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PROJECT TOPIC AND MATERIAL ON AN OVERVIEW OF FORENSIC ACCOUNTING IN NIGERIA, EVIDENCE FROM THE BANKING INDUSTRIES (A STUDY OF SELECTED BANKS IN AWKA – ANAMBRA STATE)
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1.1 BACKGROUND OF TTHE STUDY
Financial irregularity is a severe problem of concern globally. It is the major concern to developing nations. It is so endemic that fraud and corruption is gradually becoming a normal way of life. Financial irregularities are so common that almost every individual cannot wash his or her hands, clean of it, starting from the public sector to the private sector; from the presidential villa of the nation, down the political office—holding ladder, to the ward councilors; from managing directors of a company, through middle management cadre and to as low as messengers. Individual perpetrates fraud and corrupt practice according to the capacity of their office. Although financial irregularities affects private and public sector, the magnitude of public office fraud, together with the extent to which citizens are affected, calls for alarm.
No money is entirely free, every Naira and Kobo has its legal use, and consequently misuse of any amount will impact negatively, on where it should legally be used. The effect of these can be on an organization or a whole nation. If the effect is not direct it may be indirect as it may affect facilities and infrastructure that is supposed to be beneficial to the concerned.
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. Oyejide (2008) opine that fraud is a subject that has received a lot of attention both globally and in Nigeria. This interest has been heightened by several high profile cases involving several organizations. Issues relating to fraud have also been the subject of rigorous theoretical and empirical analysis in the academic literature (Appah and Appiah, 2010). According to Karwai (2002) maintains that the increasing wave of fraud is causing a lot of havoc in Nigeria. This is because fraud has eaten deep into every aspect of the Nigerian society to the extent that many organizations have lost confidence of their customers. In the words of Adesola (2008), the threat of Fraud to the global economy is better illustrated by the statistics released by Criminologists at a consultancy: over two hundred thousand cases of online frauds were committed in the United Kingdom in 2006, doubled the amount of real world robberies. The study revealed that 75% of card not present fraud was committed on-line in 2006. The global market is concerned about fraud in high and low places. We are very familiar with Enron, WorldCom etc. We are also experiencing more and more frauds committed in the society.
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 he used from the prevention to detection is called forensic accounting. According to Hansen (2009), computer forensics is currently the investigators best tools in detecting and implementation of white—collar investigations. Degboro and Olofinsola (2007) described forensic accounting as the application of criminalistic methods, and integration of accounting investigative activities and law procedures to detect and investigate financial crimes and related accounting misdeeds. According to Dhar and Sarkar (2010), forensic accounting, also called investigative accounting or fraud audit, is a merger of forensic science and accounting.
Crumbley (2003) defined forensic science as the application of laws of nature to the laws of man. He described forensic scientists as examiners and interpreters of evidence and facts in legal cases that also offers expert opinions regarding their findings in court of law.
Baird and Zelin (2009) say that forensic accounting is important investigative tool for detection of fraud. Gray (2008) reported that the forensic accountants investigation include identification fraud. Gottschalk (2010) stated that the focus of forensic accounting is on evidence revealed by the examination of financial documents. The evidence collected or prepared by a forensic accountant may be applied in different contexts. According to Curtis (2008), forensic accountants are essential to the legal system, providing expert services such as fake invoicing valuations, suspicious bankruptcy valuations, and analysis of financial documents in fraud schemes.
Unless it is impossible, individual or establishment affected negatively by the fraudulent or corrupt practices will want to seek redress. Individual, corporate body and interested government organs takes action towards seeking redress using divergent institutions like the police and the law court. Whatever an investigator wants to do, will not be complete if the extent to which the affected person is affected is not quantified. This and other pecuniary areas are where the service of the experts “forensic accountant” are been engaged for a very long time worldwide and probably, recently, in Nigeria.
It is not that financial misappropriation is non existence, in-fact in a sophisticated form, in developed economies. Fraud and corruption are often reported in their private and public sector too. The problems of developing third world nations are that it is common in public sector, which affect a lot of citizen and in most cases perpetrators get away with the act. This is to say that, only on few instances are the nefarious act uncovered on-time, investigated, prosecuted and adequate punishment awarded for them. Consequently, many involved are left free and hence there is no deterrent from future acts.
Although the Central Bank, as a regulatory authority, came in handy by appointing forensic auditors to investigate and determine the financial losses to the banks and clients and the resultant curatorship of the financial institutions, the damage had already been occasioned. Clients, potential investors, and the public have lost confidence and trust with the banking sector. The aftermath of the financial crisis evidenced the inexorable withdrawal of savings from the banking institutions by clients who had the worst belief and fear that their hard – earned cash would be swindled. The risk was evidently high among the new and emerging black-owned financial institutions.
Apart from the occupational frauds committed from within, the advent of new communication technologies has ushered in a plethora of other challenges, which emanate from without. Among the challenges are threats of computer fraud, cheque initiated frauds, identity frauds, credit card frauds, ‘missing in the post’ frauds, the use of fraudulent Real Time Gross Settlement (RTGS), and advance fee frauds, to name a few. The incidences of such frauds committed by outsiders in connivance with insiders have markedly compromised the security and risk of several banks. It is within these challenges faced by banks that this research has been carried to determine the effectiveness of the forensic auditors whether outsourced or within in detecting, investigating, and preventing bank frauds.
The study seeks to explore forensic auditing techniques adopted by the banking fraternity and how they can be effectively used to assist the departments to achieve their objectives in detecting, investigating, and preventing bank frauds. Forensic auditing should be responsible for digging out frauds committed through application of auditing, accounting, and investigative techniques in order to come up with sufficient evidence that can be used in court proceedings (Albrecht et al, 2001).