EFFECT OF FORENSIC AUDIT ON PROFITABILITY OF CONSUMER GOODS COMPANY IN NIGERIA

EFFECT OF FORENSIC AUDIT ON PROFITABILITY OF CONSUMER GOODS COMPANY IN NIGERIA

ABSTRACT

 

Fraudulent practices have led to increased losses and collapse of consumer goods company, hence the need to use forensic approach services to detect and prevent such fraudulent activities. The consumer goods company ing industry is a very important institution with many internal controls in order to overcome the fraudulent practices. The objective of this study was to examine the effect of forensic audit on profitability of consumer goods in Nigeria, the most prevalent type of fraud and to establish the major areas of application of forensic accounting services. The data collection instrument preferred for the study was a questionnaire. Findings from the study saw that fraud detection and prevention increased when forensic accounting services was employed.   The sample size of 179 were used and was chosen among the 9 consumer goods company in Nigeria using Bowleys proportional allocation formula Data were analyzed using table and simple percentage, hypothesis were tested using chi-square statistics ( x²).  The study findings indicated that the application of forensic approach services led to increased fraud prevention in the consumer goods company and the highest application was on enhancing quality of consumer goods company reporting.

 

CHAPTER ONE

INRODUCTION

1.1 Background to the Study

Considerable scandals that have been experienced in recent years in consumer goods company in Nigeria have reduced the confidence to consumer goods company and non-consumer goods company statements leading to improved regulations governing both the consumer goods company ing sector and the accounting practices as well. Due to this, forensic accountancy as a profession with its services as litigation support, consultancy expert testimony and fraud auditing (investigation accountancy) filled a large gap in prevention of such frauds. History has shown that despite the presence of Sarbanese-oxley legislation of 2002 in the United States and the publishing Enron and other big companies in US, employees have continued to manipulate even the best internal controls available for their own personal gain.  These scandals have consumer goods company ly devastated employees and investors and severely harmed the reputation of auditors, analysts and corporate managers. It is in realization of this that various initiatives have been put into place to enhance and enforce the applicability of  forensic accounting services by use of the right people, tools, techniques and insight to  prevent and detect fraudulent activities and to ensure that the applicability of such  services are effective. Modern Information technology has even increased the pace of electronically manipulated frauds in the complex business environment. According to Fraud Survey of KPMG (2008), the total value of fraud reported was $301.1 million with an average value for each organization of $1.5million in Australia and New Zealand of 420 organizations surveyed which represented 20% of the 2018 surveys distributed.  In May 2011 in a response to spiraling fraud cases, the CBN demanded an audit of automated payment processing systems operated by consumer goods company after their investigations showed the rising cases of fraud were in fact being initiated by consumer goods company  employees at the point of entry of information into their internal payment systems. Due to this, this study focused on the impact of forensic accounting services on fraudulent practices in the consumer goods company in Nigeria. Theoretical prediction indicated that, the application of Forensic Accounting Services helps to prevent fraud occurrence in the consumer goods company. According to Gollwitzer (1990), the mindset of a fraud specialist will lead them to search for pertinent information pertaining to frauds. When people are much aware that their fraudulent activities were to be disclosed by the application of forensic accounting services, they feared to commit fraud in the consumer goods company ing industry.

 

1.2       Statement of the Problem

The failure of statutory audit to prevent and reduce misappropriation of fund and an increase in corporate crimes have put pressure on the professional accountant and legal practitioner to find a better way of exposing this consumer goods company  crimes. The problem is incessant consumer goods company  crimes in the corporate world requires regular audit. 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).  Although a number of studies had been done on the concept of forensic accounting services, none of them had focused on the impact of forensic accounting services on fraud prevention and detection specifically in consumer goods company in Nigeria hence making this study justifiable as it was to address if such applications had an impact on prevention and detection of fraud in consumer goods company in Nigeria.

 

 

1.3       Objectives of the Study

The general objective of this study is to appraise the usefulness of forensic auditing in preventing and detecting corporate fraud in Nigeria. The specific objectives of this study are as follows;

1) To ascertain how forensic audit has been a useful tool in prevention and detection of fraud in consumer goods company in Nigeria.

2) To determine the most prevalent type of fraud among consumer goods company in Nigeria.

3) To determine the effect of forensic accounting on consumer goods company in Nigeria.

 

1.4       Research Questions

In order to achieve the objective of the study, the following research hypothesis have been raised, providing answers to them will help achieve the aim of this  work. These questions includes;

1. Why forensic audit is considered a useful tool in prevention and detection of fraud in consumer goods company?
2. Is there any relationship between the most prevalent type of fraud among consumer goods company?
3. What is the effect of forensic accounting on consumer goods company audit?

 

1.5       Statement of Hypotheses

The statement of hypothesis provides a measurement criterion that keeps the researcher on the main line of the study (Osuala 1982:44). In order words, it is “a speculation of the way the variables of study behaves” it is a guide method to be used in their analysis. The needs for such guides rise to the following hypothesis;   

Ho₁:    There is no significant need to employ a forensic auditor in a consumer goods company.

Ho₂:    There is no relationship between the type of fraud among consumer goods company in Nigeria.

Ho₃:    Application of forensic accounting in consumer goods company has no significant impact on consumer goods company audit.

 

1.6       Significance of the Study

This study will be of great importance to the government since it will help to determine the actual income of every company and consumer goods company so as to pay the exact tax. It will also give them positive insight on how to fight this evil menace called corruption in the country. It will also be of great benefit to the corporate world as the effective work of forensic auditors will help prevent, reduce and detect fraud and other corporate crimes in an organization it will help the investors and depositors to know the consumer goods company  position of the institution they are investing in if it is going to be a profit venture or not, and also to schools and students, it will serve  as a reference point for future researchers who will want to research more on the  topic.

 

1.7       Scope of the Study

This study was designed to discuss the usefulness of forensic audit in preventing and detecting fraud in an organization” the research will be restricted to the nine selected consumer goods company in Enugu state.

 

1.8       Limitation of the Study

I was confronted with some problems when carrying out this research. These problems include.

1. Uncorporative attitude of some of my respondents: – some of the respondents refused to fill my questionnaires and some refuse to return the filled ones.
2. Financial problems:- the success of my research work depends on the finance availability            and this affected the researcher because the finance at his  disposal was not sufficient to          carry out the research effectively.

 

1.9       Definition of Terms.

FORENSIC ACCOUNTING:- It is a specially practice area of accounting that  describes engagements that results from anticipated disputes or litigations.   FORENSIC: According to oxford advance learners dictionary means connected with or used in the court to law.

 

INVESTIGATIVE ACCOUNTING: This is the reviews of the factual situation of  a company and suggest possible course of action.

 

WHITE-COLLAR CRIME:- Edwin Sutherland in 1939 defines it as “a crime  committed by a person of respectability and high social status in the course of his occupation. It is a consumer goods company ly motivated nonviolent crime committed for illegal monetary gain.

 

FRAUD: This is a type of criminal activity, defined as abuse of position, or false representation or prejudicing someone’s rights for personal gain.

 

FORENSIC AUDITING: This is an examination and evaluation of a firm’s or individual consumer goods company  information for use as evidence in court. A  forensic audit can be conducted in order to prosecute a party for fraud, embezzlement or other consumer goods company  claims.

 

BANK AUDITING: This is an examination of the accounts and be conducted by internal and external agency known as the auditors

 

FINANCIAL INSTITUTION: Financial institution is an establishment that conducts consumer goods company  transactions such as investment, loans and deposits. Almost everyone deals with consumer goods company on a regular basis.

 

COMMERCIAL BANK: This is a type of consumer goods company that provides services such as accepting deposits, making business loans and offering basic investment products.

 

 

 

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