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ROLE OF FORENSIC ACCOUNTING IN FRAUD MANAGEMENT IN NIGERIAN BANKS: A STUDY OF UNION BANK OF NIGERIA PLC.


Project topic for Banking And Finance department

CHAPTER ONE

INTRODUCTION

1.1 Introduction

Forensic and investigative accounting is the application of financial skills and investigative mentality to unresolved issues, conducted within the context of the rules of evidence. As a discipline, it encompasses fraud knowledge, financial expertise, and a sound knowledge and understanding of business reality and the working of the legal system (Bologna & Lindquist, 1987). Forensic accounting is the tripartite practice of utilizing accounting, auditing and investigative skills to assist in legal matter (Olola, 2016). It is a specialized field of accounting that describes engagements that result from litigation. Forensic accounting can, therefore be seen as an aspect of accounting that is suitable for legal review and offering the highest level of assurance (Apostolou, Hassell & Webber, 2000). The failure of the major corporate governance mechanism to reduce financial fraud and the increasing sophisticated financial fraud has posed serious threat to investors, government, and general public (Eyisi & Agbaeze 2009). Change they say is constant; to response to these changing fraudulent activities that is going on in corporate Group, entities and skills of forensic accountants which include investigators and legal experts to combat this corporate menace is paramount.

1.2. Background

Bottom of Form

The widespread frauds in modern organizations have made traditional auditing and investigation inefficient 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 across nations. Fraud is a universal problem as no nation 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. 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 of these crimes are made more difficult and commission of 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 and 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 prevention to detection. One of the modern approaches that can be used from the prevention to detection is called forensic accounting. Forensic accounting is a rapidly growing field of accounting that describes the engagement that results from actual or anticipated dispute or litigations. Professional Forensic Accountant may work for government 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 can, therefore, be seen as an aspect of accounting that is suitable for legal review and offering the highest level of assurance (Apostolou, Hassell & Webber, 2000). Also, forensic accounting encompasses three major areas, investigation, dispute resolution and litigation support.

Ojaide (2000) noted that there is an alarming increase in the number of fraud and fraudulent activities in Nigeria, requiring the visibility of forensic accounting 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 role of forensic accounting in fraud management in Nigeria banking sector.

1.3. Statement of the Problem

In recent times, series of fraud have been committed both in the public and private sectors of the economy. These 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 accounting services. Okoye and Akamobi (2009), Owojori and Asaolu (2009), Izedomin and Mgbame ( 2011), Kasum (2009) have all acknowledged 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 become 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 accounting 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 accounting can help curtail financial and economic crimes beyond the several unreliable views that abound. Consequently, the study fills the gap of forensic accounting in fraud management in Nigeria banks with a particular reference to union bank of Nigeria plc.

1.4. Objectives of the study

The main objective of this study is to assess the role of forensic accounting in fraud management in Nigerian banks: A study of Union Bank of Nigerian Plc. The specific objectives of this study include:

    To examine the role of forensic accounting in fraud detection.

    ii.                To examine the role of forensic accounting in fraud prevention.

1.5. Research questions

The study has the following research questions to guide the researcher to meet up with objectives of the study.

i. What are the roles of forensic accounting in fraud detection?

ii. What are the roles of forensic accounting in fraud prevention?


1.6. Statement of Hypotheses

  The following hypotheses were posed for the study           

Hypothesis one

Ho1: Forensic accounting plays no significant role in fraud detection.

Ha:  Forensic accounting plays significant role in fraud detection.

                Hypothesis two

Ho2: Forensic accounting has no significant role in fraud prevention.

Ha2: Forensic accounting has significant role in fraud prevention.

1.7    Significance of the Study.

          This study will be of immense benefit to all strata of the Nigeria society.Firstly, the entire Nigerian populace will benefit greatly from this study as it will broadly enlighten them on the role of forensic accounting in fraud managements in Nigeria banking sector. Also this study will greatly benefit the government and other policy makers on how to use forensic accountants to curtail frauds in Nigerian banking sectors. It will also guide them in formulating the right policies that will help the forensic accountants in elimination of frauds in Nigeria. Finally, this study will contribute to knowledge by being a rich reference material for students and other scholars interested in investigating how forensic accounting can be used to reduce fraud in Nigerian banking sectors.

1.8     Justification for the Study.

      Many scholars and researchers have written extensively on the role of forensic accounting in fraud management in Nigerian banking sector and even in union bank of Nigerian plc. But none has linked the high rate of fraud in Nigerian banking system to lack of forensic accounting experts as the major causes of the fraud and poor policy making and implementation as it relates to forensic experts in Nigeria. This is the gap in literature that this study seeks to fill. In fact this study came in the right time when the federal government of Nigerian is fighting against corruption and bribery. It also comes at a time when the noise about economic and financial crime commission is loudest because of the fraudulent activities going on in the country. Therefore, this study is timely and apt at this period of our nation’s history.

1.9    Scope of the Study

          The aim of this study is to examine the role of forensic accounting in fraud management in Nigerian banking sector, Using Union Bank Plc as a study. This study concentrates only on the role of forensic accounting in fraud detection and prevention. It does not cover other aspect of fraud management.

1.10      Definition of Terms

Forensic accounting- This means use of accounting skills to investigate fraud or embezzlement and to analyze financial information for use in legal proceedings.

Financial crime:Is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud (cheque fraud, credit card fraud, mortgage fraud, medical fraud, corporate fraud, securities fraud (including insider trading), bank fraud, insurance fraud, market manipulation, payment (point of sale) fraud, health care fraud); theft; scams or confidence tricks; tax evasion; bribery; embezzlement; identity theft; money laundering; and forgery and counterfeiting, including the production of Counterfeit money and consumer goods.

Economic crime: This covers a wide rangeof offenses, from financial crimes committed by banks, tax evasion, illicit capital heavens, money laundering, crimes committed by public officials (like bribery, embezzlement, traffic of influences, etc.) among manyothers.


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