THE USEFULNESS OF FORENSIC APPROACH TO BANK AUDITING AND INVESTIGATION IN NIGERIA

ABSTRACT

Fraudulent practices in Nigeria banks have led to increased losses and collapse of commercial banks, hence the need to use forensic approach services to detect and prevent such fraudulent activities. The banking 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 usefulness of forensic approach to bank Auditing and investigation 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 commercial banks 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 by banks led to increased fraud prevention in the commercial banks and the highest application was on enhancing quality of financial reporting.

                                                       CHAPTER ONE

                                                        INTRODUCTION

1.1 Background to the Study

Considerable scandals that have been experienced in recent years in commercial banks in Nigeria have reduced the confidence to financial and non financial statements leading to improved regulations governing both the banking 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 financially 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 commercial banks after their investigations showed the rising cases of fraud were in fact being initiated by bank 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 commercial banks in Nigeria. Theoretical prediction indicated that, the application of Forensic Accounting Services helps to prevent fraud occurrence in the commercial banks. 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 banking 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 financial crimes. The problem is incessant financial crimes in the corporate world require 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 commercial banks 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 our financial institutions.

 

 

 

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 our financial institutions.

2) To determine the most prevalent type of fraud among commercial banks in Nigeria.

3) To determine the effect of forensic accounting on bank audit 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      financial institution?
  2. Is there any relationship between the most prevalent type of fraud among commercial        banks in Nigeria?
  3. What is the effect of forensic accounting on bank 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 financial institution.

Ho2:     There is no relationship between the type of fraud among commercial banks in Nigeria.

Ho3:     Application of forensic accounting in banks has no significant impact on bank 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 companies and banks 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 financial 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 banks 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 financially 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 financial information for use as evidence in court. A  forensic audit can be conducted in order to prosecute a party for fraud, embezzlement or other financial 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 financial transactions such as investment, loans and deposits. Almost everyone deals with financial institution on a regular basis.

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Feb 19

Assessment of effectiveness of accounting information as a tool for management decision

Assessment of effectiveness of accounting information as a tool for management decision

CHAPTER ONE

INTRODUCTION

BACKGROUND OF STUDY

Accounting is fundamentally a measurement and communication process used to report on the activity of profit and non-profit seeking organizations. In other words, it is concerned with the discipline of summarizing, recording, analysing and interpreting economic events and other financial activities. This process is performed by accountants who furnish management with the relevant information needed for effective and efficient decision making as to contribute to the quest for means of surmounting industrial, commercial, governmental and academic problems inherent in a dynamic and volatile socio-economic and political setting. The chambers 20th century dictionary defines information as “intelligence given-knowledge”. This is because reliable information is necessary before a sound decision involving the allocation of scarce resource (land, labour and capital) can be made, that is why accounting profession is dynamic and there is always the need for an accountant to continually update his/her knowledge of accounting portfolio. Accounting information is valuable because it can be used to predict the financial consequences of each alternative course of action. An organization needs quantitative information to function or make decision. Management uses the best available information system to

 

provide management information which is used primarily to accomplish three broad purposes;

  • To provide financial statement to the interest of external users,

 

  • To plan the organization activities and operations in both short and long run, and
  • To control the result of its

 

The American Accounting Association (1966) also defined accounting as “the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information”. Another definition, which is widely accepted, is by the American Institute of Certified Public Accountants (1970) defined accounting as “the art of recording, classifying and summarizing an event which is in part at least of a financial character and interpreting the result thereof”.

The above definition place emphasis on the use of accounting information for evaluating the results of the past and present activities and making decisions concerning future actions. The information is primarily financial and generally stated in monetary terms. It is the process by which the profitability and solvency of an organization can be measured and also periodic information needed as a basis for making business decision and appropriate control that will enable the management to guide the organisation on a profitable and solvent

 

course. The accounting information is prepared and presented in form of financial statement in accordance with the accounting standard issued by the Nigerian Accounting Standard Board Act (2003) which are the means of conveying to management and interested outsiders a concise picture of the profitability and financial position of the business. The form of preparing and presenting accounting information includes the following; the profit and loss account, balance sheet, income statement etc.

Hence, accounting is divided into three (3), namely;

 

  • Financial accounting

 

  • Cost accounting, and

 

  • Management accounting

 

According to Leopold (1982), he said that, financial accounting “is concerned with providing information on the financial activities of the organization for the benefit of both internal and external users”. It is also the classification, recording of monetary transaction of an entity in accordance with establish concepts, principles, accounting standard and legal requirement and  presentation of a view of those translations during and at the end of an accounting period.

 

While cost accounting on the other hand produce information about cost that are incurred by organization in running the organization so as to achieve the objectives on which it is set up.

Finally, Calvin (1982), stated that management accounting “is concerned with providing information to management for the purpose of planning or provision of information needed at all levels”. Management and creditors use these reports internally.

Stamford (1978) stated that accounting information has played a role as “a tool for management decision making” because it function as “a historical record of contractual obligations between the outsiders with the end product in form of financial statements to report the financial status of an organization at a point in time”.

However, the relevance of accounting information to effective management decision making in many organisation is still not appreciated but with the test to be conducted in this research, the degree of accounting information as a “tool for management decision making” shall be clearly understood.

STATEMENT OF PROBLEM

Management who takes wrong decision always end up not achieving their set goals and objectives. Many managers who think that they can operate successfully without the use of information provided by their accountants, leads to economic failure such as liquidation of many banks. So, effective decision or management decision cannot be taken by managers if the information provided by their accountants is not properly adhered to. Accounting information answer questions such as;

  • Arethedisclosuresof accounting information accurate and reliable?
  • Is accounting information prepared with General Accepted Accounting Principle (GAAP)?
  • Does accounting information as a tool for decision making satisfy the management?

AIMS AND OBJECTIVES

 

The purpose of this study is on Assessment of effectiveness of accounting information as a tool for management decision.

The subsidiary objectives of this study are;

  • The basic issues of how the accounting information systems are used to perform the generally recognised financial and management function in First Bank Nigeria Limited, Abdullahi Fodio Road Branch,
  • To carefully look at the need for accounting information for management decision-making.
  • To make suggestions as to the usefulness of accounting information to the users in
  • The research seeks to know the extent to which the management of the organisation under review have used the accounting

SIGNIFICANCE OF STUDY

 

The study is aimed at establishing whether there is any correlation between the accounting information provided by the account department (accountants) and the decision made thereof by the users of the information, most importantly management of First Bank of Nigeria LimitedAbdullahi Fodio Road Branch, Sokoto.

These groups will benefit from the research namely;

 

  • The organization under study
  • Business Managers
  • Future researchers, and
  • The researcher

THE ORGANISATION UNDER STUDY

The management of the organisation (Bank) will use the research where applicable as a tool for formulating policies for the firm as a standard of

 

evaluating accounting information and control of their accounts department through financial decision.

  • BUSINESS MANAGERS

 

The work will also go a long way to educate managers on the relevance of a sound accounting information in decision-making process of their organisation and subsequently on its growth.

  • FUTURE RESEARCHERS

 

The work will serve as a source of secondary data to future researchers who intend to carry out further research work on “accounting information as a tool for management decision making” or any related topic. It will also help students in the accounting department to have in-depth knowledge of the practical application of accounting information.

  • THE RESEARCHER PERSONALLY

 

The research will enable us imbibe thorough knowledge of the uses of accounting information as a tool for management decision making. It will also give foresight on the applicability of accounting information on the Management of the Bank.

 

  • RESEARCH HYPOTHESIS

 

Abubakar (2004) said, “Hypothesis is a theoretical conceptualization or guess about how the researcher thinks the result should look like or as statement that was usually linked to the theory being treated and it was tested in a testable form to predict the relationship between two variables”.

For the purpose of this study, the following hypothesis was available for testing;

 

Ho – There is no statistically significant difference in the respondent size  among those who accept that accounting information are not tools for management decision making.

H1 – There is a statistically significant difference in the respondent size among those who accept that accounting information are tools for management decision making.

SCOPE OF STUDY

 

The research work will cover certain aspect of accounting systems operational in First Bank of Nigeria Plc (as a case study of Abdullahi Fodio Road Branch, Sokoto and types of reports prepared for decision making. The relationship that exist between accounting information and management decision making will be examined and some related literatures in the field of the study will be reviewed and incorporated.

 

The study will also be limited to the importance of each branch of accounting and the type of information they prepare, usefulness of each of the information prepared by individual segment of the branches of accounting, examples financial accounting section, management accounting section and cost accounting section.

  • LIMITATION

 

The project is limited by many factors which posed as snags or obstacles to the smooth compilation of the work. It is important that users of the work note the limitations in the course of carrying out the work. The significant problems faced include the following;

ECONOMIC TREND

 

The global economic meltdown, which apparently affected the Nigerian economy ate deep into the Banking sector of the economy destroying the shares value of all financial institutions in the Country and resulted in poor performance. This has a psychological impact on the respondents.

FINANCE

 

The economic turndown coupled with inflation has increasingly raised the cost of materials. This led to the devaluation of Naira affecting every aspect of the Nigerian economy. The impact of this on the study is enormous limiting visits to the respondents and qualitative materials for carrying the study.

 

TIME

 

Time is another limiting factor which acted as a snag to the completion of the project, though lengthy period was given for the submission of the work but considering the academic pressure coupled with the writing of the project made things not too really easy for the research.

NON-DISCLOSURE

 

There are some vital as well as important information which the Bank refused to disclose for security reasons. Incomplete and lack of availability of records, which was considered to be very useful, were referred to as confidential.

However, time and financial constraints are the most impactful limitation to the study. Finally, despite all limitations and constraints, the research contained the necessary relevant resource material and to- date data obtained, analysed and provided in the work.

  • TERMINOLOGY

 

Accounting

 

This is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information.

Information

 

This is a complete set of processed data that has a meaning.

 

Accounting information

 

These are processed data used by an organization to make financial decision.

 

Financial Accounting

 

It is the process of collecting, classifying, recording, summarizing and communicating data in respect of event, which can be expressed in terms of money for the purpose of making decisions.

Accountant

 

This is a professional whose job is to prepare and keep the books of account of an organization.

Management Accounting

 

This is a process of allocating resources by planning, organizing, controlling and directing for the purpose of producing desired output.

Management

 

This means a group of decision makers or managers in an organization who see to the smooth running of the affairs of the business.

Assets

 

These are the economic resources of the business that can usefully be expressed in monetary terms. Assets may be in form of land, building and equipment which have readily identifiable physical features.

Liabilities

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Aug 18

The contributions of market to socioeconomic development

The contributions of market to socioeconomic development of Nkanu East

Nkanu East is a Local Government Area of Enugu State, is located in the south- eastern part of Nigeria, bordering Ebonyi State to the east. Its time zone is WAT (UTC+1), 402 as the postal code. The ISO 3166 code for Nkanu East is NG.EN.NE.  Its headquarters is in the town of Amagunze. The council area is predominantly swampy but with fertile land for agriculture. It also has great lime stone deposits, a raw material for cement production. See plate 1.

   Plate 1: Nkanu East Local Government Headquarter (Amagunze) It has an area of 795 km² and a population of 148,774 at the 2006 census. Nkanu people live continually within the Enugu East Senatorial Zone in the present day Enugu State of south-eastern Nigeria.

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Jul 24

MONETARY POLICY IN NIGERIA BANKING INDUSTRY ( A CASE STUDY OF FIRSTBANK OF NIGERIA OWERRI BRANCH)

  • INTRODUCTION

Currently, monetary policy has been taken to be a very vital measure in controlling the Nigeria economy this is one of the principal functions of the firstbank of Nigeria (CBN). The CBN caries out this responsibility on behalf of the federal Government of Nigeria through a process outlined in the firstBank of Nigeria Decree 24, 1991 section 8 sub sections 1 and 2, the Governor shall keep the president informed of the monetary and banking policy pursued or intended to be pursued the Bank. The president after due consideration may, in writing, direct the bank as to monetary and banking policy pursued or intended on the board which shall forthwith take all steps necessary or expedient to give effect there to

 

Monetary policy is a programme of action undertake by the monetary authorities, generally the firstbank, to control and regulate the demand for and supply of money with the public and the public and the flow of credit with view to achieving predetermined macroeconomic goals

1.1   Background of the Study

The federal Government have seen economy as a result of unstable exchange rate. Is cobbling, and have decided to improve and maintain to strengthening balance of payment and maintenance of stable domestic price level.

1.2   Statement of the Study

In this report, the impact of monetary policy in Nigeria banking industry will be investigated. The investigation on the impact of this monetary policy in Nigeria banking industrys will enable its complete distribution even to the local communities. It will also enable its ascertainment on the likely problem that will occur on the process of implementing monetary policy. It will also go a long way. Way in making people know how to spend their money.

 

 

1.3   Objective of the Study

The objective of this study is to ascertain know the high rate of employment.

1.4   Research Question

For the purpose of this study the following question will guide this work.

How does C.B.N implement their monetary policy

How does the C.B.N uses the monetary policy in controlling the price stability of the state.

How does monetary policy increase the growth of the economic productivity.

1.5   Research Hypothesis

For the purpose of the work, the following hypothesis will be tested.

Null hypothesis; if the impact of monetary affect the banking industry

Alternative hypothesis; if the impact of monetary policy does not affect the banking industry.

1.6   Significance Of The Study

This project proposal is significant in the following ways:

To prospective study who wants to know more on the impact of monetary policy in the banking sector.

The study will be relevant to those who work in the bank to help them know how impact monetary policy in banking sector.

To the Government on how to plan to improve the impact of monetary policy in banking industrys.

  • Delimitations And Limitation

this study will cover areas of academics, business, Government and banks

1.8   Limitation

A study of this nature cannot be carried out without difficulties in the process. An important constraint is the time constraint. This research proposal work and examination and the research were complied with a very short period of one week.

Another constraint is finance, a research of this nature involves adequate search ( raw materials)

Lastly, difficulty in securing relevant data for the study

1.9   Definition Of Terms

Harry (1962) defines monetary policy as a “policy employing firstbanks control of the supply money as an instrument of achieving the objectives of general economic policy”.

According to C.B.N brief (1999) monetary policy refers to the combination of measure designed to regulate the value, supply and cost of money in an economy in consonance with the level of economic activity.

Barbara (2006) defined monetary policy as one of the main policy tools used to influence interest rate, inflation and credit availability through changes in supply of money or variable in economy

Falepan (1978) maintain that monetary policy deals with the discretionary control of money supply by the monetary authorities in order to achieve stated or desired economic goals.

 

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