the accountant to know that the profession has a significant role to play in combating this virus of fraud that has eaten deep into the fabrics of our economy and also realize that they are not restricted to auditing or auditing skill alone, but can become investigators in their own field of work.
3. Professional auditing bodies: To reveal emerging trends in the auditing profession (A Nigeria Perspective) especially in the rise of forensic auditing so that professional bodies can evaluate their curriculum to appropriately suit the trend as well as to keep their members abreast of new development and emerging trends in the profession.
4. Researchers: Researchers who will like to carry out further studies on this area will find this study very relevant because it will serve as a data bank for further studies.
5. Society: The society at large will have a better understanding on the effect of fraud and corruption practices on the growth and development of the nation and how it effect her public image in the world at large.
1. 7 Scope of the Study
This issue covers the relevance of forensic auditing in strengthening internal control in business performance.
1.8 Limitations of the Study
1) Time constraint: The combination of both academic activities and the writing of this project will really be a stretching task. The project was very demanding, so also is academic assignment. This wouldn't permit the use of a very large sample size.
2) Resource constraint: This research cost a lot to carry out. Expenses ranged from transportation costs, printing costs, telephone costs and some others posed a challenge on writing this project.
3) Difficulty in gathering data: The data used for this project is a combination of both primary and secondary data. The gathering of this data was really tedious especially the primary data which involves the distribution of questionnaires to various respondents.
4) Poor response to questionnaire: Most respondents were very reluctant in divulging the information needed. They refused to grant their assistance until basic requirements were met and my ability to meet such made them to respond inadequately.
5) Difficulty in gathering relevant materials: The broadness of the topic might hinder my access to specific materials such as journals and write-ups that will aid the smooth presentation of the research. Some information on various cases was not included in the research because they were not readily available.
1.9 Definition of Terms
Auditing: This is the art of collecting, analyzing, classifying and recording of financial transactions affecting the performances and financial position of any business organization.
Forensic: Forensic according to the Cambridge international dictionary of English, can be used to discover information about a crime by scientifically examining the object or substance that are involved in the crime.
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