FORENSIC AUDIT AND THE PERFORMANCE OF PUBLIC SECTOR
A CASE STUDY OF RIVERS STATE MINISTRY OF FINANCE
The menace of fraud, corruption, and misfeasance are commonplace and are the increase globally and, indeed, in Nigeria. Thus forensic accounting or forensic auditing has emerged as a result of the surge in fraud. Accordingly, the aim of this conceptual paper is three fold. First, this paper sought to imbibe the art of forensic thinking among auditors; second, it aimed at stimulating and promoting the understanding of basic forensic skills; and third, it aimed at expanding the stock of literature in forensic accounting and audit. Given this broad spectrum of objectives of this paper, characteristics of a forensic auditor were examined and skills as well as objectives of forensic audit were discussed. In the discus of the application of forensic audit, both reactive and proactive accountings were examined. This was followed by a highlight on the distinction between statutory audit and forensic audit. Detection techniques and steps in conducting forensic audit were also discussed. We concluded that forensic audit practice can reduce the incidence of fraud.
1. O BACKGROUND OF STUDY
Kessr international, a world renowned forensic accounting and investigative consulting firm, began his lifelong career as a forensic auditor in the early1970’s.
Kessler’s first job out of college was that of a field auditor for associated hospital service of New York. His job was to ferret out fraud and abuse committed by health care institutions and its employees against the Medicare. In those days health care facilities received reimbursement for the services they rendered based on a calculated rate derived from cost reports submitted to an insurance carrier. Kessler’s job was to visit hospitals and health care facilities to review and compare the original documentation of the facility reported on the cost report and ascertain if it properly reflected the actual revenue and expenses of the facility
Mr. Kessler’s audits began uncovering significant fraud by the facilities he audited, so he was designated as one of the companies first field auditor specializing in investigative audits. Mr. Kessler’s, wanting t to distinguish his role from other field auditors and the accountants whose job was to certify the books and records of a facility, began calling himself an “Investigative accountant”, a term he heard while working closely with the government’s accountants assigned to analyze his fraud findings. Kessler quickly realized that this title would not be accepted by individuals in the health care industry. It seemed no one felt comfortable in the hands of an “investigative Auditor”. Kessler was now faced with a dilemma Kessler’s inspiration came from a very unlikely source. One night after watching his favorite show, “Columbo”, he found the resolution to his problem. To some viewers Columbo’s most memorable attribute was his crumple raincoat, but for Michael G. Kessler, it was much more. Kessler realized the peter Falk could quickly solicit the cooperation of defendants and solve cases using a gentle approach and the use of “forensic evidence”. Kessler thus began calling himself a “forensic auditor”, a term coined by Kessler, and now widely used within the industry. He found the result was as he had hoped and he was quickly accepted when the announced himself in the health care community.
The rest is history and today forensic auditing is one of the fastest growing professions in the nation. With worldwide offices and on staff specialists in Forensic Auditing, Computer Forensic, Risk Management and Corporate investigation, Kessler international provides solution to difficult business problem. Auditors need to be alert for situations, control weaknesses , inadequacies in recordkeeping, errors and unusual transactions or results which could be indicative of fraud, improper or unlawful; expenditure, unauthorized operations, waste, inefficiency or lack of probity.
The last decade or so the words forensic auditing have become part and parcel of our vocabulary but under the general population the only association the make is that it is just another “accounting” or “auditing” procedure or process.
But let us start at the very beginning; Auditing is the process of identifying, measuring, recording and communicating economic information about an organization or entity, in order to permit informed judgments by users of the information. On the other side of the coin is forensic auditing which is a new discipline under the umbrella auditing.
It is crime, and especially economic crime that gave birth to forensic auditing. Economic crime is an unpleasant fact and has escalated into a monster. It touches every country, every industry, and has no signs of stopping. During the past decade, the number of reported cases of fraud and corruption has continued to grow dramatically.
Compounding that is the challenges faced by the criminal justice system and a general absence of the necessary skills to gather the proper audit evidence so vital to criminal investigations. Information from law enforcement and criminal success rate for convictions are not satisfactory – the reason being that prosecuting authorities lacked skills and knowledge to provide effective investigation and prosecution of corruption and fraud cases. Enter forensic auditing!
Therefore, forensic auditing draws its name from association with a court of law. It is performed to accomplish an objective that involves a judicial process. Examples of forensic auditing objectives include: computation of asset values in a divorce proceeding; assessment of damages caused by an auditor’s negligence; fact-finding to see whether embezzlement has taken place, in what amount, and whether criminal proceedings are to be initiated; and the collection of evidence in a criminal proceeding. Forensic auditing is focused upon both the evidence of financial transactions and reporting as contained within an accounting system, and the legal framework which allowed such evidence to be suitable to the purpose of establishing accountability. Forensic auditors are typically Chartered Accountants that specialize in those types of cases where there is need for such evidence.
Their job is to detect and interpret the evidences of both normal (non fraudulent) and abnormal (fraudulent) transactions in the books and records of an accounting system and the subsequent effect upon the accounts, inventories, and the presentation thereof. It is imperative: therefore, that forensic auditors first understand what normal auditing procedures and processes are – remember they are first and foremost chartered accountants. Just as forensic dentists and forensic anthropologists are dentists or anthropologists first (that is, they are fore most professionals in the underlying discipline and are specialists in its forensic aspects), so too forensic auditors are auditors first.
The failure of statutory audit to prevent and reduce misappropriation public funds and an increase in embezzlement in Nigeria has put pressure on professional auditors and legal practitioners to find a better way of exposing crime in the public sector. The specific problem which the research tends to address is as follow
The problem of audit in the public sector needs to be seriously addressed. The objective of this research work is:
The focus of this study is on forensic audit with special emphasis on public sector fraud reduction and mismanagement in ministry of finance, rivers state, Nigeria. Data will be obtained from various stake holders within rivers state ministry of finance.
When viewed from the prospective of forensic auditing, in the Nigeria public sector, the significance of this research will be appreciated
The primary purpose of is research is to enlighten non-forensic auditors on how public sector fraud and mismanagement can be tackled.
The research is also aimed at creating understanding of the duties of foreign auditors in litigation support, the potential of foreign auditing service in the Nigeria public sector, special skills and characteristics of forensic auditors.
The organisation of study is the rivers state ministry of finance, located at (
Hypothesis shall be developed and tested to ensure a more effective and result oriented work. The null hypothesis (H0) and the alternative hypothesis (H1) will be used for the purpose of this study.
(H0): Public sector fraud reduction is not dependent on forensic auditing
(H1): Public sector fraud reduction is dependent on forensic auditing
(H0): Forensic auditing cannot promote public sector performance
(H1): Forensic auditing can promote public sector performance
TERMS AND CONDITIONS
Using our service is LEGAL and IS NOT prohibited by any university/college policies
You are allowed to use the original model papers you will receive in the following ways:
1. As a source for additional understanding of the subject
2. As a source for ideas for your own research (if properly referenced)
3. For PROPER paraphrasing (see your university definition of plagiarism and acceptable paraphrase)
4. Direct citing (if referenced properly)
Thank you so much for your respect to the authors copyright
For more project materials
Log on to www.grossarchive.com