CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The issue of fraud, money laundering and other corrupt practices in business and government organizations has necessitated the application and practice of forensic or investigative accounting. Forensic or investigative accounting is that branch of accounting that deals with recovering proceeds of fraud, money laundering and other related corrupt practices that may occur in an organization. Once fraud is perceived or detected, a professional set of people-the forensic accountants are called upon to help detect the fraud and furnish management with substantial evidence to be presented in the court of law, when prosecuting the suspects involved in the fraud. ‘Forensic’ which means evidence or material(s) to be used in court has been incorporated into accounting and finance as a result of increase in white collar crimes (Mazunder, 2011). Mazunder also remarked that law enforcement personnel in recent years have become more aware of white collar crimes, but lacked expertise and training in combating such crimes. According to Zysman (2004), forensic accounting utilizes accounting, auditing and investigative skills.
Enyi (2012) also asserted that it takes an accountant to catch a corrupt of fraudulent accountant, as man is expected to know the trick of a monkey in order to catch it. Strict ethical conducts must be applied by an auditor in-order to carry out forensic accounting successfully. An auditor must be fully independent and must be aware of the tricks of management staff and employees in perpetrating fraud in an organization. Joshi (2003) traced the history of forensic accounting to Kutilya, the first economist to openly recognize the need for the forensic accountants. The first form of forensic accounting can be traced to an 1817 court decision. The phase ‘Forensic Accounting’ was first coined by Puloubet in 1946. Publoubet was the first man to publish in his book the phase ‘Forensic Accounting’. Since Nigeria gained her independence in 1960, forensic accounting has existed due to increase in fraud, money laundering and other forms of economic and financial crimes in the country (Enyi, 2012). The term ‘forensic accounting’ is not new in Nigeria as auditors, police and intelligence units apply it every day in the discharge of their duties.
The growing demand for forensic accounting is a known characteristic of most companies in the world. Forensic accounting arises from the effect and cause of fraud and technical error made by human. Forensic accounting is quite new in Nigeria as companies have realized that the service of a forensic accountant is needed as fraud cases have substantially increased in number. Forensic accounting is the application of financial skills and investigative mentality to unsettled issues, conducted within the context of the rules of evidence (Arokiasamy and Cristal, 2009). Bologna and Lindquistn (1987) assert that forensic accounting as a discipline encompasses fraud knowledge, financial expertise, and a sound knowledge and understanding of business reality and the working of the legal system.
Forensic accounting may be one of the most effective and efficient way to decrease and check accounting fraud. Presently, forensic accounting is gaining popularity worldwide. It is been taught as a major course in many educational institutions in various countries, Howard, and Sheetz, (2006). It has been noted that “Government spending has always been a big business, but it has become so massive today that the public through its legislators is demanding to know whether the huge outlays of money are being spent wisely or whether they should be spent at all.” Officials and employees who manage public sector activities are by virtue of that duty, required to render adequate accounts of their activities to the public (Ribadu, 2005).
The incidence of fraud continues to increase across private and public sector organizations and across nations. Fraud is a universal problem as no nations is immuned, although developing countries and their various states suffer the most pain. Forensic accounting is said to bring significant improvement in the quality of fraud detection and prevention. This study meant to help and remind the public sector organization of Kogi State, in the affected ministries to design an integrated approach to preventing and controlling fraud and corruption within the workplace through an establish service of Professional Forensic Accountants.