FORENSIC ACCOUNTING AND FRAUD PREVENTION IN AKWA IBOM

STATE MINISTRY OF FINANCE

A RESEARCH PROJECT

BY

NLEBEM, CHIBUIKE JOSHUA

13/BA/AC/1305
DEPARTMENT OF ACCOUNTING
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF UYO, UYO

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

AWARD OF BACHELOR OF SCIENCE (B.Sc.) DEGREE IN
ACCOUNTING

NOVEMBER, 2017

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 DECLARATION

I declare that this research project work titled “Forensic Accounting and Fraud Prevention in

Akwa Ibom State Ministry of Finance” is the original work done by me, Nlebem, Chibuike

Joshua under the supervision of Mr. Samuel Charlie of the Department of Accounting, Faculty

of Business Administration, University of Uyo, Akwa Ibom State.

………………………….. ………………………..

Nlebem, Chibuike Joshua Date

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 CERTIFICATION

This research project entitled “Forensic Accounting and Fraud Prevention in Akwa Ibom

State Ministry of Finance” by Nlebem, Chibuike Joshua with Registration Number of

13/BA/AC/1305 meets the regulations governing the award of Bachelor of Science (B.Sc.)

degree of the University of Uyo and is approved for its contribution to knowledge and literary

presentation.

Mr. Samuel Charlie ……………………………….

Supervisor Signature/Date

Dr. Emmanuel E-. Daferighe ……………………………….

Head of Department Signature/Date

Prof. Emmanuel Okoye ……………………………….

External examiner Signature/Date

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 DEDICATION

This project is dedicated firstly to God Almighty for being my source of encouragement, strength

and wisdom to undertake this course successfully.

Then, to my beloved parents, MR. & Mrs. Nlebem and my dear siblings, specifically my twin

brother, Nlebem, Emeka David for their unflinching support, dogged belief in me, their

enormous efforts, inspiration, encouragement, understanding and prayers towards the successful

completion of this course. Your steadfast prayers towards the successful completion of my

studies have indeed been answered. May God Almighty continue to bless you all richly

Finally, I dedicate this project to the entire academic and reading public.

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 ACKNOWLEDGEMENTS

I am most grateful to God Almighty for giving me the needed breathe, strength and

wisdom to undertake this course successfully. His infinite mercy, grace and sufficiency has

brought me this far. I am ever indebted to him.

Secondly, my profound gratitude goes to my able project supervisor, Mr. Smauel Charlie

who has been supportive and cooperative in making this work successful. I appreciate his time,

energy and commitment to read, scrutinize and make corrections, and equally, his useful advice

throughout the period of this project.

Thirdly, my warmth appreciation goes to my beloved parents, Mr. & Mrs. Nlebem for

their undying belief in me, their unwavering support, financial assistance and words of wisdom

and advice throughout my studentship period in the University of Uyo, Nigeria. I forever remain

grateful to them; they are the best parents I could ever wish for in life.

My sincere appreciation goes to all lecturers who have impacted deeply to my life and

academic pursuit in University of Uyo, Uyo, specifically, Dr. Etim E. Osim, Dr. Mbobo

Erasmus, Dr. Emmanuel Daferighe, Head of Department, Department of Accounting, University

of Uyo, Nigeria, Dr. Lawrence Udofia and my amiable Dean, Faculty of Business

Administration, Prof. Leo Ukpong who has been my role model.

I extend my warmth appreciation to my Uncle, Prof. Paul Nwafor of the Faculty of

Pharmacy, University of Uyo, Nigeria whom I call my school father, for his words of

encouragement, advice and continuous support throughout my studentship period in the

University of Uyo, Uyo. I am forever grateful to him.

I want to also seize this opportunity to thank the entire Management and Staff of Akwa

Ibom State Ministry of Finance; specifically the Office of the Accountant General who took time

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out of their busy schedule in providing the needed data for this study, without them, this project

work would have ended in futility.

I will not fail to mention the support of Mr. Gabriel, Immediate Past Head of Department,

Department of Accountancy, Kenule Beeson Saro-Wiwa Polytechnic Bori and Dr. Ikowa I. O of

the Department of Banking and Finance, School of Management Science, Kenule Beeson Saro-

Wiwa Polytechnic Bori, for their dogged belief in me, insurmountable support, words of

wisdom and advice and knowledge impacted to me throughout my studentship period in Kenule

Beeson Saro-Wiwa Polytechnic Bori And University of Uyo, Uyo. I am indeed grateful to them.

Pertinently, I will not fail to appreciate the concern, support, care and love shown to me

by my amiable siblings, Ugochukwu, my beloved twin, Emeka; Emmanuel and my dear and only

sister, Esther; my aunties, specifically, Mrs. Onyinyechi Obulata; my Uncles and all my relatives

towards this successful completion of this course.

I will not fail to recognize the impact and contributions of several writers who through

their works, textbooks and materials this work has been completed. Specifically, I thank

Professor O. C Nwankwo of the Department of Educational Psychology, Guidance and

Counseling, University of Port Harcourt for his book “A Practical Guide to Research Writing for

Students in Education and Social Sciences (Revised Sixth Edition)”. I am forever grateful to

have stumbled on his book.

Finally, with heartfelt appreciation, I thank all my friends and colleagues of the University

of Uyo, University of Calabar and Kenule Saro- Wiwa Polytechnic Bori, to mention but a few,

Samson, Ebenitimi, Sandy, Wilfred, Nonso, Adaeze, Ransom, Desmond, Matthew, Samuel,

Seun, Victor, Ikechukwu, Wilson, Gift, Maltida, Nsikak, Nsikan, Emenike, Obongodiong,

Rebecca, Uyai, Happiness, Friday, Udochi, Divine, Emmanuel, Divine, Julius, etc.

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 ABSTRACT

This study sets out to examine the relationship between forensic accounting and fraud prevention
in the Akwa Ibom State Ministry of Finance, Uyo. The objective of the study was to determine
the extent to which forensic accounting helps to reduce and prevent fraud in the public sector
because of the general expectation that forensic accounting may be able to stem the tide of
financial malfeasance witnessed in most sectors and ministries of the Nigerian economy. Primary
data was used as the basis for data collection. Specifically, 141 copies of questionnaire were
administerd to the staff of the Akwa Ibom State Ministry of Finance, of which, 105 copies were
filled and returned. Correlational design was used and the hypotheses formulated were tested
using the Pearson Product Moment Correlation (PPMC) and One Way Analysis of Variance
(ANOVA) with the aid of the IBM Statistical Package for Social Science (SPSS) version 22.0
Software package. From the analyses, it was discovered that there is a strongly negative
relationship between forensic accounting and fraud prevention in Akwa Ibom State Ministry of
Finance because the services of forensic accountants are not engaged in Akwa Ibom State
Ministry of Finance and also that there are significant differences between forensic accountants
and external auditors. On the basis of the findings it was concluded that forensic accountants can
help to detect and prevent fraud in the public sector if their services are adequately engaged. It
was recommended that the practice of forensic accounting should be incorporated and
institutionalized in the Akwa Ibom State Ministry of Finance, Uyo. It is of apt importance in
relation to the detection and prevention of fraudulent practices.

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 TABLE OF CONTENTS
TITLE PAGE ------------------------------------------------------------------------------- i
DECLARATION--------------------------------------------------------------------------- ii
CERTIFICATION-------------------------------------------------------------------------iii
DEDICATION------------------------------------------------------------------------------iv
ACKNOWLEDGEMENT----------------------------------------------------------------v
ABSTRACT--------------------------------------------------------------------------------vi
TABLE OF CONTENTS----------------------------------------------------------------vii
LIST OF TABLES-----------------------------------------------------------------------viii
LIST OF FIGURES----------------------------------------------------------------------IX
CHAPTER ONE: INTRODUCTION-------------------------------------------------1
1.1 Background to the Study ----------------------------------------------------------1
1.2 Statement of the Problem----------------------------------------------------------3
1.3 Objective of the Study--------------------------------------------------------------4
1.4 Research Questions-----------------------------------------------------------------4
1.5 Hypotheses of the Study------------------------------------------------------------5
1.6 Significant of the Study------------------------------------------------------------5
1.7 Scope of the Study------------------------------------------------------------------5
1.8 Limitations of Study-----------------------------------------------------------------5
1.9 Operational Definition of Terms--------------------------------------------------6
1.8 Brief Historical Background of Akwa Ibom State Ministry……………… 7
CHAPTER TWO: REVIEW OF RELATED LITERATURE--------------------8
2.0 Introduction -------------------------------------------------------------------------- 8
2.1 Conceptual Framework--------------------------------------------------------------8
2.1.1 Concept of Forensic Accounting-------------------------------------------------- 9

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2.1.2 Forensic Accounting and Financial Accounting------------------------------- 9
2.1.2(a) Financial Accounting: Following Financial Accounting Standard Board
(FASB) Rules and Guidelines --------------------------------------------------------- 10
2.1.2(b) Forensic Accounting: Performing a Financial Investigation --------------11
2.1.3 Forensic Accountants and Auditors ---------------------------------------- 11
2.1.4 Responsibilities and Importance of a Forensic Accountant in Combating
Fraudulent Activities --------------------------------------------------------------------14
2.1.4.1 Responsibilities of Forensic Accountants ------------------------------------14
2.1.4.2 Importance of Forensic Accountants -----------------------------------------15
2.1.5 Fraud------------------------------------------------------------------------------16
2.1.5.1 Embezzlement of Cash ---------------------------------------------------------17

2.1.5.2 Misappropriation of Goods ----------------------------------------------------18

2.1.6 Fraud Detection------------------------------------------------------------------- 19
2.1.7 Forensic Accounting and Fraud Detection ---------------------------------- 20
2..1.8 Challenges of Forensic Accounting Application in Nigeria--------------- --21
2.2 Theoretical Review---------------------------------------------------------------- 21

2.2.1 Agency Theory--------------------------------------------------------------------22

2.2.2 White Collar Crime Theory---------------------------------------------------- 22
2.2.3 Theory of Mindset and Problem Representation ------------------------------23
2.5 Empirical Review-------------------------------------------------------------------24

CHAPTER THREE: RESEARCH METHODOLOGY---------------------------31

3.1 Introduction------------------------------------------------------------------------31
3.2 Research Design-------------------------------------------------------------------31
3.3 Area of Study………………………………………………………………31

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3.3 Population of the Study----------------------------------------------------------31
3.4 Sample size/Sample Technique-------------------------------------------------31
3.5 Method of Data Collection------------------------------------------------------33
3.6 Data Analysis Technique------------------------------------------------------- 33
3.7 Test of Signicance(s)/ Decision Rule(s)-------------------------------------- 33

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA--------34

4.0 Introduction---------------------------------------------------------------------- 34
4.1 Data Presentation----------------------------------------------------------------34
4.2 Analysis of Research Question------------------------------------------------34
4.2.1 Awareness of Forensic Accounting -----------------------------------------35
4.2.2 Understanding the concept of Forensic Accounting-----------------------35
4.2.3 Engagement of the Services of Forensic Accountants in Akwa Ibom State
Ministry of Finance, Uyo.----------------------------------------------------------- 35

4.2.4 Roles of Forensic Accountants-----------------------------------------------36

4.2.4.1: Application of forensic accounting-------------------------------------- 37

4.2.5 Relationship between Forensic Accounting and Prevention of Fraud --37

4.2.5.1 Forensic Accounting as a Fraud Detection Tool------------------------38
4.2.6 Differences between Forensic Accountants and External Auditors --38
4.2.6.2 Specialization in Fraud Detection ----------------------------------------39

4.2.6.3 Failure of Internal and External Auditors ------------------------------- 40

4.2.6.4 Forensic Accounting and Fraudulent Activities in Akwa Ibom State

Ministry of Finance, Uyo………………………………………..41
4.2.6.5 Quality Financial Reporting and Assurance----------------------------- 41

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4.3 Data Analysis and Test of Hypotheses------------------------------------42
4.3.1 Pearson Product Moment Correlation (PPMC) Test Results------------42
4.3.1.1 Descriptive Statistics--------------------------------------------------------42

4.3.1.2 Correlation Analysis -------------------------------------------------------42

4.3.3 ANOVA Test Results----------------------------------------------------------43

4.4 Discussion of the Findings----------------------------------------------------44
CHAPTER FIVE:SUMMARY OF THE FINDINGS, CONCLUSION AND
RECOMMENDATIONS-----------------------------------------------------------47
5.1 Introduction---------------------------------------------------------------------47
5.2 Summary of the Findings-----------------------------------------------------48
5.3 Conclusion---------------------------------------------------------------------48
5.4 Recommendations------------------------------------------------------------49
References----------------------------------------------------------------------50
APPENDIX I
APPENDIX II

LIST OF TABLES
Table 2.1: Differences between Auditors and Forensic Accountants regarding
Error Identification, Error Prevention and Fraud Identification and Fraud
Prevention-------------------------------------------------------------------------------------13
Table 2.2: Summary of Empirical Review----------------------------------------------27

Table 3.1: Distribution of Respondents-------------------------------------------------32

Table 4.1.: Distribution of Questionnaire-----------------------------------------------34

Table 4.2 Awareness of Forensic Audit------------------------------------------------35

Table 4.3: Understanding the Concept of Forensic Accounting---------------------35

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Table 4.4 Engagement of the Services of Forensic Accountants in the Akwa Ibom
State Ministry of Finance, Uyo. --------------------------------------------------------
Table 4.5: Forensic accounting has helped to detect, prevent and control financial
fraud, misappropriation of goods, fraudulent manipulation of accounts, and
identify reversible insider transaction ---------------------------------------------- 36
Table 4.6: Application of Forensic accounting helps management of Public
Sectors to easily maintain adequate and proper financial record ----------------------36
Table 4.7: Forensic accounting reduces the occurrence of fraud cases in public
sectors --------------------------------------------------------------------------------------------------37
Table 4.8 Forensic Accounting Effective as a Fraud Detection Tool ----------------- 38

Table 4.9: Forensic Accounting is more effective than Traditional External Auditing
in the area of Fraud Reduction ------------------------------------------------------39
Table 4.10: Forensic Accountants are more effective than Traditional External
Auditing in the area of Fraud Detection ---------------------------------- 39
Table 4.11: Failure of both Internal and External Auditors have resulted to corporate
failure and poor corporate governance, hence, necessitating the need for
Forensic Accountants --------------------------------------------------------40
Table 4.12 : Forensic Accountants have helped to reduce fraudulent activities in the
Akwa Ibom State Ministry of Finance, Uyo.-----------------------------41
Table 4.13: External auditors deliver more quality financial reporting and assurance
than Forensic Accountants.----------------------------------------------------------------41
Table 4.14: Descriptive Statistics------------------------------------------------------42
Table 4.15 : Correlation Analysis-------------------------------------------------------42

Table 4.16 : ANOVA Summary--------------------------------------------------------------------------------43

LIST OF FIGURES
Fig. 2.1: Fraud Triangle---------------------------------------------------------------20
Fig. 4.1: Graphical Illustration of the differences between Forensic Accountants
and External Auditors----------------------------------------------------44

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