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A STUDY ON THE EFFECTIVENESS OF AUTOMATED FORENSIC AUDITING ON FRAUD CONTROL IN NIGERIA ( A CASE STUDY OF EFCC PORTHARCOURT)
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ABSTRACT
The topic “Automated forensic auditing and fraud control in Nigeria” is a critical concept in modern-day accounting, and our country Nigeria is not left out in its practice. This research aims to point out the rationale behind fraudulent practices as well as examine the role of automated forensic auditing on fraud control. A survey research design was adopted for this research study and the sample size was selected using the Taro Yamane sampling technique as data used were obtained from both primary and secondary sources. Four research questions were formulated out of which three hypotheses were tested using the (ANOVA) statistical technique. From the analysis, the major findings derived were that; Automated forensic auditing has a significant relationship with fraud control as it helps in the detection and prevention of fraud; There are measures employed to solve the problems of insufficient documented materials necessary for investigating suspects as it helps to foster investigative process; There are standards set for improving on techniques used for obtaining evidence. Conclusively, it can be said that fraud control in Nigeria cannot be done without forensic accounting; fraud detection may not be possible in Nigeria if the management of different levels is not committed to doing an in-depth study of a financial statement i.e. having a physical check of assets and liabilities. It was recommended that; The internal control system of every organization should be strengthened through regular audits; training of forensic auditors should be done regularly, and seminars should be organized to encourage the use of automated tools.
TABLES OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgments iv
Abstract v
Table of contents vi
CHAPTER ONE: INTRODUCTION
1.0 Introduction 1
1.1 Background of the study 2
1.2 Statement of the Problem 4
1.3 Statement of the Objectives 5
1.4 Research Question 5
1.5 Research Hypotheses 6
1.6 Significance of the study 7
1.7 Scope of the study 8
1.8 Limitations of the study 8
1.9 Definitions of Terms 9
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.0 Introduction 10
2.1 Academic review 10
2.2 Fraud deterrence and detection 12
2.3 Elements of Fraud 13
2.4 Types of fraud 14
2.5 Fraud theories 15
2.6 Antidotes to fraud 16
2.7 Fraud Risk Management 19
2.8 The fraud teams 23
2.9 Forensic Auditing 25
2.10 Application of Forensic Audit 26
2.11 Investigative Audits 29
2.12 Automated Forensic Tools 33
2.13 The Significance of Automated Tools 40
2.14 Differences between forensic and financial audit 41
2.15 Advantages of forensic auditing to fraud control 42
2.16 Disadvantages 43
2.17 References 44
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction 47
3.1 Research design 47
3.2 Sources of Data Collection 48
3.3 Area of the study 48
3.4 population of the study 49
3.5 Determination of sample size 49
3.6 Reliability test 50
3.7 Validity test 51
3.8 Method of Data Analysis 51
3.9 References 52
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND IMPLEMENTATION
4.1 Presentation of data 53
4.2 Test of Hypotheses 67
4.3 References 81
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Summary of Findings 82
5.2 Conclusion 82
5.3 Recommendation 84
5.4 References 85
Appendix 1 86
Appendix 11 87
Bibliography 91
CHAPTER ONE
1.0 INTRODUCTION
Mobile Wise Geek (2011) defined fraud as a deliberate misrepresentation that causes a form of monetary loss. All of these are usually required for an act to be considered fraud if someone lied about his name.
United States Legal (2011), defined fraud as an international misrepresentation of material existing facts made by one person to another with the knowledge of its falsity and to induce the other person to act, and upon which the other person relies with resulting injuries or damages.
Fraud has been in existence from the beginning of its creation, and the increase of fraud daily brought about forensic auditing.
Forensic auditing is defined as the activity that consists of gathering, verifying, processing, analyzing, and reporting data to obtain facts and /or evidence in the area of legal financial disputes and or irregularities including fraud, and giving preventative advice. IFA (2011).
Fraud is an independent criminal offense, and it is the main phenomenon that gave birth to forensic auditing, especially those related to economic crime. These economic crimes are known to be an unpleasant fact and a disheartening issue in the heart of many organizations, and the control of it is a concern for any organization that employs employees, accountants, or other hired professionals that have access to the organization’s income, receipts, or funds.
Therefore, we are faced with the inescapable conclusion that forensic auditors are charged with the responsibility of controlling and preventing fraudulent practices.
1.1 BACKGROUND OF THE STUDY
Brief History of the Economic and Financial Crime Commission (EFCC)
The Economic and Financial Crime Commission (EFCC) has grown into a robust and reputable national institution that now commands respect. They have gained the admiration of Nigerians and the international community as a whole as the most vibrant anti-corruption fighting organization that has fought corruption to a standstill within the short time of its existence.
Over the years, Nigeria suffered tremendously in her economy in the hands of corrupt leaders who for selfish reasons reduced a country like Nigeria which is rich in oil to one of the poorest countries in the world. All these brought about the establishment of EFCC.
i.Formation of the Economic and Financial Crime Commission (EFCC)
The Economic and Financial Crime Commission (EFCC) was established in 2003 by the Economic and Financial Crimes Commission Act 2002 and reenacted in 2004 by the Act as a body corporate with perpetual succession and a common seal. It has its headquarters at No 5 Fomella Street, Off Crescent, Wuse 11, Abuja. With Nuhu Ribadu as the first executive chairman until 2008 he was replaced by Fomida Waziri, and Mr. Ibrahim Lamorde was appointed the chairman of the commission on 15th February 2012 and he is still the substantive chairman
till date.
Its establishment was partially in response to pressure from the Financial Task Force on Money Laundering (FATF), which named Nigeria as one of the 23 countries non-corporative in international communities’ effort to fight money laundering.
- Vision statement: To make Nigeria a safe and corrupt-free business environment for sound health and a positive image of the country.
- Mission statement: The mission statement of the commission includes;
- To curb the menace of corruption that constitutes the cog in the wheel of progress of Nigerians.
- To protect national and foreign investments in the country.
- To imbibe the spirit of hard work in the citizenry and discourage ill-gotten wealth.
- To identify illegally acquired wealth and confiscate it.
- To build an upright workforce in both the public and private sectors of the economy.
- To contribute to the global war against financial crimes and terrorism financing in Nigeria.
1.2 STATEMENT OF THE PROBLEM
In this study, certain problems are related to the application of forensic auditing including;
- Insufficient skilled manpower for the use of automated tools or software.
- Insufficiently documented materials for investigating suspects.
- Inadequate techniques for obtaining evidence.
- High cost of analysis.
1.3 STATEMENT OF OBJECTIVES
The general objective of the study is to examine the role of automated forensic auditing on fraud control, while the specific objectives of the study are as follows.
- To determine why there is insufficient skilled manpower needed for operating automated tools.
- To investigate the reasons for insufficiently documented materials.
- To examine the cause of not obtaining enough techniques used as evidence.
- To evaluate the reasons for the high cost of analysis.
1.4 RESEARCH QUESTION
Based on the foregoing, the following research questions were formulated:
- Is there any significant relationship between automated forensic auditing and fraud control?
- Are there methods adopted to adequately train forensic auditors with
investigative skills?
- Are these measures employed to solve the problem of insufficiently documented materials necessary for investigating suspects?
- Are these standards set for improving on techniques that are meant for obtaining evidence?
1.5 RESEARCH HYPOTHESES
The following are the hypotheses to be tested.
Ho1: There is no significant relationship between automated forensic auditing and fraud control.
HA1: There is a significant relationship between automated forensic auditing and fraud control.
Ho2: There are no methods adopted to adequately train forensic auditors with investigative skills.
HA2: There are methods adopted to adequately train forensic auditors with
investigative skills.
H03: There are no measures employed to solve the problem of insufficiently documented materials necessary for investigating suspects.
HA3: There are measures employed to solve the problem of insufficiently documented materials necessary for investigating suspects.
1.6 SIGNIFICANCE OF THE STUDY
This study of forensic auditing will be helpful to the following categories of users.
For Management: It will serve as a reference document for management to use as a guide for investigating and controlling fraud.
For Auditors: It will serve as a revision kit for practicing auditors in the field.
For the Public: It will add to existing knowledge by exposing the public to the matter of fraud, making them know that even if fraud cannot be completely
eradicated, it can be controlled.
For Researchers/Analysts: It will serve for future research studies.
1.7. SCOPE OF THE STUDY
This study covers the activities of the Economic and Financial Crime Commission (EFCC), in Nigeria, especially the branch that is situated in Port-
Harcourt.
1.8. LIMITATIONS OF THE STUDY
This research work was faced with certain challenges because the topic in question is not yet widely known. VI2:
- Inadequate Materials: This was the major constraint of the research work, for it was limited to a few materials and mainly on the Internet.
- Time Factor: This is another factor that limited the flow of this research work. The time factor is a constraint limitation of the study. Inadequate time to work due to some school activities that restrict the student from going out to research.
- Distance: The different locations of where the materials are to be gathered posed a problem to this work since it requires going from one accounting firm to another to gather facts relating to the topic.
- School Exeat: Here getting permission to sign out of school is a very big problem for the researcher. School exeat sometimes limits us, students, from gathering enough material for our work.
- Fund: This serves as a major constraint to the research work. Enough funds are required to get materials for this work.
1.9. DEFINITION OF TERMS
AUTOMATION: This is the use of control systems and information technology to reduce the need for human work in the production of goods and services.
FORENSIC: Belonging to, used in, or suitable to courts of judicature.
FRAUD: Irregularities involving the use of criminal detection to obtain unjust or illegal advantage.
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