FRAUD DETECTION AND PREVENTION - THE ROLE OF THE ACCOUNTING PROFESSION

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

This project explores the relevance of the accounting profession in the detection and prevention of fund in our organizations due to the prevalent increase in the rate of misappropriation and embezzlement of frauds. The financial irregularity is a service problem of concern globally. It is common that a lot of individual cannot wash their hands clean of it. Beginning from the public sector to the private sectors, accounting as a social science plays significant roles in our society and serves as a legitimating device for the market economy system.

However, accounting figures are heavily exposed to fraud due to their influence on numerous crucial accessions that affect various keys factors with far reaching implications. For instance, accounting figures are source of rewards for management, a basis for the assessment of firm performance and grouping in the sense of profitability and non profitability firms and investors decisions. These numerous needs and interest makes accounting figures to be extremely susceptible to fraud. Fraud in accounting is fraudulent financial reporting and misappropriation of firms’ resources and thus has been occurring in our society, thereby making great emphasis on how fraud will be detected and prevented. Though the auditor’s responsibility has been increased to consider the risk of fraud while conducting audit of financial statements; thereby calling for stronger techniques and skills on those who perform these audits. Hence the primary responsibility of an auditor is to verify whether the financial statements show a true and fair view of the business while their secondary responsibility is the prevention and detection of errors and frauds.

Therefore, forensic accountants were introduced in order to prevent, detect and respond to harm caused by fraud that an auditor could not detect or prevent. A forensic accountant has the sole aim of unveiling fraudulent activities within and outside the organization. In general term, forensic accounting involves reporting where is established and the report is considered as evidence in the count of low. The engagements of forensic accounting techniques are usually geared towards funding where money went, how it gets there and who was responsible.

A forensic accountant has been described as experienced auditors. Accountants and investigations of legal and financial document that are hired to look into possible suspicious of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activity from occurring. They also provide services in areas such as accounting, construct, damages, analysis, valuation and general consulting. Forensic accountants have also been used in bankruptcy, insurance claims, personal injury claims, fraudulent claims, construction, royalty audits and tracking terrorism by investigating financial records. Forensic is an amalgamation of forensic science and accounting.

1.2      STATEMENT OF PROBLEM

The study, therefore is aimed at ascertaining the impact of the accounting profession that will create on detecting and preventing fraud using the forensic accounting techniques and that its contribution in bridging the audit expectations gap. Below are some of the statements of problem that were looked into;

1.  To what degree do people believe in the opinion of accountants/auditors concerning their report on an audited financial statement?

2.          To what extent has the negligence of auditors/accountants to their job caused financial misappropriation in our sectors?

3.          In what way has the 50% un-independent quality of our auditor affected their opinion to the public concerning the financial statement of our sector?

1.3      RESEARCH QUESTIONS

The following research questions were formulated for the purpose of this study;

1.          How has the total number of reported cases of fraud affected the economic development of Nigeria?

2.          How has the total amount involved (in naira) affected the development of banking industry?

3.          What is the impact of actual/exported loss due to fraud on economic development of the Nigerian industries?

1.4      OBJECTIVES OF THE STUDY

The overall objective of this study is to find out the perception of accountant techniques in fraud detection and prevention and how to enhance the chances of fraud discovery and thus help in closing the audit expectation gap between the auditor responsibilities and public expectation. For this study, we looked into the following objective which is as follow;

1.          To examine how the total number of reported cases of fraud affected the banking sector and economic development of Nigeria.

2.          To investigate how the total amount involved (in naira) affected the development of banking industry.

3.          To find out the impact of actual/expected loss due to fraud on economic development of bank.

1.5      STATEMENT OF HYPOTHESES

The following hypotheses were formulated to aid the study

        Hypothesis One

Ho:  There is no relationship between the number of reported cases of fraud and the economic development of Nigeria.

Hi:   There is a relationship between the numbering reported cases of fraud and the economic development of Nigeria.

Hypothesis Two

Ho:  The total amount involved in fraud has no effect on the development of Nigerian economy.

Hi:   The total amount involved in fraud has affected on the development of Nigerian economy.

1.6      SIGNIFICANCE OF THE STUDY

The researchers undertook the research under the topic “Fraud  detection and prevention: the role of accounting profession” the researchers discovered that the shareholder investors, general public, companies and government will benefit in the inclusion of accountants to the detection and prevention of fraud in our establishment and organizations. Since their investigations goes beyond the investigations of an ordinary auditor. Again, the researchers discovered that if forensic accountants will be given proper and adequate support by the proper and adequate support by the beneficiates named above to do their job independently with full cooperation without interference. From the perpetration management and direct of the financial misappropriation. The sky will be their standing point in detecting and preventing fraud in our country and also help to reduce the level of embezzlement and financial misappropriation we experience in our organizations.

1.7      SCOPE OF THE STUDY

The research work covers all areas of auditing in some establishments in Nigeria. The need for this research arises because the accountant is needed in organizations to control, prevent and detect fraud. 

1.8      LIMITATIONS OF THE STUDY

During the course of this study, the researchers were confronted with lots of problems that include;

Finance

This research was limited by finance since is a student with a meager pocket money and considering the inflecting cost of transportation and other costs.

Time

Another major limitation was tine doe to the nature of the programmes the institution operates as well as academic stress to a large extent, prevents the researcher from making more findings in the study.

Information Gathering and Social Problems

Many of the respondents misunderstood the intention of the researcher and were not ready to give sensitive data.     

Grouping

Is one of the limitation, before you see your supervisor, you have to be complete in number and when one member is absent it affects the work. Also increase in cost by calling and sending of text messages.

1.9      DEFINITION OF TERMS

Fraud: This is the action or an instance of deceiving somebody in order to make money or obtain goods illegally.

Detection: The act of discovering or the fact of being discovered.    

Protection: This is the action of stopping something from happening or arising.

Role: According to the Oxford Advanced Learners Dictionary, role is defined as the function or position that somebody has or is expected to have in an organization.

Role mode: The degree to which somebody is involved in a situation.

Accounting: By the American Accounting Association is defined as the process of identifying, measuring, classifying and communicating economy information to permit informed judgement and decision by users of the information. It should therefore be noted that there are three classes of accounting which include the following;

Financial accounting: This can be defined as a systematic identification, measuring, classifying, summarizing, communication and interpreting of financial information so as to enable stakeholders to have stewardship report and make investment decisions.

Management accounting: This is defined as the application of professional knowledge and skill in the preparation of accounting information in such a way as to assist management in the formulation of policies and planning and controlling of the operations of the undertaking.

Cost accounting: This can be defined as the process of accounting for cost from the point at which expenditure of it ultimate relationship with cost centers and cost units. 

Profession: According to the oxford Advanced Learners’ Dictionary is defined is defined as a type of job that needs special training or skill especially one that needs a high level of education.

Accountant: Is a person whose job is to keep or check financial accounts.

Auditor: Is a professional qualified account who has been given a license to practice and carryout public assignment or public practice.

Auditing: Is defined as the independence examination of an expression of opinion on the financial statement of an enterprise by an appointed auditor in pursuance of that appointment with any relevant statutory obligation.

Organization: This can be referred to as the combination of human being working together with the aim of achieving set objectives.

Errors: An unintentional mistake, mathematical or clerical or calculative errors.

Internal control: the system of control, financial and otherwise establishment in order to carry on the business of the organization in an orderly and efficient manner to ensure adherence to management policies etc.