ABSTRACT
The study is set out to investigate forensic
accounting as a tool for fraud detection and prevention in the
telecommunication industry. Forensic accounting is an investigative style of
accounting used to determine whether an individual or an organization has
engaged in any illegal financial activity. This forensic accounting could be an
antidote to this problem of fraud in Nigeria telecommunication industry. The
research instruments utilized if they study were primary data survey and
secondary data survey education. Four hypotheses were adopted for the survey
out of a population of 340 staff, 180 permanent staff of a mobile Nigeria
Limited Enugu, were randomly selected. Data collected were presented and
analyzed using table and simple percentages. This study found out, among
others, that forensic accountant have the professional ability backed up by law
to examine the book, make discovered and presented the documentary evidence in
the law courts. As a result of these findings, the following recommendation
others were made that government should make a law which will make forensic
accounting a practice in Nigeria such that forensic accountants will have
practicing licensee like other developed countries. The institute of chartered
accountants of Nigeria (ICAN) should make it a compulsory course in their
professional examinations.
TABLE OF CONTENTS
Title
page --------------------------------------------------i
Approval
page---------------------------------------------------ii
Declaration
Page-----------------------------------------------iii
Dedication-------------------------------------------------------iv
Acknowledgements
--------------------------------------------v
Abstract---------------------------------------------------------vi
Table
of contents----------------------------------------------vii
CHAPTER ONE:
INTRODUCTION
Background of the
study--------------------------------------1
Statement of the problem ------------------------------------6
Object of the study---------------------------------------------8
Research question----------------------------------------------9
Scope of the
study----------------------------------------------9
Significant of the
study---------------------------------------10
Definition of Terms--------------------------------------------11
CHAPTER TWO:
REVIEW OF RELATED LITERATURE
Conceptual
Classification of forensic Accounting or Investigative Accounting-------------------------------------18
Theoretical
Framework----------------------------------------21
Empirical
Review----------------------------------------------23
Summary--------------------------------------------------------29
CHAPTER THREE:
RESEARCH METHODOLOGY
Research
design------------------------------------------------31
Area of
Study---------------------------------------------------31
Population
of the study---------------------------------------32
Sample
size determination-----------------------------------32
Research
Instrumentation ------------------------------32
Reliability
and
Reliability
of Research Instrument-------32
Sources
of Data------------------------------------------------33
CHAPTER FOUR: DATA
PRESENTATION AND ANALYSIS OF DATA
Presentation
and Analysis of Results----------------------35
CHAPTER FIVE:
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
Summary
findings---------------------------------------------41
Conclusion------------------------------------------------------42
Recommendations---------------------------------------------43
References------------------------------------------------------46
Appendix
I------------------------------------------------------48
Appendix--------------------------------------------------------49
CHAPTER
ONE
INTRODUCTION
BACKGROUND
TO THE STUDY
Akomaye (2007), posit that forensic
accounting includes the use of accounting and investigative skills to assist in
legal matters. It consists of two major components; Litigations services that recognize
the role of an accountant as an expert consultant and investigative services
that use forensic accountants’ skills as may be required in (possible) court
room testimony. It also involves quantitative skill to collect, analyze and
evaluate financial evidence, as well as the ability to interpret and
communicate findings.
Fraud includes all the multifarious
means human in ingenuity can devise that are resorted to by the individual to
get and advantage over another by false suggestions or suppression of the truth.
It includes surprises, tricks, cunning or dissembling, and any unfair way by
which another is cheated (Black’s Law dictionary 1979) Forensic accounting is
said to bring significant improvement in the quality of fraud detection and
prevention. Financial irregularity is a severe problem of concern globally. It
is also epidemic 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. In Nigeria today, the
telecommunication industry have fraudulent activities which is now a common
phenomenon collapsing many companies and hence weakening the economy.
Forensic accounting is an
investigative style of accounting used to determine whether an individual or an
organization has engaged in any illegal financial activity. A professional
accountant may work for government telecommunication or public accounting firm.
Although, forensic accounting has been in existence for several decades, it has
evolved over time to include several types of financial information scrutiny.
Forensic accounting may be described
as being the integration of an individual’s accounting and auditing knowledge
with investigative skills that have been gained from years of practical
experience. It is the means by which the forensic accountant review instruments
given by a client, usually through a solicitor thoroughly investigate those
instructions and the underlying contracts and other agreements obtain appropriate
evidence, prepare the whole in the form of a report suitable for presentation
to the court.
Forensic accounting in its present
state can be broadly classified into two categories encompassing litigation
support and investigative accounting. Those two major categories form the core
around which other support service revolves. However, it could be remise not to
define what encompasses litigation support and investigative accounting.
Litigation support: this is the provision of assistance of an accounting nature in a matter
involving existing or pending litigation. It is primarily focused on issues
relating to the qualification of economic damages, which means a typical
ligation support assignment would involve calculating the economic loss or
damage resulting from a breach of contract. However, it also extends to other areas
involving violations, tracing, asset, revenue recovery, accounting
reconstruction and financial analysis, to name a few. Litigation support
involves working closely with lawyers in matter involving, but not limited
contract disputes, in solving litigation, insurance claims royalty and its,
shareholders dispute and intellectual property claim.
Investigative accounting: In contrast, investigative accounting is concerned with
investigation of a criminal nature. A typical investigation assignment could be
one involving employee fraud, securities fraud, insurance fraud, kick backs and
investigative accounting services are required. In many cases, the combination
of these services will not be adequate to address unless there is in place an
effective programme for fraud risk management.
Forensic accounting which is the
application of accounting auditing and investigative skills in preparing and
presenting financial information such a manner that will be accepted by a court
jurisprudence against perpetrators of economic/ financial crimes as a matter of
fact, forensic audit of sales has been playing important roles in the area of
detection, investigation and preventing of what the nation has given to the
world 419, in plated contracts scam mails, subscription fraud, fixed network,
mobile network fraud, prepaid fraud etc. all these crimes harm
telecommunication industry and the Nigeria economy in no small measures.
The incidence of fraud continues to
increase across telecommunication industry, organizations and across nations. Fraud
is a universal problem as no nation is immune although developing countries and
their various state suffers the most pain. Fraud includes all the multifarious
means human ingenuity can devise that are resorted to by the individual to get
an advantage over another by false suggestion or suppression of the truth. It
includes surprise tricks, cunning or dissembling and any unfair way by which
another is cheated “Black’s Law dictionary”, (1979).
Employee, management fraud and other
financial crimes are increasing, therefore accounting and auditing personnel
must have training and skills to recognize those crime both at the top level
and at the grass root level to better ensure the state prospect in the area of
fraud prevention, deterrence, investigation and remediation. In making
reference outside the scope of this research to enhance a better need of the
service of forensic accounting in Kogi state is the news report following the
September 11 attack depicted low terrorist used the international banking
system to fund their activities, transfer money and hide their finances and
signaled a need for investigators to understand how financial information can
provide dues as to future threats. These events raised public awareness of
fraud and forensic accounting. The risk of financial irregularities has been in
existence for a very long time.
In fact, it was the fear of this and
the need to provide users with a means of safe guarding their wealth from
embezzlement and misappropriation of what brought about forensic accounting.
These economic and financial crimes
are the greater threat to national economic telecommunication industry and
development of the nation all large. It has eaten deep into the
telecommunication industry. The Nigeria value system and is now threatening to
spread to the culture as public for wealth has increased.
Forensic team helps client protect
their business for fraud, misconductand non-compliance. Forensic can assist
companies, telecommunications industries in deleting fraud by combing the
forensic and investigative experience of its professional’s along with the use
of technology. Forensic accounting is said to bring significant improvement in
the quality of fraud detection and prevention.
1.2 STATEMENT OF THE PROBLEM
In recent times, series of frauds
have been committed both in public sector and private sector of many economics
of which telecommunication is not left out. This is no doubt are perpetrated
under the supervision of the internal auditors. It suffices to say that the
independence of the internal auditor is not guaranteed because he works as an
employee of the organization then come to the idea of the external auditors,
yet frauds are still being committed on daily basis. It has become pertinent
that the forensic accounting be introduced and practiced since the external
auditors do not or may not have the required training to be able to tackle
modern fraud like Cenen (2005). Such as security fraud, embezzlement, contract
disputes and possibly criminal financial transactions including money laundry,
subscription fraud, fixed network fraud, mobile network fraud, prepaid fraud
etc. by organized criminal and also the ability of the forensic accountant to
provide litigation support and investigative accounting.
It is obvious that forensic
accounting could be an antidote to this problem of fraud in Nigeria
telecommunication industry. The research embarked upon the study to ascertain
the extent at which forensic accounting techniques are applied in the
telecommunication industry as a basic tool for detecting and preventing fraud.
This study tends to investigate the extent to which forensic accounting
techniques are being applied in telecommunication industry in detecting and
preventing fraud in the following ways.
1.
Non-availability
of the appropriate litigation support services. It has been discovered that
offenders are not given appropriate punishment because the gravity or extent of
economic loss or damages cannot be adequately determined,
2.
The
increasing rate of crime and corruption in the economy and telecommunication
industry. In this case most especially in the area of economic governance and
in public corporations have eroded public confidence and trust in matters
regarding transparency and financial probity. Four pillars of corporate
governance which are transparency, accountability, independence and fairness
are totally missing.
3.
Weakness
in traditional auditing style in curbing the socioeconomic evil. Auditors are
watch-dogs and fraud detectors.
4.
The
problem of battered image of the nation both locally and internationally.
Nigeria has recorded huge loss of fraud, because of bad image, Nigeria has not
been able to attract foreign direct investment (FDI) of a developing country.
1.3. OBJECTIVES
OF THE STUDY
To find out how to detect and prevent
crime in the telecommunication industry and the Nigeria economy at large
through forensic accounting is the main objective of this study and the
research therefore intends;
1.
To
access the relationship between forensic accounting and provision of litigation
support services.
2.
To
evaluate the role of forensic accounting in curbing economic and financial
crimes in the telecommunication industry.
3.
To
evaluate how forensic accounting/accountant can provide offer professional
investigation and litigation support services.
4.
To
determine if the practice of forensic accountant can repair the battered image
of Nigeria locally and internationally.
1.4. RESEARCH QUESTIONS
The important questions that this
study is set to answer are:
1.
Is
there a relationship between forensic accounting and provision of litigation
support services?
2.
Does
forensic accounting play any role in curbing economic and financial crimes in
the telecommunication industry?
3.
Does
forensic account provide more detailed reports that can support litigation
service and aid further professional investigations of crimes in the
telecommunication industry?
4.
To
what extend can the practice of forensic accounting in Nigeria economy and
telecommunication industry restore the nation’s image locally and
internationally?
1.6. SCOPE OF THE STUDY
In the high broad coverage, due time
and financial constraints, the researcher focuses on the fraud detection and
prevention in the telecommunication industry using some selected
telecommunication companies in Enugu state like 9-mobile Nigeria Ltd, MTN, Glo,
Airtel, Multi-link. The scope of this study or research therefore covers
present happenings in the telecommunication industry.
1.7. SIGNIFICANCE OF THE STUDY
Owing to the existing incidence of fraud
in the telecommunication industry an d the attendance of problem such as: loss
of confidence and trust of both potential and actual investors or customers
leading to imperable damage to the industry, as well as the nation as a whole,
the study is designed to explore the application of forensic accounting
techniques to detect any potential telecommunication fraud and is occasioned,
conduct investigation of cases at hand and at least suggest effective ways of
preventing the occurrence of such fraud.
The research will be of great
importance to the following group of people;
Researchers:
This study will be of importance to researcher who may be carrying out research
work in such related field.
Students: The
research work stands as an offshoot to student who may be undertaking a work in
the related field of this and it will also help them as a reasonable literature
that can guide their work.
Policy Maker:
This will help policy makers, management in airing at decision that will
drastically reduce if not eliminate the incidence of fraud, help in making available
the necessary internal control procedure of the check-mating fraud and
safeguarding assets of the company and most especially in the Nigeria
telecommunication industry thereby restoring the lost confidence, the trust and
patronage of the public in the industry. This will go a long way in enhancing
the economic development of the nation.
Entrepreneur:
This research will be an eye opener on the relevance of forensic accounting in fraud
detection and prevention which can help in protecting and enhancing the affairs
of the business organization.
Government:
This study will also be important to the government as it provides forensic
auditing as a way of curbing and corruption in the public sector or government
establishment.
DEFINITION OF TERMS
Forensic: The word forensic is
defined as the pertaining to connected with, or used in the court of law or
public discussion and debate (websiter’s. dictionary).
Forensic Accounting: This has been
defined in many ways but the underlying point is that, forensic accounting
involves the use of investigative, accounting and auditing skills to gather and
present financial information that will be useful in court or public debate.
Forensic accounting utilizes
accounting, auditing and investigative skills to conduct an examination into a
company financial analysis that is suitable for court.
Forensic accounting is the use of
accounting skills to investigate fraud or embezzlement and to analyze financial
information for use in legal proceedings.
Forensic Auditing: This involves the examination of business process for evidence of fraud.
It is an aspect of forensic accounting.
FRAUD: This is
a deception which is deliberately practiced in order to secure unfair or
unlawful gain. It is an act or course of deception, an international
concealment, omission or perversion of truth to gain unlawful or unfair
advantage.
It is also an act of irregularities
done intentionally for the purpose of gaining advantage, the common element of
fraud is;
a.
Unlawfulness
b.
Misrepresentation
c.
Intention
TELECOMMUNICATION FRAUD
These are fraud perpetrated in and or
through telecommunication. They are of two types;
Telecommunication Fraud by insiders
Telecommunication fraud by outsiders
FORENSIC INVESTIGATION: This is an inquiry carried out with its result having
application to the court of law. It has its peculiar techniques.
FRAUD EXAMINATION: This is similar to the forensic accounting but the difference is that
its finding are not used in the courts, it involves the following subsets;
investigation, internal control assessment, fraud loss calculation, deterrence,
anti-fraud training and fraud prevention.
FRAUD DETECTION: Fraud detection involves the use of specialized detective skills and
previously unknown, action oriented, hidden trends, patterns and complex
(fraudulent) relationship.
INVESTIGATIVE ACCOUNTING: This means examination of criminal matters.
ANTI-FRAUD INTERNAL CONTROL SYSTEMS: These are those controls, financial or otherwise put
in place in an organization designed to ensure adherence to management policies
on fraud so as to mitigate fraud risk in the telecommunication industry.
FORENSIC ACCOUNTING TECHNIQUES: Panigrahip (2006), states the techniques and tools used in
forensic accounting.
1.
Forensic
fraud detective techniques
2.
Forensic
fraud investigative techniques
FORENSIC FRAUD DETECTIVE TECHNIQUES: Generally, the detective technique used by forensic
accountants include; the proactive and reactive. The proactive and reactive
techniques are universally tactical techniques. They are aggressively target
types of fraud search for their indicators, symbols or red flags. They include;
a.
Data
mining techniques and financial
b.
Five
step detection techniques
c.
Fraud
hypothesis testing techniques.
The reactive detective techniques,
which favour to the philosophy that “we repulse when attacked” wait and see
appeals to the use of electronic equipment, such as the circuit, television and
whistle blowers.
FORENSIC FRAUD INVESTIGATIVE TECHNIQUES: The following are the forensic
investigative techniques;
a.
Interview
b.
Computer
c.
Financial
Analysis
d.
Record
research
e.
Background knowledge
ROLES OF FORENSICS ACCOUNTING
According to barney (2007), the use
of specialized techniques and
strategies,
Forensic accounting as a specialized
field of accounting, perform the following
1.
Background
check
2.
Review
of internal control and management practices
3.
Fraud
programme implementation
4.
Fraud
awareness training
5.
Discovery
of widen assets
6.
Litigation
support services
According to crumley et al (2007); forensic accounting
day’s special role in uncovering maid
embezzlement and white cover crime.
They include:
1.
Qualification
of damage resulting from financial
irregularities
2.
Preparation
of opinion and appealing in courts as in expert witness.
3.
Assisting
management in preventing irregularities, and improving work process, through
fraud risk assessments techniques.
4.
Conducting
due diligence examination prior to investments, acquisition and mergers.
In order to get time picture of the target
organization in emphasizing on the roles of forensic accounting, according
charity (2005), forensic accountant is often retained to analyze, interpret,
summarize and present complete financial and business related issue in a manner
which is both understandable and properly supported.
Forensic fraud investigative techniques:
a.
Interview
of knowledgeable persons: - forensic accountants will often conduct include
current and former employers, vendors and customers. These interviews can shed
light on additional witnesses and may even help the auditor narrow down the
list of suspects
b.
Financial
transaction Analysis:-
Forensic accountants are most at home conducting an
analysis of company financial transaction. Turning a critical eye to your books
may help the investigator identify improper, payments or accounting practices.
They will also usually check and validate all vendors and suppliers compare
employee and vendor addresses for accuracy and analyzes sales return and
allowance courts.
(c) The purposes of computer forensic
techniques:-
Is to search, preserve and analyze
information on computer systems to find potential detective use in crime scene investigations
have digital counter parts, but there are also some unique aspects computer
investigation.
(d) Background search:-
Forensic accountants combine their
accounting knowledge with investigative accounting setting forensic accountants
employed by public accounting firms forensic accounting divisions by consulting
firm specializing in risk consul and forensic accounting services.
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