CHAPTER ONE

1.0
1.1

INTRODUCTION
HISTORICAL BACKGROUND OF THE STUDY

The growth of the public limited liability companies and large increase in the number of
investors owning share and the divorce of ownership from control of companies has called
for regular auditing of corporate financial reports.
The objectives of the ordinary audit of financial statement by the independence auditor
according to AICPA (1992) is the expression of an opinion on the fairness or otherwise in all
material respect the financial position, results of operation and its cash flows in compliance
with generally accepted accounting principles.
However, modern organized corporate frauds are sophisticated and well-resourced by
managers, entrepreneurs and politicians to mention but few. Financial irregularity is a severe
problem of concern globally. It is a major concern of developing nations. It is so endemic that
fraud and corruption is gradually becoming a normal way of life. Financial irregularities are
so common that almost every individual cannot wash his or her hands, clean of it. Starting
from the public sector to the private sector, from the presidential villa of the nation down the
political office-holding ladder, to the ward councilors from managing directors of a company,
through middle management cadre and to as low as messengers. Individual perpetrates fraud
and corrupt practice according to the capacity of their office. Although financial irregularities
affect private and public sector, the magnitude of public office fraud, together with the extent
to which citizens are affected, calls for alarm.
There is the need to respond to this changing criminal threat and the skills of non-traditional
investigators like accountant and legal experts are not enough to combat the corporate ill, this
has arouse the call for forensic accountant.
Before the latest economic downturn, the accounting profession had already undergone
radical changes as a result of the Enron and WorldCom debacles, as well as other accounting
1

scandals. With the spotlight on the accounting profession, a new market with a new breed of
accountants forensic accountants has emerged.
Forensic accounting is a comparatively new specialty within the old and distinguished world
of accounting. Its role has enlarged in recent decades because of a number of factors. One is
the far greater ease with which fraud can be perpetrated in the digitized world. Forensic
accounting is one of the fastest growing professions. In fact, it has been deemed as one of the
20 hot job tracks of the future. In 2006, Bruce Dubinsky, a partner and director of forensic
accounting and dispute analysis at the Bethesda, Maryland firm of Dubinsky & Company,
PC, U.S.A emphasized that:
Although forensic accounting is currently on the hot list of client services, there are plenty
of accountants getting involved who shouldnt be because they dont understand the ins and
outs of the niche...Many accountants think it is simply fraud investigation, and its not. It is
really much more than dealing with the numbers. Its no longer just basic fraud work or
punching of calculator. (Source: American Institute of Certified Public Accountants; AICPA,
FVS section)
What is Forensic Accounting?
According to Wikipedia (2010), the term forensic means suitable for use i n t h e c o u r t
of

law.

Forensic,

according

to

the

Web s t e r s

Dictionary

means,

Belonging to, used in or suitable to courts of judicature or to public discussion

and debate.
Forensic accounting is the specialty practice area of accountancy that describes engagements

that

result

from

actual

or

anticipated

disputes

(http://en.wikipedia.org/wiki/Forensic_accounting).
It is also the integration of accounting, auditing and investigative skills.

or

litigation.

Forensic Accounting encompasses both Litigation Support and Investigative Accounting.

(http://www.forensicaccounting.com). It provides an accounting analysis that is suitable to
the court which will form the basis for discussion, debate and ultimately dispute resolution.
The Association of Certified Fraud Examiners (www.acfe.org) naturally focuses on fraud,
but it also covers forensic accounting and defines it as follows:
Forensic accounting is the use of professional accounting skills in matters involving
potential or actual civil or criminal litigation, including, but not limited to, generally
acceptable accounting and audit principles; the determination of lost profits, income, assets,
or damages; evaluation of internal controls; fraud; and any other matter involving accounting
expertise in the legal system.
Forensic accounting is simply a specialty field within the broader arena of accounting.
One conclusion that could be drawn from all these definitions and information is that forensic
accounting is primarily focused on legal situations, but it has the potential to reach beyond
the legal focus into operating areas that could be of benefit to organizations, government and
varying individuals.
1.2

STATEMENT OF THE PROBLEM

The failure of statutory audit to prevent and reduce misappropriation of corporate fund and an
increase in corporate crime has put pressure on the professional accountant and legal
practitioner to find a better way of exposing frauds in business world in Nigeria.
With the recent wave of scams and corruption probes, several rots in the banking sector being
unveiled, and several corporate frauds being brought to the know of Nigerians, there is ardent
need for the involvement of forensic accountants; to take a more critical look at the various
happenings and design ways of getting to the bottom of it and preventing future occurrences.
Most criminals walk freely on the streets even though the law enforcement agencies such as
THE EFCC and THE NIGERIAN POLICE have damning evidences against them.
3

Forensic and investigative accounting skills are required to uncover and establish the
occurrences of financial crimes and give documentary evidences to support court processes
and proceedings so that culprits do not escape justice.
Some of these thieves steal the money that belong to Nigerians and travel abroad with the
loot with no anxiety to return soon. Meanwhile, when the long arm of the law catches up with
them in those countries; where Forensic Experts exist, they quickly plead guilty and their
cases are easily dispensed with.
The practice of forensic accounting is well developed and embraced in developed countries
as a means of resolving criminal cases or crimes, but it is largely un-trodden in Nigeria. There
is a preponderance of economic and financial crimes in Nigeria which are largely undetected
and unpunished. The Nigerian justice system in place has proved largely incapable of solving
these crimes and ensuring that the perpetrators are adequately punished. This trend has turned
Nigeria into a 'low trust' society with damaging consequences for capital formation through
local capital mobilization and foreign direct investment. The prevalence of fraud in Nigeria
has created a widely held notion at the international arena that Nigeria is a nation of criminals
and fraudsters. This in turn has led to the decertification of Nigeria's electronic commerce,
thus making electronic transactions requiring online payments cumbersome and difficult.
Furthermore, persons of Nigerian nationality are being randomly denied visas to other
countries, thus constituting 'economic genocide' on Nigerians.
For Nigeria to be one of the most powerful nations by the year 2020, a lot still needs to be
done by inculcating the use of forensic means to tackle high rate corruption, scams and fraud
that is fast becoming entrenched in the system and likewise so that suspected crime cases are
quickly nipped in the bud.
The benefit of forensic accounting cannot be over emphasized, especially for a developing
country like Nigeria where corruption and fraud has eaten deep into the fabrics of both young
4

and old, citizens and residents alike. This trend can actually be a thing of the past if forensic
accountants are given enough room to thrive and their evidences admissible in the courts of
law to support fraud and issues relating to economic and financial crimes.

1.3

OBJECTIVES OF THE STUDY

In view of the importance of the role of forensic accountants and the study of forensic
accounting to the economy, the need for its inclusion in our day to day activities, in corporate
businesses, government Ministries, Departments and Agencies (MDAs), and even as a course
of study in our tertiary institutions becomes paramount.
Various articles no doubts have been written on forensic accounting Practices in Nigeria, this
study will stand as a challenge to everyone involved and among others is aimed at achieving
the following objectives:
1.

To elucidate what Forensic Accountants really do and what Forensic Accounting

entails;
2.

To highlight some of the most enhanced relevant skills which a Forensic Accountant

must possess;
3.

To bring to the fore specific challenges facing the growth of Forensic Accounting

Practice in Nigeria and to highlight some of the ways out;

4.

To enumerate the clear differences that exist between Forensic Audit and other fields

of accounting, especially Statutory Audit;

5.

To inundate readers with information about whom and where Forensic Accountants

are needed;
6.

To identify various challenges facing the Practice of Forensic Accounting in Nigeria

and suggest how the challenges may be overcome.

1.4

SIGNIFICANCE OF THE STUDY

The main difference between the 1930s and our own time is that digitization of cash flow in
a business has made it easier to move money from one place to another with few clicks of the
mouse. From behind a computer screen or another electronic device, many users feel a sense
of anonymity. Communication is faceless, indiscretions can be swept under the rug and into a
USB thumb-drive, documents are easily deleted and data can be stored in hidden folders or
sent between private email addresses.(Allan Watt, Digital crumbs show the trail, National
Accountant, April/May 2010, page 25).
The study on The Practice of Forensic Accounting in Nigeria; Issues, Challenges and
Opportunities will enable readers, government, users, management of companies, directors,
and shareholders among others, to understand that the menace of fraud and corruption can
actually be brought to the nearest minimum or even become a thing of the past in Nigeria
with the engagement and practice of Forensic Accounting. It will help them to realize the
usefulness and importance of Forensic Accountants and the need to engage their expert
services and how the quality of their services could be managed and controlled. The study
will also open the eyes of readers to this new frontier in the field of accounting profession.
The study will be of great significance to the anticorruption agencies such as the Economic
and Financial Crimes Commission (EFCC), regulatory authorities such as the Central Bank
of Nigeria (CBN) in their concerted efforts toward combating corruption in organizations and
the nation at large. The government will most especially understand the challenges faced in
the practice of forensic accounting in the country so as to provide an enabling environment
for them to thrive, unsettled cases of fraud and corruption in the court will be quickly
dispensed with and the nation will be out of its present web of corruption. Students will also
be able to acknowledge and elicit various information needed for them to not just dream of

becoming auditors or accountants as usual, but to embrace this new field of investigative
accounting.
The study will equally add to the existing body of knowledge in forensic accounting and its
quality management and control in corporate organizations and the nation at large.

1.5

SCOPE AND LIMITATION OF THE STUDY

The study covers all necessary aspects of forensic accounting, its historical background, the
need for forensic accountants, the various opportunities open to business organizations, the
country and readers alike by embracing the forensic accounting fields. It x-rays the daunting
challenges and bottlenecks prevalent and attributable to carrying out the task of forensic
audits, both in Nigeria and other developed countries. The study also dwell on the types of
work carried out by the forensic accountant, the procedures involved in forensic auditing,
areas of usefulness of forensic auditing and forensic accounting, the various types of crimes
and fraudulent practices prevalent now and in the past.
The study also highlights some organizations where forensic investigations have taken place
to sniff out hidden fraud incidences. These include Enron, WorldCom, Health South, and
Cadbury Nigeria Plc. among others. It also covers some banks technically declared insolvent
by the Central Bank of Nigeria. The study also looks into current decided court cases such as
James Ibori, Cecilia Ibru of former Oceanic Bank, Erastus Akingbola of former
Intercontinental Bank and pending court cases involving financial crimes.
Brief insight was also given into The House of Representative Committee probes. This
includes The NNPC probe panel report, SEC probe, and Fuel Subsidy probe and so on. It
equally brought to the fore recent rating of Nigeria in the Corruption Perception Index (CPI)
by the Transparency International. An index of looting in some African countries including
Nigeria in the past is also included.
7

During the course of the research exercise, several challenges were encountered. The most
prominent of these challenges are limited time available, limited financial resources and
sourcing of materials.
Combining other courses with writing the project coupled with the short academic semester
calendar was a great constraint. However the little time available was utilized efficiently to
gather sufficient materials necessary for the report.
Insufficient fund is another limiting factor in the course of gathering data for the project
report. These include funds to spend on internet facilities and to visit professionals engaged in
forensic accounting practice. However the available fund was managed to gather necessary
materials.
Equally daunting challenge was encountered in gathering information from old newspapers
archive and arranging appointments with staffs of forensic departments of audit and
accounting firms.

1.6

DEFINITION OF TERMS

In connection with this project work, there are some terms used which readers may not be
familiar with. Their meanings are hereby given in line with the context of this write up as
follows:
1.

Forensic Accounting: Forensic accounting can be defined as the use of accounting,

auditing, and investigative skills to assist in legal matters (Houck et al., 2006).
2.

Forensic Accountant: as AICPA defines it as anybody qualified by knowledge,

experience, training, education, to provide a technical or scientific, specialized knowledge,

opinion about the evidence or a fact, that will assist the trial of fact the role is that of a
practitioner who renders an expert testimony before a court of law, tribunal, by providing an
impartial, objective and rational evidence that will help the case.
8

3.

Computer Forensics: The process of acquisition, restoration and analysis of digital

data which could include restoring corrupted or lost data, resurrecting outdated systems and
software environments or to simply analyze common security breach activities.(Green and
Cooper, 2003, Stringer Calvert, 2002).
4.

Forensic Audit: An examination of evidence regarding an assertion to determine its

correspondence to establish criteria carried out in a manner suitable to the court.

5.

Forensic Investigation: The utilization of specialized skills in carrying out an

enquiry conducted in such a manner that the outcome will have application to a court of law.
6.

Litigation Support: Litigation Support provides assistance of an accounting nature in

a matter involving existing or pending litigation. It deals primarily with issues related to the
quantification of economic damages. A typical litigation support assignment would be
calculating the economic loss resulting from a breach of contract.
7.

Investigative Accounting: Investigative Accounting is often associated with

investigations of criminal matters. A typical investigative accounting assignment would be

an investigation of employee theft. Other examples include securities fraud, insurance fraud,
kickbacks and proceeds of crime investigations.
8.

Internal Audit: An audit performed by an employee who examines operational

evidences to determine whether prescribed operating procedures have been followed.

9.

Statutory Audit: An audit performed by an auditor engaged in public practice leading

to the expression of a professional opinion which lends credibility to the assertion under
examination. It is normally guided by statute.
10.

Fraud Assessment Questioning (FAQ): Questions structured so that the individual

being interviewed may not necessarily know that the information they provide is of great
significance to the forensic investigation (Buckhoff and Hansen, 2002).

11.

Red flags: Red flags would be internal controls within and outside the Accounting

Information System software that indicated possible suspect transactions (Manning, 2005).
12.

Tax Haven Country: Countries that offer various business services in order for

customers to avoid taxes and/or avoid prosecution for illegal acts. Many times individuals
intent on fraudulent acts will actively seek tax haven countries to conduct their financial
business and/or hide their financial data because of the secrecy laws of certain tax haven
countries (Manning, 2005).
13.

White-collar crime: is a financially motivated, economic, non-violent crime

committed for illegal monetary gain. Within the field of criminology, white-collar crime
initially was defined by Edwin Sutherland in 1939 as "a crime committed by a person of
respectability and high social status in the course of his occupation" (1939).
14.

Financial crime: is a crime which involves conversion of public money into

personal use. It involves monetary benefit.

15.

Corruption: Corruption is a term with many meanings, but generally it entails

misusing ones office for a private gain or unofficial end. It involves both a monetary and
non-monetary benefit.
16.

Advanced Fee Fraud or 419 frauds (Adogame, 2009): A scam where the sender

requests help in facilitating the transfer of a substantial sum of money usually perpetrated
through an email. In return, the sender offers a commission (usually in the millions of dollars)
and the scammers will ask that money be sent to pay for some of the costs associated with the
transfer. If money is sent to the scammers, they will either disappear immediately or try to get
more money with claims of continued problems with the transfer.
17.

Corporate crime: This deals with the company as a whole. The crime benefitting the

investors or the individuals who are in high positions in the company or corporation.

10

18.

Fraud: Fraud refers to an intentional act by one or more individuals among

management, those charged with governance, employees, or third parties, involving the use
of deception to obtain an unjust or illegal advantage.
19.

Placement: This is referred to in forensic as the placement of stolen loots in financial

institutions.
20.

Layering: Is the systematic transfer of looted funds from one account to the other

without economic purpose, but to make it difficult and to disconnect it from being traced to
the same account, layer by layer.
21.

Integration: Is when the looters feel the time is safe to bring it back into the system,

this is how the term money laundering emerged, literarily meaning dirty money being
laundered and washed clean and brought back to the system.

CHAPTER TWO

LITERAUTRE REVIEW
11

2.1

WHAT GAVE BIRTH TO FORENSIC ACCOUNTING?

Massive accounting scandals at Enron, WorldCom, and many others, as well as the collapse
of one of the Big Five accounting firms, Arthur Anderson, have increased the publics
awareness of fraud and fraudulent financial reporting. This increased awareness of fraud,
along with recent financial catastrophes including the collapse of commercial banks and
major turmoil on Wall Street and in Nigeria Broad Street, Union Dicon Salt, Lever Brothers
now Unilever, Cadbury, the sack of the management and board of five banks by the Central
Bank of Nigeria (CBN) due to financial abuses and more recently startling revelations of
gross impropriety in the Oil Subsidy Scheme and Police Pension Fund Fraud has made the
need for forensic accountants even greater in recent months (Solnik, 2008 and Tunde 2012).
The American Institute of Certified Public Accountants (AICPA) has called forensic
accounting one of the hot new careers in accounting and indicates there will be a shortage
of fraud professionals in the next decade (AICPA, 2004).
Joshi (2003) ascribed the origination of forensic accounting to Kutilya, the first economist to
openly recognize the need for the forensic accountant whom he said, mentioned 40 ways of
embezzlement centuries ago. He, however, stated that the term forensic accounting was
coined by Peloubet in 1946.
Crumbley (2001) wrote on same when he stated that a form of forensic accounting can be
traced back to an 1817 court decision. He stated also that a young Scottish accountant issued
a circular advertising his expertise in arbitration support in 1824 but that Peloubet was
probably the first to publish the phrase forensic accounting. Investigation of fraud and
corruption is confirmed thus, not to be new, even in Nigeria. It is only gaining prominence
because of the growing wave of the crime under the seemingly new nomenclature the last
five years (Coenen 2005).

12

Forensic accounting, also called investigative accounting or fraud audit, is a merger of

forensic science and accounting.
Forensic auditing covers a broad spectrum of activities, with terminology not strictly defined
in regulatory guidance. Generally, the term forensic accounting is used to describe the wide
range of investigative work which accountants in practice could be asked to perform. The
work would normally involve an investigation into the financial affairs of an entity and is
often associated with investigations into alleged fraudulent activity.
Forensic accounting refers to the whole process of investigating a financial matter, including
potentially acting as an expert witness if the fraud comes to trial.
Forensic science according to Crumbley (2003) may be defined as application of the laws of
nature to the laws of man. He refers to forensic scientists as examiners and interpreters of
evidence and facts in legal cases that also offers expert opinions regarding their findings in
court of law. The science in question here is accounting science, meaning that the
examination and interpretation will be of economic information.
Zysman (2001) put Forensic accounting as the integration of accounting, auditing, and
investigative skills. Simply put, forensic accounting is accounting that is suitable for legal
review offering the highest level of assurance and including the now generally accepted
connotation of having been arrived at in a scientific fashion (Crumbley, 2006).
KPMGs Fraud Survey (2003) reveals that more companies are: recently experiencing
incidents of fraud than in prior years; taking measures to combat fraud; and launching new
antifraud initiatives and programs in response to the Sarbanes-Oxley Act of 2002 (KPMG
2003).
PricewaterhouseCoopers (PWC) 2003 Global Crime Survey indicates that 37 percent of
respondents in 50 countries reported significant economic crimes with the average loss per

13

company of $2,199, 930 (PWC 2003). These survey results underscore the importance of
forensic accounting practice and education.
According to the Chancellor of the Exchequer Gordon Brown (2006), (former Prime Minister
of the United Kingdom), when speaking on the fight against terrorism, "What the use of
fingerprints was to the 19th century, and DNA analysis was to the 20th century, so financial
information and forensic accounting has come to be one of today's most powerful
investigative and intelligence tools available.
Factors that increased the need for forensic accounting emanated from the governments and
banks efforts to crack down on international money laundering and on tax evasion. There is
little existing research in the area of forensic accounting because it is such a new field
(McMullen & Sanchez 2010).
Researchers have sought to identify the most important qualifications of forensic accountants
in their roles as expert witnesses. An effective forensic accounting expert can have a
significant influence on the trier of fact (Rasmussen and Lauanae 2004, 166). From surveys
(Champagne et al. 1991; DiGabriele 2008) and experiments (Ponemon 1995; Cohen et al.
1996; Crumbley 2005; Davis et al. 2009) the research to date provides insights into the roles
of expert witnesses (Beatty et al. 1999), but does not explore their actual use or the
effectiveness of their testimony in court cases.
Coenen (2005) stated that forensic accounting involves the application of accounting
concepts and techniques to legal problem. It demands reporting, where the accountability of
the fraud is established and the report is considered as evidence in the court of law or in the
administrative proceeding (Joshi). It provides an accounting analysis that is suitable to the
court, which will form the basis of discussion, debate and ultimately dispute resolution
(Zysman, 2001).

14

This means that forensic accounting is a field of specialization that has to do with provision
of information that is meant to be used as evidence especially for legal purposes. The persons
practicing in this field (i.e. forensic accountants) investigate and document financial fraud
and white-collar crimes such as embezzlement and investigate allegations of fraud, estimates
losses damages and assets and analyses complex financial transaction. They provide those
services for corporation, attorneys, criminal investigators and the Government (Coenen,
2005). Their engagements are usually geared towards finding where money went, how it got
there, and who was responsible. They are trained to look beyond the numbers and deal with
business reality of the situation (Zysman2001).
Investigative and forensic accounting engagements are those that:

Require the application of professional accounting skills, investigative skills, and an

investigative mind-set; and

Involve disputes or anticipated disputes, or where there are risks, concerns or

allegations of fraud or other illegal or unethical conduct. (Canadian Institute of Chartered

Accountant, 2006).

2.2 COMPOSITION OF FORENSIC ACCOUNTING

Forensic accounting encompasses both litigation support and investigative accounting.
Litigation support provides assistance of all nature in a matter involving existing or pending
litigation. It deals primarily with issues related with the quantification of economic damages,
while investigative accounting is associated to the investigation of criminal matters (Zysman,
2001).
Under litigation support, forensic accountant assist in:

Obtaining document necessary to support or refute a claim.

15

Reviewing of the relevant documentation to form an initial assessment of the case in

an identified area of loss.

Examination for discovering, including the formulation of the act regarding the

financial residence.

Attendance at the examination for discovery to review the testimony, assist with

understanding the financial issues and to formulate additional questions to be asked.

Investigative accountant on the other hand;

reviews factual situation and provides suggestions regarding possible courses of

action,

assist with the protection and recovery of assets,

co-ordinate other experts (Zysman, 2001).

2.3 FORENSIC ACCOUNTING ENGAGEMENTS

Coenen (2005) identify the following as areas of specialty in forensic accounting:

Investigating corporate fraud

Litigation services

Business valuation

Computer forensic.

However, Zysman (2001) in a more elaborate form captured the assignment performed by
forensic accountant as including:

Criminal investigation; which are usually on behalf of the police with the aim of

presenting evidence in a professional and concise manner.

Shareholders and partnership dispute; that involve analysis of numerous year

financial records for valuation and qualification of the issue in dispute;

16

Personal injury claim; where for example economic losses from motor accident or

wrongful dismissal may need to be quantified;

Business interruption and other type of insurance claim; these assignments

involve a detailed review of the policy to investigate coverage issues and the appropriate
methods of calculating the loss.

Business/employee fraud investigations; which can involve fraud tracing, asset

identification and recovery, forensic intelligence gathering and due diligence review.

Matrimonial dispute; involving the tracing, locating and evaluation of asset.

Business

economic

losses;

where

contract

disputed,

construction

claims,

expropriation, product liability claim and trade mark are the issues.

Professional negligence; to ascertain the breach and quantify the loss involved, and

Mediation and arbitration; as a form of alternative dispute resolution.

A forensic investigation is a very specialist type of engagement, which requires highly skilled
team members who have experience not only of accounting and auditing techniques, but also
of the relevant legal framework.
There are numerous different types of fraud that a forensic accountant could be asked to
investigate. The investigation is likely to ultimately lead to legal proceedings against one or
several suspects, and members of the investigative team must be comfortable with appearing
in court to explain how the investigation was conducted, and how the evidence has been
gathered. Forensic accountants must therefore receive specialist training in such matters to
ensure that their credibility and professionalism cannot be undermined during the legal
process.

2.4 THE NATURE OF CORRUPTION

17

The crime of corruption has always been viewed with particular distaste. It is no coincidence
that the word itself is also used in the phrase corruption of the flesh, to indicate decay, death
and malodor. It is often coined alongside the word bribery, the means by which the politician
or official is induced to become corrupt, wrote Peter Johnston, former Chief Executive of
the Scottish Institute of Chartered Accountants.
In Nigeria, Corruption, Money Laundering, Tax evasion, Oil bunkering, Crude oil theft,
Internet Fraud and other related crimes have assumed alarming proportions. Pervasive
mismanagement of resources has become the order of the day both in the public and private
organizations. Corruption is so rife in the private sector in Nigeria that most foreign
companies find it difficult to appoint Nigerians as helmsmen to run their Nigerian offices.
Lever Brothers Nigeria suffered a similar setback a few years back when it suddenly removed
Chief Rufus Giwa after a careful review of its finances discovered abuses and irreconcilable
figures.
According to Okolo (2007), financial crime has become really pervasive and the likelihood of
corporate fraud occurring has also become more severe.
This is truly not far-fetched as is evident today. We have heard series of fraud cases ranging
from embezzlement of the police pension funds, the diversion of clients money into private
use by managing directors of banks, and high ranking public office holders who are currently
being tried in court for one financial wrong doing or the other. This includes but not limited
to the following;

The former speaker of the House of Representatives Rt. Hon. Dimeji Bankole; alleged

to have mismanaged monies to the tune of 200million Naira, contract inflation, purchase of
items without due recourse to the law;

The former Governor of Ogun State Chief Gbenga Daniel; currently being tried in the

Federal High Court in Ogun State. Charges against him include not remitting contributory
18

pensions of the state workers to their various pension fund administrators and embezzling
state money,

Ad-hoc Chairman House committee on Petroleum subsidy, Hon. Farouk Lawan (with

all his perceived integrity), is currently facing trial for collecting bribe to the tune of
$620,000 from the chairman of Zenon Oil and Gas, Chief Femi Otedola,

Former Inspector General of Police, Sunday Ehindero (CFR), and his former

commissioner of police in charge of budget, John Obaniyi, was both on 21st of September
2012, remanded in Kuje prison Abuja, for stealing money to the tune of 558million Naira
while both were at the elms of affairs at the force headquarters. This money was donated for
the purchase of arms and ammunitions for the police and the duo kept 300million naira and
200 million naira of the monies in fixed deposit accounts in Wema and Intercontinental banks
respectively where it yielded interest for them, (source; Saturday Tribune, September, 22
2012);

Petroleum companies defrauding the nation of trillions of Naira in fuel subsidy

money, including the sons of respected big wigs in the country are currently facing the music
before the Judiciary. The list is endless.
Corruption and power are closely intertwined and their links had long been recognized.
Corruption is a term with many meanings, but generally it entails misusing ones office for a
private gain or unofficial end. It involves both a monetary and non-monetary benefit. Bribery,
extortion, influence peddling, nepotism, scams, fraud, grease money, and opportunism
readily spring to mind.
Transparency International (TI) defines corruption as the abuse of entrusted power for private
gain. This definition encompasses corrupt practices in both the public and private sectors.
Corruption is now a global problem common in both developed and developing countries,
and reaching epidemic proportions across borders. In democratic nations, where checks and
19

balances deter corrupt and other unethical practices, corruption is still prevalent. For instance,
in Belgium and the United Kingdom, Japan and Italy, Russia and Spain and other countries,
allegations of corruption play a more central role than at any time in recent memory. In 1993,
serious allegations of corruption involving varying levels of government surfaced in both
developed and developing countries that include Australia, Bolivia, Brazil, Bulgaria, France,
Haiti, India, Italy, Japan, Malaysia, Paraguay, South Africa, Spain and the USA. In recent
times the volume of allegations of corruption springing out of Nigeria have reached alarming
dimension which elicited public outcries and protests from various groups in the country to
demand for good governance and for effective tackling of corruption by the government.
According to the Chairman of Transparency International, (the global civil society
organization leading the fight against corruption) Huguette Labelle, "The continuing high
levels of corruption and poverty plaguing many of the worlds societies amount to an ongoing
humanitarian disaster and cannot be tolerated". According to him, Public outcry at corruption,
impunity and economic instability sent shockwaves around the world in 2011. Protests in
many countries quickly spread to unite people from all parts of society. Their backgrounds
may be diverse, but their message is the same: more transparency and accountability is
needed from our leaders.
Transparency International since its founding in 1993 has played a lead role in improving the
lives of millions around the world by building momentum for the anti-corruption movement.
This it does by issuing a yearly Corruption Perception Index (CPI). It has become the worlds
most famous corruption ranking fiesta. People and governments all over the world expect the
annual CPI the way they expect the announcement of the Nobel Prizes. Some 200 countries
of the world are ranked from the least corrupt to the most corrupt. The Corruption
Perceptions Index ranks countries and territories according to their perceived levels of public
sector corruption. It is an aggregate indicator that combines different sources of information
20

about corruption, making it possible to compare countries. Broadly speaking, the surveys and
assessments used to compile the index include questions relating to bribery of public
officials, kickbacks in public procurement, embezzlement of public funds, and questions that
probe the strength and effectiveness of public sector anti-corruption efforts.
TI as fondly called expressed worry over the scope and speed of corruption in Nigeria this
year, saying it is beyond what it has ever dealt with. This is contained in an open letter to
President Goodluck Jonathan by Fitch and Associates in The Hague, The Netherlands, on
behalf

of

Transparency

International;

copy

of

which

was

curled

from

www.Africanspotlight.com.
Here is an extract of Ten Paragraph letter written to the President on April 30, 2012.
Dear President Goodluck Ebele Jonathan,
We are lawyers representing Transparency International, a global civil society group leading
the fight against corruption. Your Excellency, To gather corruption data every year on two
hundred countries is arduous work. Our clients thorough methodology is constantly reviewed
and updated by the best experts in the world. This methodology revolves around a national
integrity system assessment that is applied by a team of country specialists. Transparency
International allots three specialists to each of the 200 countries under assessment. Six
hundred specialists work round the clock to help our client draw up the CPI which is
released on the last month of every year.
Transparency International has retained the services of our firm because they believe that
Nigeria is about to jeopardize their work for the year 2012. The problem, Your Excellency,
has to do with the rate and scale of scams and corruption probes coming out of Nigeria in
2012. The scope and speed of corruption in your country this year is beyond anything our
client has ever dealt with. When the pension fund scam broke out, the three specialists
working on Nigeria complained about overwork and threatened a lawsuit against
21

Transparency International because they had to work 23 hours a day from Monday to Sunday
just to cope with the figures coming out of that scam. Our client had to pull country
specialists away from zero or low corruption countries such as New Zealand, Denmark,
Finland, Sweden, Singapore, Norway, Netherlands, Australia, Switzerland, and Canada. The
specialists working on all these countries were transferred to the Nigeria desk.
While the reinforced Nigeria desk was coping with the pension fund scam, the fuel subsidy
scam and the SEC scam also broke out in your country and the figures involved have been so
vertiginous that Transparency International has had no choice but to transfer all six hundred
country specialists working on two hundred countries to the Nigeria desk. With our clients
six hundred experts now struggling to cope with corruption data emanating from just one
country, the integrity of the CPI process for 2012 has been compromised. TI has no staff to
work on the remaining one hundred and ninety-nine countries.
Your Excellency, we are hoping that you would be willing to discuss a negotiated settlement.
Transparency International is seeking compensation from Nigeria for the unprecedented
disruption of her work occasioned by your gargantuan corruption scams this year which
has made it impossible to focus on any other country. If you are unwilling to negotiate, we
have been instructed to institute legal action against your country, for conspiracy to derail
the work of a credible international organization by overwhelming her with corruption data
and stretching her resources beyond tolerable human limit.
In 2011 we saw corruption on protestors banners be they rich or poor. Whether in a Europe
hit by debt crisis or an Arab world starting a new political era, leaders must heed the demands
for better government, said Huguette Labelle. Nigeria is equally not left out of the barrage of
protests and public outcry for good governance and the tackling of corruption.

22

Public sector governance that puts the interests of its citizens first is a responsibility that
transcends borders. Governments must act accordingly. For their part, citizens need to
continue demanding better performance from their leaders, says Huguette Labelle.
Below is an overview of Corruption Perception Indices of selected African countries for
5years (2007-2011) for comparison.
(These Countries are compared based on their Oil producing status and position as at

S.No
1
2
3
4
5
6

Country
Nigeria
Algeria
Angola
Libya
Egypt
Sudan
Equatorial

2007
Rank
147
99
147
131
105
172

2008
Rank
121
92
158
126
115
173

7
Guinea
168
171
8
S. Africa
43
54
9
Gabon
84
96
10
Tunisia
61
62
2011). Source: http://archive.transparency.org/

2009
Rank
130
111
162
130
111
176

2010
Rank
134
105
168
146
98
172

2011
Rank
143
112
168
168
112
177

168
55
108
65

168
54
110
59

172
64
100
73

According to the rank above, we are able to decipher that it was only in 2008 that Nigerias
position was fair being 121st most corrupt Nation in the world. This position however didnt
improve but rather worsened and later nose-dived to 143 rd most corrupt nation in the year
2011. This is equally the case with other African countries as they kept declining in the
overall survey figure. However, compared with other Oil rich countries in Africa, South
Africa is still able to hold its own as it can be seen to be the cleanest in the overall countries
ranking. According to Huguette Labelle, the 2011 Corruption Perceptions Index shows that
public frustration is well founded.
No region or country in the world is immune to the damages of public-sector corruption, the
vast majority of the 183 countries and territories assessed in 2011 scored below five on a
scale of 0 (highly corrupt) to 10 (very clean) says Huguette Labelle.
23

2.5 THE NEED FOR FORENSIC ACCOUNTING

According to Owojori, A.A and T. O. Asaolu in their work, The Role of Forensic
Accountant in Solving Vexed Problems in Corporate World, published and posted in
European Journal of Scientific Research Vol.29 No.2 (2009), pp.183-187, the need for
forensic accountant arose because of the failure of audit system in the organization as the
organizational internal and external audit failed to figure certain errors in the managerial
system.
According to the publication, experts in the field pointed out that the intense economic
pressure, with more companies facing bankruptcy, jobs and careers are at risk and employee
feel pressured to maintain and support performance levels, forcing many to commit
corruption and whatever the reasoning may be, more and more forensic accountants are been
called up to meticulously search through documents, discover new information and help in
putting together the irregular pieces of companys financial puzzle to solve the vexing
problems of high level corruption and financial mismanagement and recklessness both in the
private and public sectors of the economy.
They listed the following as the important reasons for the growth of forensic accounting,
1.

Internal audit and audit committee as a point of the management function could not

throw light on the different fact and other hidden aspects of corporate fraud.
2.

Rotation of the statutory auditor touches as part of the problem while it refuses

emphasis but it adversely needs longer duration. The method of appointing the statutory
auditors is not foolproof as it breeds collusion and lobbying.
3.

The certificates of the auditors are hardly scrutinized carefully especially when the

reports are unclean and qualified.

24

4.

The internal auditors can surely detect what was happening but they are hardly in a

position to initiate proper action in proper time.

2.6 BECOMING A FORENSIC ACCOUNTANT

Unfortunately the glamorous job of a fraud accountant or forensic accountant as is popularly
called starts with the boring necessity to be a good ordinary accountant! To become a forensic
accountant you must first become an ordinary accountant.
An old saying by the Chinese philosopher Confucius goes as follows:
"Choose a job that you enjoy and you will never need to work a day"
Accountancy training can commence with an academic qualification such as a University
degree or it can begin with professional qualifications and on the job training. Whichever
route you take will involve moving on to both professional and on the job training so if you
have a subject that you would like to study and would enjoy at university or college, such as
engineering or zoology, you will not be at a disadvantage if you pursue this prior to
commencing your accountancy training. In fact this would help you with your experience and
potentially give you a broader understanding of a number of business and other areas that you
will encounter in your working career. As a matter of fact, the Institute of Chartered
Accountant of Nigeria, the foremost accountancy body, approved by Decree and Act of the
Federal Republic of Nigeria, accepts students with a first degree different from accountancy
to obtain its professional qualification as a Chartered or Registered Accountant.
In an improved effort to increase the awareness and need for forensic accountants and
forensic accounting education in Nigeria, the Institute has started training its members on
Forensic Accounting and equally established the faculty of Audit Investigation and Forensic
Accounting in February 2009. The institute has so far produced 90 Certified Forensic

25

Accountant. Also in May, 2009, the Institute conducted induction for 125 Chartered
Accountants as Forensic Accountants.
However information obtained from the website (www.ifa.org) of Institute of Forensic
Accountant of Nigeria (IFA) established under Decree No.1 of 1990 as a professional
Institute for provision of bona fide qualifications for Forensic Accountants through the
administration Professional Examinations; lists the following guidelines,
MEMBERSHIP
The
1.

Membership
The

First

of

Category

the

Institute

the

Associate

is

consist
Member

of
with

two

Categories:

designation

of

CFA.

2. The Second and being the Highest Category is the Fellow Member with designation of
FFA, and members admitted to membership in such grades shall be entitled to use the initials
CFA

or

FFA

after

his

or

her

name

as

the

case

may

be.

3. a) A member of the Institute who is an Associate is entitled to use the

Professional designation of Certified Forensic Accountant and use after his or her names,
the

initials

CFA

(Certified

Forensic

Accountant).

b. A Fellow member of the Institute is entitled to use the designation of Fellow of Forensic
Accountant

and

use

the

initials

FFA

after

his

or

her

names.

4. No person shall be eligible for admission into direct membership of the institute unless;
a. He is a member of Professional Accountancy Bodies as may from time to time be approved
by the Institutes Council or a Graduate in Accountancy of any Polytechnics or Universities
as may be approved by the Institutes Council with a minimum of three years post
qualification

experience.

And at that date of Application he is in self-employment as practicing Accountant, or he/she

is holding a position as an Accountant, or Auditor in the public service of the Federation or
Statutory Corporation or reputable Industrial and Commercial Organization and must be a fit
26

and

proper

person

to

be

so

elected.

b. Any Nigerian citizen that was immediately before the incorporation of the Institute was an
Accountant General or Auditor General or Director of Finance, Chief Accountants in the
Public Services, Statutory Corporation or Finance Commissioners of Federal or State Inland
Revenue Department, provided he possesses a Bachelor Decree in Accountancy or
equivalent,

with

three

years

working

experience.

5. Other classes of membership may be set from time to time by the Institutes Council. The
Institutes Council shall also have power at its discretion to discontinue Admissions to any
class of Membership not being Corporate Members or to close down any such class or classes
of Membership. Particulars of persons admitted to the classes not being classes or Corporate
Members will not be entered in the Register of Members kept pursuant to Section 83.

2.7 CONDUCTING A FORENSIC INVESTIGATION

The process of conducting a forensic investigation is, in many ways, similar to the process of
conducting an audit, but with some additional considerations. The various stages are briefly
described below.

Accepting the investigation

The forensic accountant must initially consider whether their firm has the necessary skills and
experience to accept the work. Forensic investigations are specialist in nature, and the work
requires detailed knowledge of fraud investigation techniques and the legal framework.
Investigators must also have received training in interview and interrogation techniques, and
in how to maintain the safe custody of evidence gathered.
Additional considerations include whether or not the investigation is being requested by an
audit client. If it is, this poses extra ethical questions, as the investigating firm would be
potentially exposed to self-review, advocacy and management threats to objectivity. Unless
27

robust safeguards are put in place, the firm should not provide audit and forensic
investigation services to the same client. Commercial considerations are also important, and a
high fee level should be negotiated to compensate for the specialist nature of the work, and
the likely involvement of senior and experienced members of the firm in the investigation.

Planning the investigation

The investigating team must carefully consider what they have been asked to achieve and
plan their work accordingly. The objectives of the investigation will include: identifying the
type of fraud that has been operating, how long it has been operating for, and how the fraud
has been concealed, identifying the fraudster(s) involved, quantifying the financial loss
suffered by the client, gathering evidence to be used in court proceedings, providing advice to
prevent the reoccurrence of the fraud.
The investigators should also consider the best way to gather evidence the use of computer
assisted audit techniques, for example, is very common in fraud investigations.

Gathering evidence

In order to gather detailed evidence, the investigator must understand the specific type of
fraud that has been carried out, and how the fraud has been committed. The evidence should
be sufficient to ultimately prove the identity of the fraudster(s), the mechanics of the fraud
scheme, technical and the amount of financial loss suffered. It is important that the
investigating team is skilled in collecting evidence that can be used in a court case, and in
keeping a clear chain of custody until the evidence is presented in court. If any evidence is
inconclusive or there are gaps in the chain of custody, then the evidence may be challenged in
court, or even become inadmissible. Investigators must be alert to documents being falsified,
damaged or destroyed by the suspect(s).
Evidence can be gathered using various techniques, such as: testing controls to gather
evidence which identifies the weaknesses which allowed the fraud to be perpetrated, using
28

analytical procedures to compare trends over time or to provide comparatives between

different segments of the business applying computer assisted audit techniques, for example
to identify the timing and location of relevant details being altered in the computer system
discussions and interviews with employees substantive techniques such as reconciliations,
cash counts and reviews of documentation. The ultimate goal of the forensic investigation
team is to obtain a confession by the fraudster, if a fraud did actually occur. For this reason,
the investigators are likely to avoid deliberately confronting the alleged fraudster(s) until they
have gathered sufficient evidence to extract a confession. The interview with the suspect is a
crucial part of evidence gathered during the investigation.

Reporting

The client will expect a report containing the findings of the investigation, including a
summary of evidence and a conclusion as to the amount of loss suffered as a result of the
fraud. The report will also discuss how the fraudster set up the fraud scheme, and which
controls, if any, were circumvented. It is also likely that the investigative team will
recommend improvements to controls within the organisation to prevent any similar frauds
occurring in the future.

Court proceedings

The investigation is likely to lead to legal proceedings against the suspect, and members of
the investigative team will probably be involved in any resultant court case. The evidence
gathered during the investigation will be presented at court, and team members may be called
to court to describe the evidence they have gathered and to explain how the suspect was
identified. It is imperative that the members of the investigative team called to court can
present their evidence clearly and professionally, as they may have to simplify complex
accounting issues so that non-accountants involved in the court case can understand the
evidence and its implications.
29

Source: www2.accaglobal.com/documents/forensic_auditing.pdf
2.8 DISTINCTION BETWEEN STATUTORY AUDIT AND FORENSIC AUDIT
S.No.
1.

Particulars
Objective

Statutory audit
Forensic Audit
Express opinion as to Determine
true

&

fair correctness

presentation

3.

Technique

Period

any

Compliance

and substantive or in

procedures.

depth checking of

particular
of

selected transactions.
all No such limitations.

period.
stock, Relies

for

current

provisions/Liability
5.

Adverse findings, if any

be

from the beginning.

the Independent

on

verification

of management.

of

to

items carried out.

vouch

the Regularity

arithmetic accuracy & propriety

compliance

6.

may

assets, certificate/representation suspected/selected

estimation, etc.
Off balance-sheet items (like Used
contracts etc.)

the Accounts

accounting examined in detail

estimation of realizable value management

of

has

actually taken place.

and Analysis of past trend

Normally

Verification

fraud

Substantive

transactions

4.

the

of accounts or whether

accounts.
2.

of

of

these

with transactions/contracts

procedures.
Negative opinion
qualified

and

are examined.
or Legal determination

opinion of fraud and naming

expressed, with/without persons behind such

quantification.

frauds.

2.9 ADVANTAGES OF FORENSIC AUDIT

Forensic auditing can play an important role for companies under review by

regulatory authorities and can also be invaluable to ensure regulatory

30

compliance. For example, forensic auditing can be useful in helping companies to ensure
that their anti-money laundering procedures are both effective and robust.

Forensic auditing can help protect organizations from the long-term damage t o

reputation caused by the publicity associated with insider crimes. A

forensic audit also provides a sound base of factual information that can be used to help
resolve disputes, and can be used in court should the victim seek legal redress.

Forensic auditing can improve efficiency by identifying areas of waste

Forensic auditing can help with the detection and recording of potential

conflicts of interest for executives by improving transparency and probity in the way
resources are used, in both private and public entities.
2.9.1 DISADVANTAGES OF FORENSIC AUDIT

amounts

poorly

managed

of management

forensic
time

and

audit
could

could

consume

become

an

excessive
unwelcome

d i s t r a c t i o n f o r t h e business

Forensic audits can have wide-ranging scope across the business.

Under certain circumstances, the scope of the audit may need to be extended, with a
corresponding increase in the budget.

Some employees can interpret a proactive forensic audit as a slight on

their i n t e g r i t y, r a t h e r t h a n a s a m e a n s t o i m p r o v e c o n t r o l p r o c e d u r e s f o r
t h e benefit of the business
Source:

http://www.scribd.com/doc/53009045/MSc-Accounting-SEMINAR-PAPER-on-

FORENSIC-AUDIT

2.10 SKILLS REQUIRED FOR A FORENSIC ACCOUNTANT

31

Basic accounting skills Accounting is widely regarded as the language of

business and it seems obvious that a forensic accountant should have strong basic
accounting skills.

Written communication skills Forensic accountants need to document their work.

A well-written report by a forensic accountant can be a vital tool in litigation, and may help to
impress the judge/jury (Crumbley et al., 2007).

Verbal communication skills Part of the job of the forensic accountant is to go into

the field and speak to company personnel who may or may not be involved with the
suspected fraud (Crumbley et al., 2007). In addition, forensic accountants are often called to
be expert witnesses and testify during litigation, presenting often complex evidence to the
jury in an understandable manner (Sanchez and Trewin, 2004).

Analytical skills Analytics can be of use to forensic accountants because they often

reveal unusual relationships that need to be examined. Some forensic accounting experts feel
that if the auditors of HealthSouth had properly applied analytical procedures, they may have
uncovered the over $1 billion fraud that they failed to find for 17 years (Crumbley et al.,
2007).

Prior audit experience - Some fraud professionals recommend at least two years of

auditing experience, followed by a position in a law enforcement agency working on fraud

related cases to gain a competitive edge in the profession (Wells, 2003).

Personality traits - There is anecdotal evidence that good people skills and an

aggressive personality are useful traits for forensic accountants (Wells, 2003).

Computer forensics skills - Today, almost every fraud involves the use of computers

and digital documents (Smith, 2005).

32

Data mining skills Data mining, which uses mathematical algorithms to seek

hidden patterns in data, can be used by forensic accountants to review controls and discover
fraud, abuse, and corruption (Crumbley et al., 2007).

Background in criminal justice/law enforcement - Since September 11, 2001,

detecting and preventing terrorist attacks is a huge concern for the U.S. government, and
forensic accountants have been playing a major role in tracing terrorists around the world
(Florida Atlantic University, 2008). Terrorists are thought to obtain some of their funds by
exploiting U.S. programs such as workers compensation, unemployment, welfare and health
programs, food stamps, and other programs (Brooks et al., 2005).

Interviewing skills A forensic accountant often must interview executives who may

or may not be suspects. They need to be alert to both verbal and nonverbal cues to determine
whether the individual is being deceptive (Crumbley et al., 2007).

Experience with Benfords Law - Benfords law, which states that the distribution of

digits in natural numbers follows a predictable pattern, has been touted as a simple and
effective tool for helping the auditor uncover fraud (Durtschi et al., 2004).

Professional designations - Some accounting firms will hire individuals for forensic

accounting positions only if they have earned the Certified Fraud Examiner credential (CFE),
or its equivalent as the case may be in other countries, some firms will hire individuals
without that credential (Wells, 2003). A recent study indicates that CFEs earn, on average,
twenty-two percent more than their non-certified colleagues (Business and Finance Week,
2008).
(Source: Journal of Forensic & Investigative Accounting Vol. 2, Issue 2)

2.11

HIGHLIGHTS

OF

SOME

COMPANIES

INVESTIGATIONS WAS SUCCESSFULLY CARRIED OUT

33

WHERE

FORENSIC

ENRON AND WORLDCOM

No one can write or say anything on forensic accounting without mentioning the case of
Enron and WorldCom.
2.11.1 THE ENRON SCANDAL
Enron Corporation was an American energy, commodities, and Services Company based in
Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately
20,000 staff and was one of the world's leading electricity, natural gas, communications, and
pulp and paper companies, with claimed revenues of nearly $101 billion in 2000. Enron grew
wealthy due largely to marketing, promoting power, and its high stock price. Enron was
named "America's Most Innovative Company" by Fortune magazine for six consecutive
years, from 1996 to 2001. It was on the Fortune's "100 Best Companies to Work for in
America" list in 2000, and had offices that were stunning in their opulence. Enron was hailed
by many, including labor and the workforce, as an overall great company, praised for its large
long-term pensions, benefits for its workers and extremely effective management until its
exposure in corporate fraud.
At the end of 2001, it was revealed that its reported financial condition was sustained
substantially by institutionalized, systematic, and creatively planned accounting fraud, known
as the Enron scandal. Enron has since become a popular symbol of willful corporate fraud
and corruption. The scandal also brought into questions the accounting practices and
activities of many corporations throughout the United States and was a factor in the creation
of the SarbanesOxley Act of 2002. The scandal also affected the wider business world by
causing the dissolution of the Arthur Andersen accounting firm.
As was later discovered, many of Enron's recorded assets and profits were inflated or even
wholly fraudulent and nonexistent. One example of fraudulent records was in 1999 when
Enron promised to pay back Merrill Lynch & Co. investment with interest in order to show
34

profit on its books. Debts and losses were put into entities formed "offshore" that were not
included in the firm's financial statements, and other sophisticated and arcane financial
transactions between Enron and related companies were used to take unprofitable entities off
the company's books.
Enron corporation founder, Kenneth Lay was convicted on all six counts of fraud and
conspiracy while Enron Chief Executive Jeffrey Skilling was found guilty on 19 of the 28
charges brought against him. Mr. Skilling will serve a 24-year sentence on fraud and
conspiracy charges.
Source: http://en.wikipedia.org/wiki/Enron#Misleading_financial_accounts

2.11.2 THE WORLCOM SCANDAL

The company began as Long Distance Discount Services, Inc. (LDDS) in 1983, based in
Hattiesburg, Mississippi. In 1985 LDDS selected Bernard Ebbers to be its CEO. The
company went public in 1989 through a merger with Advantage Companies Inc. The
company name was changed to LDDS WorldCom in 1995, and later just WorldCom.
CEO Bernard Ebbers became very wealthy from the rising price of his holdings in WorldCom
common stock. However, in the year 2000, the telecommunications industry entered a
downturn and WorldComs aggressive growth strategy suffered a serious setback when it was
forced by the US Justice Department to abandon its proposed merger with Sprint in mid2000. By that time, WorldComs stock price was declining and Ebbers came under increasing
pressure from banks to cover margin calls on his WorldCom stock that was used to finance
his other businesses (timber and yachting, among others). During 2001, Ebbers persuaded
WorldComs board of directors to provide him corporate loans and guarantees in excess of
$400 million to cover his margin calls. The board hoped that the loans would avert the need
for Ebbers to sell substantial amounts of his WorldCom stock, as his doing so would put
35

further downward pressure in the stock's price. However, this strategy ultimately failed and
Ebbers was ousted as CEO in April 2002 and replaced by John Sidgmore, former CEO of
UUNET Technologies, Inc.
Beginning modestly in mid-year 1999 and continuing at an accelerated pace through May
2002, the company (under the direction of Ebbers, Scott Sullivan (CFO), David Myers
(Comptroller) and Buford "Buddy" Yates (Director of General Accounting)) used fraudulent
accounting methods to mask its declining earnings by painting a false picture of financial
growth and profitability to prop up the price of WorldComs stock.
The fraud was accomplished primarily in two ways:
1.

Booking line costs (interconnection expenses with other telecommunication

companies) as capital on the balance sheet instead of expenses.

2.

Inflating revenues with bogus accounting entries from "corporate unallocated revenue

accounts".
In 2002, a small team of internal auditors at WorldCom worked together, often at night and in
secret, to investigate and unearth $3.8 billion in fraud. Shortly thereafter, the companys audit
committee and board of directors were notified of the fraud and acted swiftly: Sullivan was
fired, Myers resigned, Arthur Andersen withdrew its audit opinion for 2001, and the U.S.
Securities and Exchange Commission (SEC) launched an investigation into these matters on
June 26, 2002. By the end of 2003, it was estimated that the company's total assets had been
inflated by around $11 billion.
On March 15, 2005 Bernard Ebbers was found guilty of all charges and convicted on fraud,
conspiracy and filing false documents with regulators. He was sentenced to 25 years in
prison. Other former WorldCom officials charged with criminal penalties in relation to the
company's financial misstatements include former CFO Scott Sullivan (entered a guilty plea
on March 2, 2004 to one count each of securities fraud, conspiracy to commit securities
36

fraud, and filing false statements), former controller David Myers (pleaded guilty to securities
fraud, conspiracy to commit securities fraud, and filing false statements on September 27,
2002), former accounting director Buford Yates (pleaded guilty to conspiracy and fraud
charges on October 7, 2002), and former accounting managers Betty Vinson and Troy
Normand (both pleading guilty to conspiracy and securities fraud on October 10, 2002)
(MCI, 2006). Ebbers reported to prison on September 26, 2006 to begin serving his sentence.
Source:

http://voices.yahoo.com/worldcom-scandal-look-back-one-biggest

225686.html?

cat=3
2.11.3 CADBURY NIGERIA PLC
Cadbury Nigeria sacked its Managing Director, Mr. Bunmi Oni and Mr. Ayo Akadiri, the
company's Finance Director recently, which is fallout of the financial book padding scandal
and corruption that recently rocked the company, and that is the way it should be. The bold
actions of the Board of Directors led by Dr. Uduimo Itsueli should be commended. The
Board recently commissioned the firm of PricewaterhouseCoopers to review and investigate
the company's financials. The outcome of the investigation "has confirmed a deliberate
overstatement of the company's financial position over a number of years to the tune of
between N13 and N15 billion"! This is Nigeria's version of the Enron Corporation scandal in
the United States.
It is noteworthy to mention here that the Bunmi Oni management at Cadbury for years
packaged itself as the best example of a professional establishment, its best practice, with
strong ethical clout and rectitude. It is sad to suddenly discover that this had been a ruse
and a huge deception all along; the unsuspecting Nigerian public was fooled and misled by
Mr. Bunmi Oni and Mr. Ayo Akadiri.
What actually happened was that over the number of years, Cadbury Nigeria had assigned
itself an ambitious growth target. To achieve these targets, several systems abuses occurred.
37

The overstatements were directly traceable to those systems abuses. Deliberate breaches of
accounting systems and controls and cooking up numbers became an obsession and the
central focus of maintaining a mirage. A visit to the website of Cadbury Nigeria,
http://www.cadburynigeria.com/news.php will shed more light on these acts of dishonesty
and crooked self-helps.
The average Nigerian executive considers the funds of his/her company just another piggy
bank from where all sorts of personal expenses are taken care of and every imaginable
purchase is made. In Cadbury Nigeria's case this included the provision of generators, fuel
and maintenance services to the home of one of the company's former Chief Executives.
Several accounts in Cadbury Nigeria were coded so well and there were many headings that
meant far more than they ordinarily present at casual look. Many Cadbury staff confirmed the
existence of a mafia headed by a former Chief Executive holding on to the company, and
only this former executive's sidekicks cum anointed candidates have risen to executive cadres
in more than 15 years. The average Nigerian company and banks are run like this. In such an
environment honest, hardworking and straightforward folks have no place; they are hounded,
sidelined and eventually pushed out.
2.11.4 NNPC/FUEL SUBSIDY PROBE
Following the removal of subsidy on PMS on the 1st day of January, 2012 by the Federal
Government of Nigeria and the attendant spontaneous social and political upheavals that
greeted the policy, the House of Representatives in an Emergency Session on the 8th of
January, 2012 set up an Ad-hoc Committee to verify and determine the actual subsidy
requirements and monitor the implementation of the subsidy regime in Nigeria. The Federal
Government had informed the nation of its inability to continue to pump endless amount of
money into the seemingly bottomless pit that was referred to as petroleum products subsidy.
It explained that the annual subsidy payment was huge, endless and unsustainable. Nigerians
38

were led to believe that the colossal payments made were solely on PMS and HHK actually
consumed by Nigerians. Government ascribed the quoted figures to upsurge in international
crude price, high exchange rate, smuggling, increase in population and vehicles etc. However,
a large section of the population faulted the premise of the Government subsidy figures,
maintaining that unbridled corruption and an inefficient and wasteful process accounted for a
large part of the payments. To avert a clear and present danger to descent into lawlessness, the
leadership of the House of Representatives took the bold and decisive action of convening the
first ever Emergency Session on a Sunday (8thJanuary, 2012), and set up the Ad-hoc
Committee to verify the actual subsidy requirements of the country.
The Ad-Hoc Committee held Public Hearings from 16th of January, 2012 to 9th of February,
2012, taking sworn testimonies from 130 witnesses, receiving information from several
volunteers, and receiving in evidence over 3,000 volumes of documents.
In the course of the investigations the Ad-Hoc Committee was able to establish the following:
1. Contrary to statutory requirements and other guidelines under the Petroleum Support Fund
(PSF) Scheme mandating agencies in the industry to keep reliable information data base,
there seemed to be a deliberate understanding among the agencies not to do so. This lack of
record keeping contributed in no small measure to the decadence and rots the Committee
found in the administration of the PSF. This is evident also in the budget preparatory process
by MDAs where adequate data is not made available to the National Assembly. The
Committee had to resort to forensic analysis and examination of varied and external
sources (including the Lloyds List Intelligence) to verify simple transactions. In this regard,
the PPPRA is strongly urged to publish henceforth, the Petroleum Subsidy Fund accounts on
quarterly basis to ensure transparency and openness of the subsidy Scheme.
2. The committee found out that the subsidy regime, as operated between the period under
review (2009 and 2011), were fraught with endemic corruption and entrenched inefficiency.
39

Much of the amount claimed to have been paid as subsidy was actually not for consumed
PMS. Government officials made nonsense of the PSF Guidelines due mainly to sleaze and,
in some other cases, incompetence. It is therefore apparent that the insistence by top
Government officials that the subsidy figures was for products consumed was a clear attempt
to mislead the Nigerian people.
3. Thus, contrary to the earlier official figure of subsidy payment of N1.3 Trillion, the
Accountant-General of the Federation put forward a figure of N1.6 Trillion, the CBN N1.7
Trillion, while the Committee established subsidy payment of N2,587.087 Trillion as at 31st
December, 2011, amounting to more than 900% over the appropriated sum of N245 Billion.
This figure of N2, 587.087Trillion is based on the CBN figure of N844.944b paid to NNPC,
in addition to another figure of N847.942b reflected as withdrawals by NNPC from the
excess crude naira account, as well as the sum of N894.201b paid as subsidy to the
Marketers. The figure of N847.942b quoted above strongly suggests that NNPC might have
been withdrawing from two sources especially when the double withdrawals were also
reflected both in 2009 and in 2010.
However, it should be noted that as at the time the public hearing was concluded, there were
outstanding claims by NNPC and the Marketers in excess of N270billion as subsidy
payments for 2011.
4. On its part, NNPC was found not to be accountable to anybody or authority. The
Corporation, in 2011, processed payment of N310.4 Billion as 2009 2011 arrears of subsidy
on Kerosene, contrary to a Presidential Directive which removed subsidy on Kerosene in
2009. The Corporation also processed for itself, direct deduction of subsidy payment from
amounts it received from other operations such as joint venture before paying the balance to
the Federation Account, thereby depleting the shares of States and Local Governments from

40

the distributable pool. Worse still, the direct deduction in 2011 alone which amounted to
N847.942 Billion was effected without any provision in the Appropriation Act.
5. While NNPC feasted on the Federation Account to bloat the subsidy payable, some of the
marketers were involved in claiming subsidy on products not supplied. PPPRA laid this
foundation by allocating volumes of products each quarter to the marketers which it knew
were not in conformity with its own guidelines for participation.
6. The committees investigation further revealed that certain marketers collected subsidy of
over N230.184 Billion on PMS volume of 3,262,960,225litres that from the records made
available to us were not supplied. Apart from proliferation and non-designation of bank
accounts for subsidy payment, Petroleum Products and Pricing Regulatory Authority
(PPPRA) and the Office of the Accountant General of the Federation (OAGF) were unable to
manage in a transparent manner the two accounts they chose to disclose. There were
indications that PPPRA paid N158 Billion to itself in 2009 and N157 Billion in 2010. When
confronted, the OAGF was unable to submit details of the bulk payments arrogated to PPPRA
and the account from which the bulk sums were disbursed to the supposed beneficiaries.
7. Curiously too, the particular Accountant-General that served during the period 2009 was
found to have made payments of equal installments of N999 Million for a record 128 times
within 24hours on the 12th and 13th of January 2009, totaling N127.872 Billion. The
confirmed payments from the CBN records were made to beneficiaries yet to be disclosed by
the OAGF or identified by the Committee. We however discovered that only 36 Marketers
were participants under the PSF Scheme during this period. Even if there were 128 marketers,
it was inconceivable that all would have imported the same quantity of products to warrant
equal payments.
8. In order to arrive at a probable figure of daily consumption of PMS, the Committee took
the entire volume of 14,787,152,340 litres imported by marketers and NNPC in 2011 as
41

recorded by PPPRA and then deducted what we suspected as over-invoiced volume of

3,262,960,225. Thus, the actual volume imported for year 2011 was 11,510,202,347. This
manifested into an average daily PMS consumption of 31.5 million litres.
As at now, many of the oil marketers who were found probable and guilty in this whole
corruption are currently answering questions at the court of law.
Source: www.saharareporters.com/full-report-68-billion-fuel-subsidy-scam.htm
2.11.5 SECURITY AND EXCHANGE COMMISSION FRAUD
Many people, including me wonder why THE NIGERIAN STOCK EXCHANGE market
crashed. Some of these revelations came on the 8th of May, 2012 when DirectorGeneral of
the Securities and Exchange Commission (SEC), Ms. Arunma Oteh appeared before the
House of Representatives Capital market probe panel.
According to Oteh, the market succumbed to a combination of ailments - sensational
lifestyle and financial recklessness, among others
Oteh was explaining why SEC eased out the former DG of the Nigerian Stock Exchange
(NSE), Mrs. Ndi Okereke-Onyuike.
Oteh, in a presentation before the House of Representatives ad hoc committee probing the
near collapse of the Nigerian Capital Market, said: There were incidents of financial
skimming,

misappropriation,

false

accounting,

misrepresentation

and

questionable

transactions against the former NSE DG.

For instance, the NSE bought a yacht for N37million and wrote down the book value within
one year by recognizing it in the books as a gift presented during its 2008 Long Service
Award (LSA), yet there are no records of the beneficiary.
The Exchange also spent N186million on 165 Rolex wrist watches as gifts for awardees out
of which only 73 were actually presented to the awardees. The outstanding 92 Rolex watches
valued at N99.5million remain unaccounted for.
42

This happened in previous years. Other notable fraudulent transactions include the
reclassification of the sum of N1.3billion originally expended on business travels. Of this
sum, N953million was reclassified under Software Upgrade and subsequently expended as
against being capitalized. There were other cases of such unethical accounting practices.
In 2009, N1.7billion of the 2008 operational surplus was distributed to Council members
and employees, in violation of CAMA and SEC rules which preclude the NSE from such,
given that the NSE is a company limited by guarantee.
Given the foregoing, it was important to me that we engage the NSE to address these
weaknesses. Unfortunately, the former CEO of the NSE did not attend most of the meetings
we scheduled.
These were the kinds of financial imprudence that were perpetrated at the NSE. These
transactions were routed through companies owned by some senior officers of the Exchange,
she said.
Oteh said the SEC launched a forensic investigation to examine the allegations of financial
irregularity and mismanagement.
While these investigations have been concluded, the results are unavailable because the
former CEO of NSE, Mrs. Ndi Okereke-Onyiuke, and three other former employees have an
injunction against releasing the report.
The SEC DG said while all the fraudulent practices were going on, the SEC, which was at the
time headed by Musa Al-Faki, did not do enough to stem the irregularities.
Source: http://www.thenationonlineng.net/2011/index.php/mobile/news/45880-arunma-otehat-house-capital-market-probe-okereke-onyiuke-blew-n186m-on-rolex-watches.html

2.11.6 FORMER M.D OF INTERCONTINENTAL BANK, ERASTUS AKINGBOLA

43

About three years after the baking industry was shaken by the discovery of a culture of
corporate governance abuses by rogue bankers in the business, a number of significant
documents that detail specific cases of how the abuses were carried out was made published
by the Economic and Financial Crimes Commission. The documents show specific and
graphic cases of impunity and a pattern of behavior that mirror globally celebrated fraud
cases such as those of Bernard Madoff, the financier who operated a scheme that later turned
out to be the biggest fraud in the history of the United States, and Fred Goodwin, former
Royal Bank of Scotland chief executive, who led the bank to collapse, forcing it to receive
the largest government bailout in the United Kingdom. Both men suffered severely from their
roles in the respective cases. These documents revealed that forensic findings and reports
show what had gone wrong at now defunct Intercontinental Bank among others.
A pattern of cover-up is shown in Intercontinental Bank, where Germanys Deutsche Bank,
one of its correspondent banks, raised an anti-money laundering request in a letter dated
September 3, 2009 concerning huge transfers of funds on behalf of the erstwhile group chief
executive, Erastus Akingbola, which triggered investigation over misappropriation of funds.
Transfers were made without backing funds in accounts. On July 13, 2009, 1.3 million
pounds were transferred to United Kingdoms Fuglers Solicitors. On March 11, 2009, a
transfer request for 8.54 million pounds from Intercontinental Banks Nostro Account, held
with Deutsche Bank was again made. The documents note that these funds were transferred
from the Nostro account (Deutsche Bank) of the Bank, for Dr. Erastus Akingbola when he
had no such fund in his Domiciliary accounts (GBP&USD).
In a systematic attempt described by forensic auditors as covering up, cash of $11.84
million was later paid into an interdepartmental suspense account (IDS) to cover the 8.54
million pounds transaction by bureau de change operators between March 13, 2009 and April
28, 2009. This amount was later transferred into the banks in-house Deutsche Bank account.
44

Documents also revealed that the naira used to cover the cash that was paid into the IDS
account was actually provided between March 13, 2009 and April 27, 2009 to
Intercontinental Capital Markets Limited, a subsidiary of the bank, through a treasury product
called POFI (Placement with Other Financial Institutions). The subsidiary would later make
the funds available to a company called Regal Investment Limited. The latter company was
owned by the then Chairman Raymond Obieri, who then disbursed from this facility to pay
the various bureau de change operators for the dollar cash. With regard to the 1.3 million
pounds, the document described the transaction as a misappropriated fund of the bank,
transferred from the accounts of Tropics Securities Limited to a company which had provided
the dollar amount on 27 August 2009. The transfers were later discovered to be payment for
properties purchased in the UK by the former chief executive.
Another transaction involved payment of N2.5 billion on March 11,2009 from the banks
CBN account, as part of year end deposit management to the account of a company named
Chartwell Securities in Skye Bank, which later issued two cheques to the bank in the name of
Tropics Finance Company Ltd. The two cheques with values of N1.068 billion and N1.432
billion respectively, were then utilized to settle loans owed Intercontinental Capital Markets
Ltd by Tropics Securities Ltd in which the then CEO had interest. Also emerging from the
document is what was described a general ledger manipulation of N8.684 billion. The money
was again paid from the banks prepayment/time deposit accounts to various companies in
which Akingbola had interest. This was for the purpose of the liquidation of the outstanding
loan obligations with the banks subsidiaries, Fidelity Bank, First Bank and Associated
Discount House. The document equally show that payments of various amounts totaling N8,
684,500,000 were made on 13, 18, 19, 22 and 27 May, 2009 as well as 04, 08, 11, 18, 26 and
30 June, 2009 to the companies. Erastus Akingbola, according to the documents, had interest
in some of the companies to which these monies were paid. At present Dr. Erastus Akingbola
45

is still answering cases in the court bothering on case of fraud, misappropriation of funds and
a host of other charges.
Source: BUSINESSDAY NEWSPAPER (Tuesday 24 April 2012 pg. 1 and 4) front page
headline: Reports expose culture abuse in defunct IBPLC, Oceanic. Observers question
Akingbolas role in deals
2.11.7 FORMER GOVERNOR OF DELTA STATE, JAMES IBORI
James Ibori, a petty thief who eventually became one of Nigerias richest men, has received a
13 years jail sentence after admitting fraud of nearly 50m, described by the judge as
probably ludicrously low. The former Governor of Delta state, James Ibori was jailed for
13 years at Southwark crown court in London. The former governor of Delta state in Nigeria
pleaded guilty in February to 10 offences relating to conspiracy to launder funds from the
state, substantive counts of money laundering and one count of obtaining money transfer by
deception and fraud.
In the light of other matters, perhaps that is a ludicrously low figure and the figure may be in
excess of 200m, it is difficult to tell, Judge Anthony Pitts told Southwark crown court in
London Tuesday 17, April 2012. The confiscation proceedings may shed some further light
on the enormity of the sums involved
The Metropolitan police estimate that Ibori embezzled $250m (157m) of Nigerian public
funds. The Department for International Development (DfID), which funds the Proceeds of
Corruption Unit, began investigating Ibori in 2005, alongside Nigerias anti-corruption unit,
the Economic and Financial Crimes Commission. As Ibori was sentenced, NGOs called for
further investigation into how he managed to move his money through his British and US
bank accounts. Global Witness called for a thorough investigation into British banks for their
roles in the laundering of millions of pounds by Ibori.

46

Robert Palmer, a campaigner with the Global Witness, said: By doing business with Ibori
and his associates, these banks facilitated his corrupt behavior and allowed him to spend
diverted state assets on luxury lifestyle, including a private jet and expensive London houses,
while many Nigerians continue to live in poverty.
According to the prosecutor, Sasha Wass, Ibori and his associates used multiple accounts at
the banks to launder funds. Millions of pounds passed through these accounts, some of which
were used to buy expensive London property. At Iboris sentencing hearing, was told the
court how Ibori once a petty thief with his hand in till at the DIY store Wickes amassed
a portfolio of six properties outside Nigeria worth 6.9m at a time he was being paid 4,000m
a year as a state governor of the Delta region.
The properties in London included a flat in St Johns Wood, a house in Hampstead, and one
in Regents Park. He also has a 3m mansion in South Africa, and properties in Texas and in
Dorset, near to where his children attended private school. Ibori also bought a fleet of luxury
cars, and in three years ran up 920,000 on his American Express Centurion card a card
only available to the super-rich, Wass told the court. In 2005, Ibori instructed a London
solicitor to buy him a private jet costing $20m. Global Witness said the case raised serious
questions about the due diligence that the banks carried out on Ibori and his associates.
Ibori, 49, changed his original plea as his trial was about to begin and admitted stealing
money from Delta state and laundering it in London through a number of offshore
companies. Ibori admitted to fraud totaling more than79m, said to be part of total
embezzlement that could exceed $250m.
As governor of Delta state, he racked up credit card bills of $200,000 a month and owned a
fleet of armoured Range Rovers, said the prosecution. He was trying to buy a plane when he
was arrested. Once seen as one of Nigerias wealthiest and most influential politicians, Ibori
was seized in 2010 in Dubai at the request of the Metropolitan police and extradited to
47

London last year. His wife, Theresa Ibori; sister, Christine Ibori-Idie; mistress, Udoama
Okoronkwo, and London-based solicitor Bhadresh Gohil have all already been convicted of
money laundering. DfID said Ibori systematically stole public funds, depositing them in bank
accounts across the world. A major breakthrough came when officers from Scotland Yard
found two computer hard drives that revealed the extent of his crimes. During his reign as
Governor, he occupied the nifty position as a stripper of state resources and was compulsive
with his acquisition of luxury cars and choice properties.
Much of the money stolen was laundered through his London office and he bought most of
his properties there. He owned seven properties in Britain including a six-bedroom house
with indoor pool in Hampstead for 2.2million and a flat opposite the nearby Abbey Road
recording studios. Ibori was initially arrested by the Economic and Financial Crimes
Commission in December 2007, but the charges were dismissed two years later based on lack
of substantial evidence. Its quite sad to wonder how the lives of thousands of people in Delta
state and indeed, the entire country would have been changed positively if these stolen funds
were put to good use.
He pleaded guilty to the Crown Court in London on Monday February 27 2012 and was
sentenced on Tuesday April 17 2012. He has thus begun to serve his jail term although trying
presently to file an appeal.
Source:

http://www.guardian.co.uk/global-development/2012/apr/17/nigeria-governor-

james-ibori-sentenced (Headline News- Former Nigeria state governor james Ibori

receives 13-year sentence)
2.11.8 CASES OF CONVICTIONS MADE SO FAR BY ANTI-CORRUPTION
AGENCIES IN NIGERIA
1. FORMER Chief Executive Officer of Oceanic Bank Plc, Cecilia Ibru, was on Friday
October 8, 2010 convicted and sentenced to a cumulative imprisonment term of 18 months by
48

a Federal High Court in Lagos for pleading guilty to charges bordering on economic crimes.
Ibru, under a plea bargaining arrangement with the Economic and Financial Crimes
Commission (EFCC), pleaded guilty to an amended three count-charge in which she was
accused of exceeding her approval limit by approving the grant of $20million to a company
Waves Project Nigeria Limited. Oceanic Bank was one of the eight banks that had their
management teams sacked by the Central Bank of Nigeria (CBN) in the wake of alleged
unethical practices in the industry. The bank had since been bought over by Ecobank Plc. The
court also ordered that the convict would forfeit all assets and property estimated at
N191billion, listed in a settlement agreement signed by parties and filed before the court. The
forfeited assets are to be managed by a company owned by the Federal Government Assets
Management Corporation of Nigeria (AMCON).
Other assets that were forfeited included about 82 houses (scattered across Nigeria, the
United Kingdom and Dubai, United Arab Emirate), shares in 19 companies not listed in the
Nigerian Stock Exchange and shares in 199 listed companies.
Source:

http://www.nigeriannewsservice.com/index.php?

option=com_k2&view=item&id=1077:cecilia-ibru-jailed-for-18-months--forfeitsn190bn&Itemid=231&tmpl=component&print=1
As more documents begin to emerge on some of the biggest manipulations in the modern
history of banking and business in Nigeria, and as the country continues to be smeared by
cases of public sector corruption, observers are showing serious concern about whether the
main actors in the saga have fully and truly answered for their roles in the sordid episode. It is
worthy of note however that the Anti-corruption drive of the government is yielding great
results as many cases are already in court and trial is underway. Many convictions have been
made and hopefully many more will be made. The legislative arm of government has also
thrown its weight behind this drive by ensuring speedy passages of various bills such as
49

amendment of anti-terrorist bill recently passed, seeking to ensure compliance with budget
provisions by the federal government by taking very serious their oversight functions and
visiting every Ministry Department and Agency to ensure that budget implementation is not
done with a back hand. Government is trying her best but more still needs to be done. The
cooperation of all and sundry is also needed to report any case of corruption to law
enforcement agencies.

50

CHAPTER THREE

3.0

RESEARCH METHODOLOGY

Generally researchers must specify the method of research with which they are to gather all
the relevant information relating to their subject of the survey. This method of research to be
specified at the beginning of the survey is called Research Design.
3.1

RESEARCH DESIGN

Research design is the framework or blueprint for conducting a good research project. It
details the procedures necessary for obtaining information the needed to structure or solve
research problems (Malhotra and Birks, 2000). This area looks into how the research exercise
was planned, structured and the systematic process with which the research studies was
conducted. Based on the trend of the topic, the researcher used explorative research design.
For the purpose of this study, explorative design may be divided into two namely:
1.

The survey of knowledgeable persons primary data. This will be accomplished

through personal, phone or mail interview and questionnaire.

2.

The Research of Secondary Data. This is the use of extracts from ready-made

materials related to the topic of study.

3.2

SOURCES OF DATA

Data will be collected from selected forensic accountants in audit firms most especially in
Lagos and Abeokuta. These areas were selected due because they are the places the
researcher is familiar with. The data would be derived from interview sessions with
respondents and questionnaire. Secondary data are used to corroborate the findings made
from the interview session. The purpose of data collection procedure is to get data for the
problem defined. Data can be classified into primary or secondary:

51

Primary data are data collected specifically by then researcher for the research while
secondary data are data already published and collected for their other purposes than specific
needs at hand.
3.3

RESEARCH POPULATION AND SAMPLE SIZE

Olufolabo and Talabi (2002) defined population as the entire collection of all persons,
objects or items concerning a specific area of investigation or study. Here the population
shall be Forensic Audit staffs of KPMG Professional Services Victoria Island Lagos, and
Deloitte (Akintola Williams) Professional Firm, A private certified Forensic Accountant with
The Chartered Institute of Taxation Nigeria (CITN) and lawyer.
The forensic staffs of KPMG are about 15 out of which the 5 have been selected for the
purpose of this work. The Forensic Unit at Deloitte (Akintola Williams) Accounting firm is
embedded in its Consulting and Financial Advisory Services unit.
A sample, as defined by Olufolabo and Talabi (2002), is a fractional part of the population.
It is a part of a population observed for the purpose of making scientific inferences about the
population.
3.4

SAMPLING TECHNIQUE

The procedure and technique for sampling is Expert Sampling.

Here the researcher interviews a panel of individuals known to be experts in the field. He also
sends them questionnaire to corroborate the information generated during the interview
sessions.
In this research, the experts are simply the forensic experts, both at the audit firms and private
forensic experts who are knowledgeable and versed in the subject matter. Responses were
elicited by scheduling appointments with them. Due to the nature of their work and the
location of some of these sets of respondents, some of them indicated their readiness to have

52

the questions mailed to them, some were interviewed one on one and a phone interview was
also conducted with one of them.
3.5

INSTRUMENT OF DATA COLLECTION

Data collection instrument is a device for collecting the data or measuring the variables which
are used for answering research questions and or testing study hypotheses Asika, (1991).
The research instruments used in this research work were Interview and standardized
questionnaire. A research interview as defined by Cannel and Kahn, 1986 is a two person
conversation initiated by the interviewer for the specific purpose of obtaining researchrelevant information, and focused by him on content specified research objectives of
systematic description, prediction or explanation. The questionnaire is a list of questions
structured which covers the basic objectives of the entire study. The questionnaire was
divided into three sections namely: Sections A, B, C, and D. the first part of the questionnaire
(Section A) gathered information on the respondents demographics. Items in this part
provided information relating to age range, academic and professional qualifications, working
experience, and management level in which the respondents operate.
The second part (Section B) of the questionnaire sought to test the enhanced relevant
characteristics expected that forensic accountants are expected to possess.
The third part (Section C) consists of a set of questions that intend to highlight the challenges
encountered by forensic accountants in practice and those hindering its growth in general.
The fourth part (Section D) seeks to elicit from the forensic accountants at least three types of
activities they engage in.
3.6

VALIDATION OF RESEARCH INSTRUMENT

Research instrument is measured on the basis of its validity. Validity refers to the degree to
which a research instrument measures the right concept that it intends to measure. That is, its
ability and appropriateness to effectively ferret out information.
53

The interview guide and the questionnaire were reviewed by the Supervisor of this work as
the work progressed.
3.7

METHODS OF DATA ANALYSIS

All the data gathered at this stage were analysed based on their importance and value to the
objective of the study so as to elicit the variable of interest. They are presented on point by
point basis in tables, percentages and in narratives where necessary to give more details on
the responses of the respondents. Comparisons were made between the information obtained
from individual respondents and similar responses are highlighted.

54

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS

4.0

INTRODUCTION

The chapter is concerned with the presentation, analysis and interpretation of results collected
from the various respondents through the use of interviews and questionnaire. The interviews
as conducted are transcribed and presented by the researcher in tables, in the basis of which
conclusion was reached. Responses were elicited from them based on the interview guide.
The data collected from the administration of questionnaires were equally analysed using
tables and percentages from which conclusions are finally drawn.
4.1

RESULTS AND DISCUSSIONS

The discussion of the interview results is divided into three sections:

1.
2.

Demographics of respondents
Highlighting some of the most relevant enhanced skills which forensic accountants

must possess.
3.
Bringing to the fore specific challenges facing the growth of forensic accounting
practice in Nigeria.
4.
Gathering information on where forensic accountants are needed.

4.1.1

DEMOGRAPHICS OF RESPONDENTS

Variable
Gender
Male
Female
Total
Age
Below 20
21-30
31-40
41-50

Frequency counts

Percentage (%)

14
6
20

70
30
100

0
12
8
0

0
60
40
0
55

Total
Educational qualification
Only B.Sc./HND
Both B.sc/HND and
Masters/equivalent
Total
Professional qualification
Only ACA/ANAN/ACCA
Both CFE/CFA &
ACA/ANAN/ACCA
Both AAT &
ACA/ANAN/ACCA
Total
Academic Major
Accountancy
Economics
Banking and finance
Business Admin.
Total
Working Experience
1-5 years
6-10 years
11-15 years
Total
Place of work
Audit firm
Private Practice
Government
Total
Present Position
Top management
Middle management
Low management
Total
Practicing forensic
accountants
Yes
No
Total
Table 4.1.1

20

100

9
11

45
55

20

100

11
5

55
25

20

20

100

15
4
1
0
20

75
20
5
0
100

6
13
1
20

30
65
5
100

18
2
0
20

90
10
0
100

1
12
7
20

5
60
35
100

14
6
20

70
30
100

The table above shows the distributions of the respondents whom the questionnaires were
administered to and it indicates that there were 14(70%) males while 6(30%) was female. It
also revealed that 12(60%) were between the ages 21 and 30, and 8 fell within age 31 and

56

40(40%). In addition it indicates 9(45%) of the respondents had only B.Sc. / HND while the
remaining 11(55%) had B.Sc. and Masters/its equivalent.
It also depicts that in terms of professional qualifications 7(35%) had AAT, and all of them
11(55%) had only ACA/ANAN/ACCA, while 5(35%) have both CFE/CFA &
ACA/ANAN/ACCA and the remaining 4(20%) had both AAT & ACA/ANAN/ACCA.
Inclusively, 15(75%) had accountancy as their academic major, Economics 4(20%) Banking
and finance 1(5%).
In terms of working experience, 6(30%) had worked for between 1 and 5 years, 13(65%) had
worked for between 6 and 10 years while 1(5%) had worked for between 11 and 15 years.
18(90%) works with Audit firms, while 2(10%) work with private practice. None of them
works in government establishment. It also indicate that just 1(0.05%) is in Top level
management, 12(60%) are in middle management level while the remaining 7(35%) fall
within the low level management. 14(70%) are practicing forensic accountants while the
remaining 6(30%) are simply auditors at the audit firms.
BSC/HND ACA,ANAN/ACCA CFA/CFE WORKING
KPMG
DELOITTE
CITN

Yes
Yes
Yes

Yes
Yes
Yes

Yes
No
Yes

EXPERIENCE
5
7
9

Table 4.1.1.2
In addition Table 4.1.1.2 above depicts the demographics of those personally interviewed by
the researcher.
4.2 ANALYSIS OF DATA BASED ON REASEARCH OBJECTIVE
OBJECTIVE ONE
Highlighting some of the most relevant enhanced skills which forensic accountants must
possess
57

Forensic accountants needs

basic accounting skills
Forensic accountants need
possess written

YES

NO

20

100

20

100

20

100

20

100

20

100

communication skills
Analytical skills are
important to succeed in the
field of forensic accounting
Forensic accountants need to
be conversant with criminal
laws and enforcement
Forensic accountants need to
have prior audit experience
Source: Field survey 2013

Table 4.2.1

Table 4.2.1 above shows the responses of 20 respondents as regards forensic accountants and
the most enhanced relevant skills they must to possess. Amazingly, all the respondents were
in favour of all the characteristics examined. 20(100%) affirmed that forensic accountants
need basic accounting skills. As postulated in the previous chapters of this research that
forensic accounting is a specialty field of accounting. In other words, they affirmed that
one cannot become a forensic accountant without the basic knowledge and rudiments of
accounting.
With respect to the interview on this, all the respondents equally could not agree otherwise
that basic accounting skills are needed to become a forensic accounting. It was gathered from
them that part of what forensic accounting does is to observe keenly the financial statement
prepared by ordinary accountants and derive whether there are evidences of fraud or criminal
intentions. In their words looking at financial transactions with more than the ordinary eyes
Basic understanding in accounting includes; understanding the double entry principles,
accounting concepts and conventions, treatment of various items in the accounts, calculation
of depreciation, understanding of cash and accrual basis are needful.
58

We can then conclude that we cannot separate forensic accounting from the basic accounting.
Forensic accounting takes its root from basic accounting.
Equally 20(100%) of the respondents agreed that forensic accountants must possess written
communication skills. This is because the forensic accountants are required as a trier in court
to write and present their reports in the agreed lingua franca and readable formats. Before an
accused is convicted in any criminal case, it is pertinent form the point of the law that the
prosecution must be able to convince the judge and all based on the evidences at his disposal;
beyond reasonable doubts that the accused must without gain say be punished for the alleged
crime. As is the usual believe that accountants speak in figure but rather than in words, this is
not the case with forensic accountants. The forensic accountant, representing in court must be
able to speak and write beyond figures but also in correct and sound verbal lingua franca.
One of the respondents working with KPMG said what is the use of the evidences gathered
when it cannot be succinctly communicated at the law court to prove ones case beyond
reasonable doubts.
Furthermore, all the respondents submitted that forensic accountants need to be conversant
with criminal laws and the art of law enforcement. The courts and the laws are two basic
reasons why forensic accountants are different from ordinary accountants or even statutory
auditors. Anything forensics has to do with court and the legal laws. To perform at his
optimum, forensic accountants therefore need to be conversant with the criminal laws and the
court system. Mr. Adebayo Olumuyiwa from Akintola Williams (Deloitte) said you are not a
forensic accountant if you dont know the law and its enforcement; most especially criminal
laws. This isnt in anyway different from what both Mr. Seun with KPMG and Mr. Godwin
at CITNs conclusion. They both added that forensic accountants need equip themselves with
several laws and ACTS such as Companies and Allied Matters Act (CAMA), Insurance laws,

59

Matrimonial/customary Laws, Money Laundering and Evidence ACT and other laws that
enhance their efficiency on the job.
In addition from the survey carried out, 100% of the respondents agreed that a forensic
accountant need to have prior experiences in statutory audit works to enhance his efficiency.
As equally gathered from the personal interview, experience in statutory audit works will
assist a forensic accountant a great deal but it is not a sine qua non. Mr. Seun of KPMG gave
himself as an example. He said he entered as a chartered accountant with KPMG 5years ago
without prior working experience but was later trained and he is still undergoing on the job
training. He added that most times the young forensic accountants in his organization are
attached to the experience once in field work and by this, they even learn faster instead of
what they just read in books. He said the researcher was lucky to get him because he just
came back from training in India.
Mr. Adebayo at Deloitte however stressed the need for forensic accountants, professional
bodies and audit firms generally to orgarnise training programmes for their forensic staff so
that they may be conversant with the recent trends in forensic accounting and accounting
practice in general. He said this will not only build their capacity, it will equally build their
confidence and enhance their performance on the job.

4.2.2 OBJECTIVE TWO

To bring to the fore specific challenges facing the growth of forensic accounting practice
in Nigeria
Nigerian Criminal laws affect
the growth of forensic
60

Yes
15

%
75

No
5

%
25

accounting practice
Nigerian Legal and court
system have negative impact
19

95

20

100

on the growth of forensic

accounting practice
Nigerian educational system
do not encourage the growth
and

practice

of

forensic

accounting
Source: Field survey 2013

Table 4.2.2

Table 4.2.2 above elucidates the challenges affecting the growth and practice of forensic
accounting in Nigeria. It corroborates the findings of the researcher during the interview.
Majority of the interviewee maintained that ill-structured legal system is a bane of forensic
accountants success. They said if the forensic accountants are well equipped in terms of
capacity and learning, and there is no favourable environment for him to operate, then he is
handicapped.
Although from the table above, 15 out of 20, which represent 75% of the respondents agreed
in the affirmative that criminal laws in Nigeria affect the growth of forensic accounting and
the remaining 5 which represents 25% of the respondents said Nigerian criminal laws do not
affect its growth. When asked for reasons why criminal laws affect the growth of forensic
accounting practice, of the 15, 8(53%) spoke in the same direction. It could be implied from
their reason that the judgments handed down to offenders who are found guilty are not
always commensurate with their offense so as to serve as deterrents to intending offenders. In
an earlier interview with Mr. Godwin of the CITN, he gave an insight of a judgment which
was delivered early in the year where a man accused to have stolen N23 billion was
sentenced to 2years imprisonment with an option of fine of N500, 000.

61

5 of the respondents, representing 25% did not agree that there is anything wrong with
Nigerian criminal laws as it relates to forensic accounting. Mr. Seun of KPMG equally agreed
with them. He gave reasons for this. He said, the laws are there, but they are not being
enforced. Mr. Seun said, even though some of the laws needed to be reviewed to meet present
day realities, he concluded that more still needed to be done in terms of enforcement of the
existing ones. When asked to elaborate on why most of the laws are not being enforced, Mr.
Seun said it can be traced to the corrupt tendency of enforcement agents in the country.
Furthermore 3(20%) of those who agreed that Nigerian criminal laws affect the growth and
practice of forensic accounting alluded their reasons to be that several loopholes in the laws
aid offenders to evade justice.
It can be concluded from the foregone that for the practice of forensic accounting to grow and
be more embraced, several of the lopsided and extinct Nigerian criminal should be reviewed,
updated or totally extinguished for replacement.
Also from the table, we see that all the 19 respondents which represent 95% of the entire
population agreed that Nigerian legal and courts systems have negative impact on the growth
of forensic accounting in the country while just 1 respondent which represent 5% said it does
not have any negative impact on the growth of forensic accountants. The reason is not farfetched as we all know. Court proceedings foot drag with unending adjournments which
naturally kills the drive of the prosecutors. Also, as Nigeria is very slow in accepting some
electronic evidences as admissible evidences in the court of law. Several cases have been lost
and offenders have walked out freely when damning evidences that should have nailed them
have been turned back mainly because the law does not permit its admittance as evidences.
Mr. Seun, Mr. Godwin and Mr. Adebayo all agreed that it is the ill manner with which the
Nigerian legal system have been structured that has rendered the efforts of law enforcement
agents such as The EFCC, and The ICPC in fighting corruption futile. They equally added
62

that the abortive nature with which cases are abruptly brought to an end without reasonable
conclusion also leaves much to be desired.
In addition, all of the respondents (100%) affirmed that the Educational system in Nigeria do
not support the growth, learning and practice of forensic accounting. Mr. Adebayo with
Akintola Williams (Deloitte) emphatically suggested that as it is done in the western
countries where forensic accounting is embraced, forensic accounting should be taught as a
course of study to accounting students at least from 200level so that by the time they get to
the field, they will just start practicing with little supervision since they would have been
conversant with its rudiments in the classroom. Mr. Godwin did not affirm less.
It can be concluded from this aspect that bedeviling the practice and growth of forensic
accounting in Nigeria are majorly the legal and court systems in the country, educational
system and to some extent the criminal laws in the country which should be reviewed. It is
certain that if all these are looked into, the country will experience rapid growth in the niche
which will equally translate into speedy dispensation of justice.

63

4.2.3 OBJECTIVE THREE

Areas where forensic accountants are needed
Here the respondents are left to state by themselves with no option being provided for them to
choose from, the several areas and activities in which forensic accountants are most
commonly engaged in.
Corporate fraud investigation
Criminal investigation
Litigation service
Matrimonial dispute
Partnership dispute
Business valuation
Professional negligence
Computer forensics
Personal injury claim
Employee fraud
Source: Field survey 2013.

Frequency count
14
12
9
8
6
3
3
2
1
1

Percentage
70
60
45
40
30
15
15
10
5
5
Table 4.2.3

As seen in table 4.2.3 above, commonly featured in the responses is corporate fraud
investigation with 14 representing 70% of the total respondents. We may deduce from this
that forensic accountants are mostly employed to investigate corporate fraud. From findings,
most of the corporate frauds are mostly perpetrated by the top level management in the
organizations or the owners of the business themselves in the case of privately owned
businesses. A vivid example of this is Enron and WorldCom in the United States of America.
Also the KPMG forensic review of the NNPC showed a major rot in the Multinational
Company. Among the scope of the study was to determine the accuracy and completeness of
reported crude oil and gas revenues accruing to the NNPC (both Federation and NNPC crude)
during the period 2007 to 2009 among others. The report dated 07 September 2010 had in it
the following findings among others;

64

Production /Commercial Allowable volumes have been observed to consistently

exceed OPEC quota of 1,673,000 BBL/D for the six month period (April to
September 2010),

NNPC is invoiced in US$ for domestic crude allocations but is expected to remit the
equivalent Naira value to the Federation Account. However we observed that
exchange rates used by NNPC were lower than the average exchange rates published
by the CBN during the review period. The implication of this is that there is
significant underpayment by the NNPC to the Federation account

We observed that crude oil sales and collections are not promptly captured on the
accounting system. Typically, these transactions are captured in the accounting system
after the transaction have been approved at FAAC meeting which is typically two (2)
months in arrears. This implies inaccurate sales and collection information on the
financial system and multiple data sources as data are predominantly managed outside
the system

The process of selecting Suppliers for importation of products is documented but the
documented procedures are not adhered to. We observed that the Evaluation
Committee only recommends prices for the importation of petroleum products while
actual allocation of importation contracts (especially volumes) appear to be at
Managements discretion. Here the risk exists that the product importation process
could be prone to abuse.

KPMG observed that NNPCs subsidy claims and PPPRAs verification are based on
volume of petroleum products available for sale (volume of products imported and
actual production from the refineries) as against duly verified volume of products
lifted out of the depots (volume of petroleum products sold) as stipulated in the
subsidy guidelines.
65

Source: Interim report on the Process and Forensic review of NNPC: Consolidated
Detailed Findings-v1.docx. 07 September 2010.
Closely following corporate fraud investigations is criminal investigation with 12(60%) of
them indicating it as one of the services forensic accountants engage. This is seen by the
deluge of criminal cases in the courts all over the country ranging from armed robbery, theft,
militancy and terrorism, oil bunkering, and rape to mention just a few. This has been
attributed to several factors such as unemployment, agitation for resource control, religious
and ethnic indifferences among other reasons. Equally the police, FBI in the United States of
America, CIA and others engage the services of forensic accountants.
When asked why forensic accountants are becoming more popular in Nigeria, Mr. Godwin,
Mr. Adebayo and Mr. Seun all insinuated that the rate of crime and fraud in the country has
become so alarming and the court are now been regarded as the settler of disputes which
means a forensic accountant must be hired to prove the case of fraud and criminalities beyond
reasonable doubt.
Equally listed among the areas of engagement of forensic accountants are litigation service
and matrimonial disputes taking 9(45%) and 8(40%) respectively of the total responses. As
stated earlier, it is now a common practice to head for the court for the settlement of disputes
than in the past. Many business owners, shareholders, politicians and other interested parties
now see the court as the arbiter of truth and justice. Litigation services include assisting with
the protection and recovery of assets, obtaining documents necessary to support or refute a
claim, the review of factual situation and provide suggestions regarding possible courses of
action. Also many couples now demand the services of forensic accountants in Matrimonial
disputes by employing him for the assessment and evaluation of assets to be divided. This is
evident from the divorce rate prevalent all over the world in recent times.

66

Also on the list of services where forensic accountants are in high demand is in the area of
investigating the root cause of partnership dispute. 6 respondents which represent 30% of the
entire population stated this as the services engaged in by forensic accountants.
Equally on the list of clients demand for forensic accountants are business valuation for
merger and acquisition, investigation of professional negligence, computer forensics,
personal injury claim, and investigation of employee fraud which were written by a handful
of the respondents. The profession is really growing and there are no limits to the services
that forensic accountants can render if only they could develop and build their capacity for it.

67

4.3 ANALYSIS OF FINDINGS

4.3.1

FINDINGS ONE

Ho: forensic accountant need possess basic relevant skills to succeed in their field
From table 4.2.1, it is observed that all the respondents affirmed positively all the expected
characteristics of a forensic accountant. There is no basis for testing here. We can only
conclude in line with the result of the finding and base our decision on the outcome and agree
with the following:
1. Forensic accountants need basic accounting skills;
2. Forensic accountants must of a necessity possess written communication skills;
3. To succeed as a forensic accountant, adequate analytical skill is a sine qua non.
4. Adequate knowledge of criminal law and enforcement is important for the forensic
accountant and
5. It is a must for a forensic accountant to have a prior audit experience.

Decision: since there is no opposing motion or view, there is no need for further computation
Conclusion: we can therefore conclude that forensic accountants must possess enhanced
relevant skills to succeed and be seen as a good forensic accountant.

4.3.2

FINDINGS TWO

Ho: there are challenges facing the growth of forensic accounting in Nigeria
From table 4.2.2 above, there were no opposing view to the fact that;
1. Nigerian Legal and court systems negatively impact the growth of forensic accounting
practice;
2. Nigerian Educational system does not encourage the growth of forensic accounting.

68

Conclusion: Based on this, we can reasonably conclude that the growth forensic accounting is
impeded by faulty legal and court systems and equally ill structured educational system and
curriculum.
However on the question of effect of criminal laws on the growth of forensic accounting,
15(75%) agreed that it negatively affect its growth, while just 5(25%) spoke in the positive
that criminal laws do not hinder its growth.
Decision: if we are to put this to a vote, those who said it has negative impact will obviously
carry the day.
Conclusion: since majority of the respondents are the forensic accountants themselves and
they know the challenges they encounter in the field, suffice to say that we can reasonable
conclude that Criminal laws affect the growth of forensic accounting practice negatively to a
large extent but in some other instances where the laws exist, all that is needed is its full
enforcement.

4.3.3

FINDINGS THREE

Ho: to gather information on where forensic accountants are needed

Based on findings as stated in table 4.2.3 above, the respondents listed the following as areas
where forensic accountants are needed and where they are engaged in;

Corporate fraud investigation: 14 out of 20 respondents which represent 70% of the

entire population wrote this. This could reasonably mean that the rate of occurrence of
corporate fraud is on the very high side as highlighted in the literature of this research.

Conclusion: we can reasonable conclude that majority of the respondents are favourably
disposed to the fact that forensic accountants are mostly engaged to investigate corporate
frauds.

69

Criminal investigation: 12 of the respondents wrote that forensic accountants are

engaged in the investigation of crimes of various kinds, most especially financial
crimes. This represents 60% of the entire population.

Conclusion: we can reasonably conclude that forensic accountants are also mostly
engaged in the investigation of financial crimes the world over going by the percentage of
respondents that wrote in its favour.

Litigation Services: 9 of the total respondents wrote in favour of litigation services.

This represents 45% of the entire population.

Conclusion: we can reliably conclude that litigation service is also a major area where
forensic accountants are engaged for.

Matrimonial and partnership dispute: 8 and 6 of the total population wrote this
representing 40% and 30% respectively of the total respondents.

Conclusion: this enables us to reasonably gather that a handful of forensic accountants are
equally engaged in matrimonial and partnership dispute investigation and settlement.

Business valuation and professional negligence: 3 of the entire population wrote these
which represent 15% of the entire population affirm that forensic accountants are
engaged to evaluate businesses in the time of business purchase or merger. They are
equally engaged to investigate professional negligence causing injury to the third
party.

Conclusion: we can conclude that at least some forensic accountants are engaged to
evaluate businesses and professional negligence.

Equally on the list of services offered by forensic accountants are computer forensic,
personal injury claim and employee fraud investigation.

70

Conclusion: no matter how small, we can equally conclude that forensic accountants are
also needed to investigate personal injury claims and employee fraud and computer
forensics.

71

CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.0

INTRODUCTION

This chapter presents the summary of the whole study, the conclusion drawn from it and the
recommendation made based on the findings of the study.
5.1

SUMMARY

The study focuses on the issues, challenges and opportunities available in the practice of
forensic accounting in Nigeria. The study analysed the ensuing and recent developments in
the practice of forensic accounting in Nigeria; assessed why forensic accounting practice is
not a popular field in Nigeria and the major challenges facing forensic accountants as expert
witnesses in prosecution in the court of law. The study equally identified opportunities
available in the acceptance of practice of forensic accounting and how to encourage the
growth of this specialty field of accounting.
5.2

CONCLUSION

Based on the research findings, it can be concluded that the views of the respondents
concerning the issues raised about the practice of forensic accounting in Nigeria are
somewhat similar and all pointing to the fact that more still needed to be done by the
government, students, accounting practitioners, audit firms and professional accounting
bodies to provide an enabling environment for the practice of forensic accounting, to
encourage its growth and practice in Nigeria. It can be inferred from the study that the legal
system is a bane of the success of forensic accounting. Capacity of accountants also needs to
be built to facilitate the practice and embracing of forensic accounting in Nigeria.

72

5.3 RECOMMENDATIONS
Based on the findings of this study, the following recommendations were made:
1.

There should be coalition amongst those involved in forensic and investigative

accounting including lawyers, accountants and other members of the public.

Balkanisation of the profession should be avoided.
2.

The subject of forensic and investigative accounting should be professionalised. In

this regard, the necessary legal framework for regulating the practice of forensic accounting
and investigations should be established, and where necessary, existing laws should be
amended to address developments in this area.
3.

Training of persons interested in the practice of forensic and investigating accounting,

as well as continuing education for persons already in the profession should be provided in
order to develop capacity in this area.
4.

The public sector should be involved in the forensic accounting initiative in view of

the fact that the government is the biggest spender in Nigeria's economy, is victim of most of
the corrupt practices and therefore, needs forensic and investigative accounting support more
than other stakeholders
5.

Tertiary institutions in Nigeria should engage and be encouraged at this embryonic

stage of forensic accounting and investigation to develop curricula for forensic accounting
and investigation as obtains in many universities outside the country.
6.

It should be determined early enough at what point professional certification should

become a requirement for new entrants into the forensic accounting and auditing profession.
In achieving this, a harmonised approach which insists on evident demonstration of expertise
in forensic accounting and investigation and defines the required basic knowledge of law and
accounting expected of professional should be adopted.

73

7.

A 'duty of care' should be imposed on cyber caf operators. To this end, cyber caf

operators should be required to register their customers so as to facilitate easy and effective
investigation of fraudulent practices perpetrated via their internet facilities. Furthermore,
technological measures should be utilised by online and internet service providers to preempt and abort fraudulent acts and transactions perpetrated with the use of their facilities.
8.

The Evidence Act should be amended such that the definition of 'document' includes

electronically generated document in order to make forensic evidence admissible in the

prosecution of banking offences.
9.

There is also need to coalesce forensic and investigative accounting and auditing

efforts. Furthermore, the relevant laws should provide that where possible, membership of
Audit Committees of public companies should include a forensic accountant.
10.

To guarantee the successful mitigation of economic crimes generally, and in the

banking sector specifically, the malaise of corruption should be effectively addressed. In this
regard, moral and ethical re-orientation is needed in the society in general to ensure that less
value is placed on materialism, and material success through illegal means is abhorred.
11.

The Money Laundering Act should be reviewed to reflect the current nature of

banking practice in Nigeria vis--vis the perpetration of financial and economic crimes to
ensure a more practicable role for the banking institution in mitigating financial crimes
5.4 SUGGESTIONS FOR FURTHER STUDIES
The present research on the practice of forensic accounting in Nigeria has helped to highlight
the main difficulties facing forensic accountants which if worked upon can further increase
the awareness and success of the practice among accountants in the country.
Further researchers will need to evaluate those areas and factors not discussed in details in
this research and other issues that could also throw more light on various issues discussed.

74

BIBLIOGRAPHY
1.

American Institute of Certified Public Accountants (AICPA), Characteristics and

Skills

of

forensic

accountants

http://www.aicpa.org/interestareas/forensicandvaluation/resources/practaidsguidance/downlo
adabledocuments/forensicaccountingresearchwhitepaper.pdf
2.

Becoming a forensic accountant. www.ifa.org

3.

Brigitte W. Muehlmann, Priscilla Burnaby, Martha Howe, 2012. The Use of Forensic

Accounting Experts in Tax Cases as identified in Court Opinions. Journal of forensic and
investigative accounting Vol. 4, Issue 2, 2012.
4.

Communiqu on Forensic and Investigative Account. July 2010. http://www.nials-

nigeria.org/round_tables/CommuniqueonForensicandInvestigativeAccount19th_july_10.pdf
5.

Dr. Adegbie, Folajimi Festus, Dr. Fakile, Adeniran Samuel, 2012. Economic and

Financial

Crime

in

Nigeria:

Forensic

Accounting

as

Antidote.

http://www.bjournal.co.uk/paper/BJASS_6_1/BJASS_06_01_05.pdf
6.

Dorothy A. McMullen, Maria H. Sanchez, A Preliminary Investigation of the

Necessary Skills, Education Requirements, and Training Requirements for Forensic

Accountants, Journal of Forensic & Investigative Accounting Vol. 2, Issue 2
7.

Eme Joel Efiong, February 2012, Forensic Accounting Education: An Exploration of

Level

of

Awareness

in

Developing

Economies

Nigeria

as

Case

Study.

http://www.ccsenet.org/journal/index.php/ijbm/article/download/13033/10215
8.

How to become a forensic accountant. http://www.ehow.com/how_2306364_become-

forensic-accountant.html
75

9.

ICAN STUDENTS JOURNAL, January/March, 2010 Vol. 14 No.1 Forensic

Accounting: Issues in Accountancy and Audit Practice

10.

ICAN STUDY PACK. 2006 Advanced Audit and Assurance

11.

Jonathan A. Okunbor, Osasumwen Obaretin, December 2010 Effectiveness of the

Application of Forensic Accounting Services in Nigerian Corporate Organisations,

http://aaujms.org/Effectiveness%20of%20the%20Application%20of%20Forensic
%20Accounting%20Services%20in%20Nigerian%20Corporate%20Organisations.pdf
12.

MARK J NIGRINI PH.D, Forensic Analytics; Methods and Techniques for Forensic

Accounting Investigations
13.

Owojori, A.A, T. O. Asaolu, 2009. The Role of Forensic Accounting in Solving the

Vexed Problem of Corporate World. http://www.eurojournals.com/ejsr

14.

Tabi H. Joda 2011. Anti - corruption Handbook for Nigerian Youths. A fundamental

Paradigm for Re-branding Education, Business, Politics, and Public Administration in

Nigeria.
15.

http://archive.transparency.org/

16.

www.Africanspotlight.com

17.

www.businessdayonine.com

18.

http://en.wikipedia.org/wiki/Enron#Misleading_financial_accounts

19.

http://www.forensicaccounting.com

20.

http://www.nigeriannewsservice.com/index.php?

option=com_k2&view=item&id=1077:cecilia-ibru-jailed-for-18-months--forfeits
n190bn&Itemid=231&tmpl=component&print=1
21.

http://saharareporters.com/content/full-report-68-billion-fuel-subsidy-scam

22.

http://www.scribd.com/doc/53009045/MSc-Accounting-SEMINAR-PAPER-on-

FORENSIC-AUDIT
76

23.

http://www.thenationonlineng.net/2011/index.php/mobile/news/45880-arunma-oteh-

at-house-capital-market-probe-okereke-onyiuke-blew-n186m-on-rolex-watches.html
24.

http://voices.yahoo.com/worldcom-scandal-look-back-one-biggest 225686.html?cat=3

77

APPENDIX I
INTERVIEW GUIDE
So as to ensure that the most important points and the main objective of the interview is not
defeated, the following questions will serve as guide

What are the major challenges faced by forensic accountants in their practice in

Nigeria?

Why is the practice of forensic accounting so unpopular in Nigeria despite its obvious
lucrativeness?

Even when corruption and fraud cases has been established against a person, most of
these cases still end up being thrown out by the judges for lack of diligent prosecution.
What can you comment about these situations?

What do you think are the Nigerian factors that could affect the roles of forensic
accountants as expert witnesses?

What can the government of Nigeria do to encourage the growth of this new niche in
accounting?

What qualities do you perceive are lacking in forensic experts in Nigeria that when
forensic experts are needed, we simply import them?

What opportunities abound for students that will be aspiring to become forensic
accountants? What skills should they equip themselves with so as to compete favourably with
their foreign counterparts?

78

APPENDIX (II)
DEMOGRAPHICS OF INTERVIEWEE
NAME

PLACE OF WORK
KPMG Professional

DESIGNATION
Senior Associate, Department

MR.SEUN ODEKU

Services, Victoria Island

of forensic accounting
Lagos
Akintola Williams(Deloitte)

MR ADEBAYO
House 235, Ikorodu Road

IFRS coordinator

Ilupeju Lagos
Chartered Institute Of

Ass. (Head) Finance CITN

MR GODWIN

Taxation Of Nigeria (CITN),

Lagos, Certified Forensic

OYEDOKUN

LCCI Building, Moshood

Accountant, Certified fraud

Abiola Way, Ikeja Lagos.

Examiner( CFA/CFE)

OLUMUYIWA

79

APPENDIX (III):

QUESTIONNAIRE

OBAFEMI AWOLOWO UNIVERSITY, ILE-IFE NIGERIA

FACULTY OF ADMINISTRATION
DEPERTMENT OF MANAGEMENT AND ACCOUNTING
INTRODUCTION
This questionnaire is designed to obtain information on the current issues,
challenges and opportunities that abound in the practice of forensic
accounting in Nigeria.
Please fill the information by ticking where necessary to the best of your
knowledge as all information will be treated strictly as confidential.
SECTION A: DEMOGRAPHICS
1. Gender: Male ( ) Female ( )
2. Age range: Below 20 ( )
21-30 ( )

31-40 ( )

41-50 ( )

Above ( )
3. Educational Qualification: OND ( ) B.Sc./HND ( )
Masters/Equivalent ( ) Above ( )
4. Professional Qualification: AAT ( ) ACA,ANAN,ACCA ( )

CFE/CFA

( )
5. Academic Major: Accountancy ( ) Economics ( )

Banking and

Finance ( ) Business Administration ( ) Other ( )

6. Working Experience: 1-5years ( ) 6-10years ( )

11-15years

( )
7. Where do you work? : Audit firm ( )

Private Practice ( )

Government Establishment ( )
other ( )
8. What position do you occupy presently occupy? : Top Management
level ( )

Middle management level ( )

Low/operational

management level ( )
9. Are you a practicing forensic accountant Yes ( )

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No ( )

SECTION B
TO HIGHLIGHT SOME OF THE MOST ENHANCED RELEVANT SKILLS
WHICH ACCOUNTANTS MUST POSSESS
i.
In general, forensic accountants need basic accounting skills.

Yes

ii.

( )
No ( )
Forensic accountants need possess written communication skills.

iii.

Yes ( ) No ( )
Analytical Skills are important to succeed in the field of forensic

iv.

accounting. Yes ( )
No ( )
Forensic accountants need to be conversant with criminal laws and

v.

enforcement Yes ( )
No ( )
Forensic accountants need have prior audit experience Yes ( ) No
( )

SECTION C
TO BRING TO THE FORE SPECIFIC CHALLENGES FACING THE GROWTH OF
FORENSIC ACCOUNTING PRACTICE IN NIGERIA
i.

Criminal laws in Nigeria affect the growth of forensic accounting practice

Yes ( )

No ( )

If yes, How...............................................................................................
ii.

Legal and Nigerian court system have negative impact on the growth of
forensic accounting practice Yes ( )

iii.

No ( )

Nigerian Educational system do not encourage the growth and practice of

forensic accounting Yes ( )

No ( )

SECTION D
TO GATHER INFORMATION ON WHERE FORENSIC ACCOUNTANTS ARE
NEEDED
Please kindly identify areas and activities forensic accountants are engaged
in.
1.
2.
3.

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