forensic accounting and audit expectation gap - the perception of accounting academics

8/12/2019 Forensic Accounting and Audit Expectation Gap - The Perception of Accounting Academics

1/35Electronic copy available at: http://ssrn.com/abstract=1920865

Forensic Accounting and Audit Expectation Gap The Perception of Accounting Academics.

By Emma Ik Okoye and S C Okaro

Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria.

Working Paper Series

Contact Author: S C Okaro

E Mail: [email protected]

ABSTRACT

This research is about the perception of Accounting Academics on the vexed issue of whether the

injection of Forensic Accounting techniques, on a cost/benefit basis, in an audit is capable of increasing

the ability of the auditor to discover fraud and thus help in bridging the audit expectation gap in Nigeria.

A survey research design approach was adopted for this study. Questionnaire was administered onAccounting Academics of 8 tertiary institutions in the Eastern part of Nigeria. The study reveal , from the

perception of Accounting Academics, that Forensic Accounting techniques injected in an audit and given

cost/benefit considerations is capable of increasing the ability of the Auditor to detect fraud and thus

help bridge the audit expectation gap in Nigeria. This finding has implications for both accounting

education and accounting practice.

Key Words: Forensic Accounting; Audit expectation gap; Perception; Accounting Academics.

1.1 background of Study.

The integration of accounting, auditing and investigative skills results in the special field known as

forensic accounting (Crumbley, 2008). Forensic accountants have been described as experienced

auditors, accountants and investigators of legal and financial documents that are hired to look into

possible suspicions of fraudulent activity within a company; or are hired by a company who may just

want to prevent fraudulent activities from occurring. They also provide services in areas such as

accounting, antitrust, damages, analysis, valuation, and general consulting. Forensic accountants have

also been used in divorces, bankruptcy, insurance claims, personal injury claims, fraudulent claims,

construction, royalty audits, and tracking terrorism by investigating financial records. Many forensic

accountants work closely with law enforcement personnel and lawyers during investigations and often

appear as expert witnesses during trials. Forensic Accounting is an amalgam of forensic science and

accounting. Although the coining of the term Forensic Accounting is said to date back to 1946, the

practice is relatively new in Nigeria (Kasum, 2009). The need for forensic accountant has been ascribed

to the fact that the audit system in an organization had failed to detect certain errors in the managerial


2/35Electronic copy available at: http://ssrn.com/abstract=1920865

system. In particular, the following have been fingered as being responsible for the growth of Forensic

Accounting:

- Failure of internal audit and audit committee to unearth hidden aspects of corporate fraud

- The often compromised method of appointing statutory auditors

- The apparent lack of independence of internal auditors.

The increasing incidence of fraud and fraudulent activities in Nigeria and around the world as a whole

(Okoye & Akamobi, 2009; Owojori & Asaolu, 2009)

Audit expectation gap, on the other hand, is often described as the gap between the auditors actual

standard of performance and the various public expectations of auditors performance. Members of

the public expect that:

- Auditors should accept responsibility for the Financial Statements

- Auditors should vouch for the Financial Statements

- Auditors perform a 100% check instead of sampling check,

- Audit reports should serve as early warning signals of corporate distress

- Auditors should take responsibility for all frauds

Public misperceptions of auditors responsibility are a major part of the expectation gap problem

(Koh & Woo, 1998).

The primary responsibility of an auditor is to verify whether the Financial Statements show a true and

fair view of the business while their secondary responsibility is the prevention and detection of errors

and fraud. The primary duty to detect and prevent errors and fraud lie with those charged withgovernance and the management of an entity. Fraud involves misapplication of resources or distorted

reporting of the availability of resources, so this contradicts the element of round and prudent

management. While the third party emphasize that an auditor must be in a position to detect all kinds

of fraud, the auditors are not so persuaded as they believe that it is not their primary duty to detect

fraud, so there is a gap between auditors and third parties(Salehi & Azary, 2009a)

Performance gap is also the other component of the problem. Performance gap occurs when the

perception of the public about the auditors duty is reasonable but the auditor fails in his performance

of such duty. Empirical Studies have long confirmed the existence of audit expectation gap in many

climes (Abduiqaderai qarni, 2004; Ojo, 2006a). Lack of independence by auditors remains a critical issuein the expectation gap conundrum. The following are at the base of auditors lack of independence:

1 Economic dependence

2 Audit market competition

3 Regulatory Frame work and


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4 Provision of non-audit services (Salehi, Mansoury, & Azary, 2009)

Forensic accounting per se is not new. However, the recent accounting scandals including the celebrated

case of Enron, the energy giant that collapsed as a result of monumental fraud has added impetus to the

search for a viable option in dealing with accounting frauds. In Nigeria, the recent accounting scandal

involving the food and beverages giant, Cadbury (Nig) Plc. Has brought to the fore the need for anurgent solution. Conventional audit techniques cannot be guaranteed to detect fraud all the time

because of the limitations inherent in the modern audit process. Hence the need for a more robust

technique to stem the tide of fraud and thus bridge the audit expectation gap caused by the inability of

the accounting profession to satisfactorily grapple with fraud from the perception of users of Financial

Statements. The Forensic Accountant is a blood hound of book keeping as opposed to a watch dog

associated with an auditor. They sniff out fraud and criminal transactions in corporate entities financial

records. They hound for the conclusive evidences. External Auditors find out the deliberate

misstatements only but the Forensic Accountants take a more proactive, skeptical approach to

examining the books of accounting. They make no assumptions of Management integrity, show less

concerns for arithmetical accuracy and have nothing to do with assurance or accounting standards butare kin in exposing fraud (Anwar, 2008)

1.2 Statement of the Problem

Some people believe that the incorporation of modern forensic auditing techniques in an audit in

Nigeria is needed to arm the accounting profession to deal effectively with the problem of unearthing

ingenious fraud schemes arising from audit failure to detect frauds. Studies on forensic accounting and

audit expectation gaps are very few in Nigeria. In climes where the use of forensic accounting

techniques is much more common, experts warn that the cost of such tools could be enormous. This

study, therefore, is aimed at ascertaining, on a cost benefit basis, the perception of accounting

academics on the ability of forensic accounting techniques to discover fraud and thus contribute in

bridging the audit expectation gap.

1.3 Objective of Study

The general objective of this study is to find out the perception of accounting academics as to whether

the wide spread use of forensic accounting techniques in the average audit in Nigeria will on a cost

benefit basis, enhance the chances of fraud discovery and thus help in narrowing the audit expectation

gap. Specific objectives of this research are:

1 to find out the view point of accounting academics as to whether on a cost benefit basis, the

introduction of some forensic accounting techniques in an audit is capable of stemming

the tide of financial fraud and thus bridge the audit expectation gap.

2 to ascertain the opinion of accounting academics on some of the identified skills that will serve

the Forensic Accountant in good stead.


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3 deriving from the above, to make recommendations

1.4 Research Questions

The following research questions were formulated for the purpose of this study.

1 To what extent do Accounting Academics agree to the suggestion that the introduction of forensic

accounting techniques in an audit will stem the tide of corporate fraud and thus help in bridging the

Audit expectation gap?

2 What is the perception of Accounting Academics to some identified skills needed to make a success

of forensic accounting career?

1.5 Research Hypotheses.

For the purpose of this study, the following research hypotheses were framed and tested in this study

H1 Accounting Academics in Nigeria agree to the suggestion that, on a cost - benefit basis, the

introduction of forensic accounting techniques in an audit will stem the tide of financial fraud and thus

help in bridging the audit expectation gap.

H2 Accounting Academics in Nigeria perceive in positive light some identified skills needed by a

forensic accountant.

1.6 Scope and Limitations of the Study

This study is focused on accounting academics in Nigeria. However, for reasons of cost and time,

accounting academics in Eastern geo political zone of Nigeria will be the main target. They will be

sought at in their various universities and polytechnics. In particular, accounting academics will be

targeted from the following institutions:

- Nnamdi Azikiwe university, Awka

- University of Nigeria, Enugu Campus

- Anambra state university, Igbariam campus

- Delta state university

- Federal technical college, Umunze

- Federal polytechnic, Oko

- Auchi Polytechnic and

- Enugu State University

1.7 Significance of the Study


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This study will add to the little pool of studies available in this area in Nigeria. Members of the public

(including investors) will be able by reading this work to advance their knowledge of this rather

important but new area in corporate governance in Nigeria. The accounting academic will come to

know the thinking of his colleagues as a group on this matter as well as being equipped for future

curriculum development in the area. NUC as a curriculum developer will also be informed of an

input from an important stakeholder group which will help it fashion out an enduring and relevant

curricula in that area. Regulators like ICAN and ANAN will have an input that will enable them

regulate their members better. The international community will have the benefit of another

research on a subject that has international relevance but this time from Nigerian accounting

academics. The individual universities will be in a position to know whether they need to introduce

forensic accounting as a subject to rejuvenate their accounting discipline and give them competitive

edge over their peers. This study may enable Government determine whether there is critical need

for forensic accountants in the economy and thus enable it plan accordingly. Fellow researchers will

be equipped with a study that will give them a base for further work in this area.

References:

Abduiqaderai qarni, A. (2004).Audit expectation gap in saudi Arabia- perceptions of

auditors,preparers of Financial Statements and users. Dundee, Uk.

Anwar, N. (2008, April 20). Forensic accounting: A dynamic tool for combating corruption. The

Financial Express, 1-1. Dhaka.

Crumbley, D. L. (2008). What is Forensic Accounting?Journal of Forensic Accounting,IX(1),1

Kasum, A. S. (2009). The Relevance of Forensic Accounting to Financial Crimes in Private and

Public Sectors of Third World Economies: A Study from Nigeria. Proceedings of The 1st

International Conference on Governance Fraud Ethics and Social Responsibility, June

(pp. 1113).

Koh, H. C., & Woo, E.-S. (1998).The Expectation Gap in Auditing.Managerial Auditing

Journal, 13(3), 147-154.

Ojo, M. (2006). Eliminating the Audit Expectations Gap: Myth or Reality? Munich Personal

RePEc Archive.

Okoye, E. I., & Akamobi, N. (2009). The Role of Forensic Accounting in Fraud Investigation


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and Litigation Support. The Nigerian Academic Forum, 17(1), 39-42.

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

Problem of Corporate World.European Journal of Scientific Research, 29(2), 183187.

Salehi, M., & Azary, Z. (2009). Fraud detection and audit expectation gap: Empirical evidence

from Iranian bankers.International Journal of Business and Management, 3(10), P65.

Salehi, M., Mansoury, A., & Azary, Z. (2009). Audit Independence and Expectation Gap:

Empirical Evidences from Iran.International Journal of Economics and Finance, 1(1),

P165.

Chapter 2

2.0 Theoretical Framework and Review of Related Literature

2.1Theoretical Framework

Fraud examination is conducted in order to find where fraud is being perpetrated and by whom.

The concept of the fraud triangle has often been advanced to explain the key elements

underpinning most frauds. These include opportunity, pressure and rationalization. Sometimes,

companies unknowingly give their companies the opportunity to perpetrate fraud because of

poor internal control. While some succumb to such temptations, others are able to resist. The

culprit then rationalizes his action. Forensic accounting is based on fraud examination and fraud

triangle (E. I Okoye & Akenbor, 2009)

Since the beginning of the audit profession, theories were made in order to specify and

determine the audit profession. The agency theory is associated with the conflicting interest of

shareholders and management of a company suggesting that the less informed party

(shareholders) will have a demand for information that monitors the behavior of the better

informed manager. Audits of financial reports will be one form of such information. The

policeman theory posits that auditing is focused on arithmetical accuracy and on prevention and

detection of fraud. Other theories guiding auditing include the lending credibility theory,

moderator of claimants theory, Quasi-judicial theory and theory of inspired confidence (Hayes,

Schilder, Roger, & Philip, 1998). The policeman theory is considered most relevant for this

study.

2.2 Forensic Accounting versus Audit

Serial No Forensic Accounting Audit

1 Forensic Accounting is done in Audit is mandatory


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response to an event

2 Forensic Accountants should

possess investigative

mentality

Auditors should possess

professional skepticism

3 Deals with financial

investigations

Measures compliance with

reporting standards4 Findings used as evidence in

court or to resolve disputes

Obtain reasonable assurance

that financial statements are

free of material misstatements

5 A Forensic Accountant may

focus more on seemingly

immaterial transactions

An Auditor basically focuses

on material transactions

6 The coverage of Forensic

Accounting is wider than

Audit dealing with both

financial and non- financial

issues

Audit is mainly concerned on

financial statements and its

related items

Source: Sage Inc.

It should be noted, however, that the divergence between Forensic Accounting and auditing

became more pronounced when Auditors began to reject the notion that a primary duty of an

Audit is discovery of errors and fraud (Gray & Moussalli, 2006; Mazumder, 2011).

2.3 Dimensions of Fraud and Audit Expectation Gap

A material misstatement may occur in two ways- misappropriation of assets and fraudulent

financial reporting. These could further occur in the following ways:

- Misappropriation of assets

- Suppression or omission of the effect of transactions from records or documents

- Recording of transactions without sufficient evidence and

- Misapplication of accounting policy.

Possible reasons for management fraud include

1) Incompetent managers playing a survival game by trying to deceive.

2) Management perks often depend on profits

3) Pressure on management to excel in the market place

4) Excessive risk taking by some managers

Management fraud remains the night mare of Auditors as they are very intractable since

management can easily override internal controls. While third parties believe that auditors should as

a primary responsibility, detect fraud, Auditors believe that their primary duty is to issue a report on

the truth and fairness of the financial statement audited by them. Given this scenario, the audit

expectation gap as a result of failure of modern audit process to guarantee the detection of all

material fraud persists (Salehi & Azary, 2009b)

2.4 Skills Set for the Forensic Accountant


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Several studies have sought to chronicle the skills which a Forensic Accountant should have in his kitty

to be effective and remain relevant.

In one study, the following findings were made:

- The market place requires the Forensic Accountant to possess a different skill set from the

traditional Accountant

- Over 60% of the respondents ranked analytical skills, attention to details and ethical orientation

as necessary for success as a Forensic Accountant

- The survey targeted Certified Public Accountants (CPAs), Academicians and Attorneys

(representing users).

- All three groups agreed that analytical skills were the most essential.

- Other skills identified by the three groups, though not ranked the same, include effective oral

communication, ability to simplify information, auditing skills, investigative intuitiveness, ability

to identify key issues and relevant qualifications(Davis, Ramona, & Ogliby, 2009)

In a related research that surveyed Forensic Accounting Practitioners, Accounting practitioners and

attorneys, the following skills were identified although perceptions differed among groups as to the

different rankings of the skill sets:

- Deductive Analysis

- Critical Thinking

- Unstructured problem solving

- Investigative flexibility

- Analytical proficiency

- Oral communication

- Written Communication- Specific legal knowledge and

- Composure(DiGabriele, 2007)

One striking thing is that the outcomes of the two researches have a lot in common although

nomenclature may differ.

Interestingly, a similar study in Nigeria which also pooled Accounting practitioners, Academicians

and users of accounting information arrived at similar conclusions on the skill set that will place the

Forensic Accountant in good stead ( Okoye & Yohanna, 2010)

An extensive review of literature also revealed certain other skills which some writers believe willhelp the Forensic Accountant be at his best. These include:

- Persistence and doggedness

- Knowledge skills in criminology

- Computer skills

- Confidence


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- Curiosity

- Creativity

- Discretion

- Prudence

- Secrecy

- Honesty and

- Personal courage

(Crawford, 2010; Kleeyman, 2006; Wells, 2003; Zia, 2010)

2.5 Bridging the Audit Expectation Gap-the role of Forensic Accounting. The introduction of Forensic

accounting techniques in an audit will enhance the chances of fraud detection and thus help bridge the

audit expectation gap. Forensic Accounting has been adjudged to have a positive role in solving the

vexed problems of corporate governance in Nigeria including fraud detection (Owojori & Asaolu, 2009).

Other studies confirmed that forensic accounting was relevant in fraud detection (Chariri, 2007; Kasum,

2009). Researchers have even gone a step further to establish that auditors should develop forensic

mindset in order to enable them assess more accurately the risk of fraud in any engagement so thatthey can take appropriate remedial action and thus enhance audit quality(Chui, 2010). However,

researchers caution that the injection of a Forensic auditing expert in an audit, or/and auditors

developing forensic mindset, cannot completely eliminate the audit expectation gap. The simple reason

is that expectation gap has various components, fraud detection or lack of it on the part of auditors

being only one component (Ojo, 2006b)

2.6 Forensic Accounting A cost/ Benefit Analysis. Introduction of Forensic Accounting techniques in an

audit will certainly increase the cost of an audit. This cost will be more in the nature of professional fees

paid to the Forensic Accountant and reimbursable in cases of litigation arising from fraud discovery.

There are, however, benefits also associated with the any decision to introduce forensic accountingtechniques. The real issue, therefore, is whether such a decision will be justifiable on a net benefit/cost

basis. The benefits of Forensic Accounting include fraud prevention and fraud detection (Pirraglia, 2011).

A good starting point is to investigate the cost of fraud. On a global basis, it has been estimated that

about 2.74trilion British pounds has been lost to fraud as at 2009.(McGinn, 2009). The quantifiable and

the unquantifiable costs of financial statement fraud to the global community following the aftermath of

ENRON have been chronicled as follows:

- Heavy losses suffered by companies. For example, it is estimated that more than 50% of U.S.

Corporations are victims of fraud with losses of more than 500,000 U.S dollars

- Investors, employees and pensioners suffer huge losses in the event of bankruptcy of victimcorporations. Enron, for example, lost about 70billion dollars in market capitalization when it failed.

- Other fraud costs include legal costs, increased insurance costs, loss of productivity, adverse impact

on employee morale, customer goodwill, supplier trust and negative stock market reactions.

- Undermines the reliability, quality, transparency and integrity of the financial reporting process


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- Jeopardizes the integrity and objectivity of the auditing profession.

- It diminishes the confidence of the capital market and

- Adversely affects the Nations economic growth.(Quffa, 2011).

2.7 Summary of Theoretical Framework and Review of Related Literature.

Forensic Accounting is not as new as many people think. In the beginning, auditors took

responsibility for detection of fraud and forensic accounting techniques were used in audit. Beginning

from early 1940s auditors and the accounting profession began to redefine the duties of an audit.

Auditors were no longer primarily responsible for fraud detection and that the prime purpose of an

audit is to enable the auditor express an opinion as to whether the Financial Statements of an

organization showed a true and fair view of the entitys transactions. With the strident calls and

pressures on modern audit to once again assume responsibility for fraud, the signs are that Audit and

Forensic Accounting will soon reunite again. Forensic accounting techniques by increasing the

probability of fraud prevention and detection help in bridging the audit expectation gap as it relates to

inability of an audit to detect fraud. The cost of financial statement fraud is enormous and may never

be fully quantified. Forensic accounting techniques on a net cost/benefit basis appear to fully justify

their application in a modern audit. Perception studies have shown that various stakeholder groups

agree on the core skill sets required of the modern Forensic accountant. There is a surfeit of research on

forensic accounting especially on the skill sets required of such a professional. In Nigeria, forensic

Accounting presents a relatively new area of enquiry. To the best of the researchers knowledge, only

very few tertiary institutions (including Nnamdi Azikiwe University) are offering courses in Forensic

Accounting. Correspondingly, few local researches are available in this area going by the extensiveliterature review undertaken by the researcher in the course of this study. As forensic accounting is a

new growth area in Nigeria, it is important that perception studies are done particularly in respect of

accounting academics that will drive the needed change in forensic accounting education. This is the

gap this research will help to fill.

References:

Chariri, A. (2007). The Relevance of Forensic Accounting in Detecting Financial Frauds.

Journal Organisasi dan Manajem, 3(2), 81-88.

Chui, L. (2011).An experimental examination of the effects of fraud specialist and audit

mindsets on fraud risk assessments and on the development of fraud-related problem

representations. University of North Texas.

Crawford, C. J. (2010). CAN FORENSIC ACCOUNTING PROVIDE THE TOOLS TO


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RESTORE CONFIDENCE IN THE FINANCIAL STATEMENT REPORTING

PROCESS?Journal of Business and Accounting, 3(1), 125-133.

Davis, C., Ramona, F., & Ogliby, S. (2009). Characteristics and Skills of the Forensic

Accountant(p. 277). US: AICPA.

DiGabriele, J. A. (2007). Fishbowl the Forensic Accountant: Are There Differences in the Views

of the Relevant Skills of a Forensic Accountant Among Practitioners, Academics and

Users of Forensic Accounting Services? Mont clair State University.

Gray, O. R., & Moussalli, S. D. (2006). Forensic Accounting and Auditing United Again: A

Historical Perspective.JOURNAL OF BUSINESS ISSUES _, 2, 15- 25.

Hayes, R. S., Schilder, A., Roger, D., & Philip, W. (1998). Principles of International Auditig.

Auditingtext.com. Retrieved August 17, 2011,




(pp. 1113).

Kleeyman, Y. (2006).A Course in Forensic Accounting. Pace, U.S.

Mazumder, M. (2011). Forensic AccountingAn Investigative Approach of Accounting. SSRN

Electronic Library.

McGinn, J. (2009, November 16). The global financial cost of fraud |. Finance Week. Retrieved

August 20, 2011, from http://www.financeweek.co.uk/topic/global-financial-cost-fraud

Ojo, M. (2006). Eliminating the Audit Expectations Gap: Myth or Reality?

Okoye, E. I, & Akenbor, C. O. (2009). Forensic Accounting in Developing Economies Problems

and Prospects.Advanced Research Journal, (1).


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Okoye, Emma I, & Yohanna, J. (2010). An Empirical Investigation of the Relevant Skills of

Forensic Accountants in Nigeria.Journal of Knowledge Management, 1(2). Retrieved

from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1797683



Pirraglia, W. (2011). The Advantages of Having a Forensic Accountant Within an Organization |

eHow.com. eHOW. Retrieved August 20, 2011, from

http://www.ehow.com/list_6292827_advantages-forensic-accountant-within-

organization.html

Quffa, H. C. (2011). Financial Statement Fraud.Hanna Associates.



Wells, J. T. (2003). The Fraud Examiner. Sleuthing careers bring CPAs personal and

Professional Satisfaction.Association of Certified Fraud Examiners. Retrieved August

10, 2011, from http://www.acfe.com/resources/view.asp?ArticleID=35&fontsize=lg

Zia, T. A. (2010). Development, Delivery and Dynamics of a Digital Forensics Subject.Digital

Forensics conference (p. 175). Presented at the 8th Australian Digital Forensics

Conference, Cowan University.

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1RESEARCH DESIGN

A survey research design was adopted for this study. The choice was predicted on the


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fact that it allowed for the collection of data from Accounting Academics in an

economical way. The standardized data in the questionnaire allowed for easy comparison.

The approach was also basically cross-sectional as the opinion of Accounting Academics

in Nigeria was elicited at one point in time.

3.2 NATURE AND SOURCES OF DATA.

This study drew its data from primary and secondary sources. The primary source of data

from the respondents. Section B listed 14 statements about Forensic Accounting and Audit

expectation Gap and Accounting Academics were asked to indicate the extent to which

they agreed with the statements. To this end, the questionnaire was based on the five

point likert scale- strongly agree, agree, neutral, disagree and strongly disagree with the

following numerical values correspondingly attached to each state, 5,4,3,2 and 1.The last

part of section B of the questionnaire was unstructured and allowed respondents

unfettered freedom to make general comments as they deemed fit on the subject matter.

The face to face distribution method was adopted to get across the questionnaire to the

various respondents. This study drew copiously from such secondary sources as

textbooks, journals, magazines and internet.

3.3 POPULATION AND SAMPLE SIZE

The population of this study is all Accounting Academics in Nigeria. However, to make the

research manageable given resource constraints, Accounting Academics were targeted

from 8 tertiary institutions in the Eastern and Western Zones of Nigeria. Accounting

Academics are a homogenous group as minimum standards of entry and progression in

the Academic ladder are prescribed. .About 100 questionnaire were administered by hand

delivery on respondents. The researcher was able to enlist the help of fellow lecturers in


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the various tertiary institutions who facilitated the delivery and return of the questionnaire

70 of the questionnaire were completed and returned given a response rate of70%.

However, 20 of the questionnaire were invalid as they were not properly filled out. 18 0f

the improperly filled questionnaire came for one tertiary institution suggesting that the

problem was peculiar to the institution and had nothing to do with difficulties associated

with the questionnaire.

3.4 DATA ANALYSIS TECHNIQUES.

Simple percentages were used to analyse the distribution of responses. The two

hypotheses of the study were tested using the Chi- square test statistic at an alpha level of

5%. The justification for use of X test statistic is predicated on the fact that the data of

study were essentially discrete, categorical and non-parametric. As a decision rule, if X

calculated is greater than X tabulated the null hypothesis is rejected and vice versa.

3.5 VALIDATION AND RELIABILITY OF INSTRUMENTS

The project supervisor provided expert validation of the questionnaire. The questions

included in the questionnaire were meticulously chosen to ensure the attainment of the

research objectives. Respondents were given clear and unambiguous instructions as to

what to do. The incidence of non- bias response was reduced by the mode of distribution

and collection of the questionnaire.

CHAPTER 4

4.0 DATA PRESENTATION AND ANALYSIS

4.1 INTRODUCTION


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This chapter is concerned with the presentation and analysis of data gathered from questionnaire

gathered administered on Accounting Academics in Nigerias Universities. Main analysis

of this study was done here and results obtained in line with the objectives of study.the

analysis was carried out in such a way that allowed a smooth flow that enabled

implications to be drawn for policy making.

4.2 PRESENTATION AND ANALYSIS.

TABLE 4.1 DISTRIBUTION OF RESPONSES IN RESPECT OF ALL THE STATEMENTS

MADE ON FORENSIC ACCOUNTING AND AUDIT EXPECTATION GAP- THE

PERCEPTION OF ACCOUNTING ACADEMICS

STATEMENT 5 4 3 2 1

% % % % %

Forensic

Accounting is

a relatively

new area of

enquiry

62 36 2 0 0

The Forensic

Accountant is

different from

the traditional

auditor

36 60 0 4 0

While 26 64 8 2 0


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auditors

express an

opinion on the

financial

statements

based on their

audit work,

members of

the public

believe that

they certify

the statement

Members of

the public

believe that

auditors

perform a

100%

verification of

amounts in the

financial

statements

while often

28 56 10 6 0


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auditors

obtain

evidence for

such amounts

through taking

of samples

The average

investor

expects the

auditor as a

matter of his

duty to

discover all

material fraud

38 52 6 2 2

The auditor,

however,

believes that

his primary

duty is not

fraud

detection

52 42 2 2 2

The Forensic

accountant

52 40 6 2


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who is not

affected by the

limitations of

the audit

process is in a

better position

to discover

fraud and thus

bridge the

expectation

gap between

the auditor

and investors

The Forensic

Accountant

should be

analytically

minded and

inquisitive

52 48 0 0 0

He/ She

should be able

to

communicate

46 46 6 2 0


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complex

financial

transactions in

a simple and

easy to

understand

manner

He/ She must

possess a

sense of

urgency and

commitment

30 54 10 6 0

The Use of

Forensic

Accountant in

an audit will

increase the

cost of the

audit

22 56 8 12 2

The benefits

of using

Forensic

Accountants ,

32 46 12 6 4


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however,

outweigh their

costs

The Forensic

Accountant in

Nigeria is up

to a hard job

because of the

high rate of

dishonesty in

the country

52 40 4 4 0

Inculcation of

whistle

blowing

culture in

Nigeria will

help the

Forensic

Accountant in

his work

24 48 16 8 4

Source: Compiled from Researchers Questionnaire, 2011

Deriving from Table 4.1:


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- 98% of respondents agree that Forensic Accounting is a new area of enquiry. 2% did not

express any opinion on the matter

- 96% of respondents believe that the Forensic Accountant is different from the traditional

Auditor. 4% were not so persuaded.

- 90% of respondents agreed with the statement that members of the public believe that

Auditors certify Financial Statements. 8% had no opinion on the matter while 2%

disagreed.

- 84% of the respondents agreed with the suggestion that members of the public believe

that Auditors perform a 100% verification of the amounts in the financial statements.

10% had no opinion on the matter while 6% disagreed

- 90% of respondents agreed with the suggestion that the average investor expects the

Auditor as a matter of his duty to discover all material fraud. 6% did not express any

opinion while 4% disagreed.

- 94% of respondents agreed that Auditors believe that it is not their primary duty to

discover fraud. 2% declined comment on the matter while 4% disagreed.

- 92% of respondents agreed with the suggestion that Forensic Accountants were in a

better position to discover fraud and thus bridge the Audit expectation gap. 6% chose to

be neutral while 2% were persuaded otherwise.

- All respondents without exception agreed that the Forensic Accountant should be

analytically minded and inquisitive.

- 92% believes that the Forensic accountant should be able to communicate complex

financial transactions in a simple and easy to understand manner. 6% declined opinion on

the matter while 2% did not agree.


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- 84% of respondents agreed that agreed that Forensic Accountants must possess sense of

urgency and commitment. 10% were neutral while 6% disagreed.

- 78 % of respondents believe that the use of a Forensic Accountant in an Audit will

increase the cost of the Audit. 8% chose not to comment while 14 % disagreed.

- 78% of those sampled believe that the benefits of using Forensic Accountants in Audits

will, however, outweigh their costs. 12% did not offer any opinion on the matter while

10% did not agree.

- 92% of respondents agree that the Forensic Accountant is up to an uphill task in Nigeria

because of the environment of high dishonesty. 4% are neutral while 4% expressed a

dissenting view.

- 72% agreed that the inculcation of the whistle blowing culture in Nigeria will facilitate

the work of the Forensic Accountant, 16% refused to be committed while12% disagreed.

TABLE 2 Survey on Cost/ Benefit of Using a Forensic Accountant in an Audit

S/No Statement Strongly

Agree

Agree Neutral Disagree Strongly

Disagree

Total

1 The use of a

forensic

Accountant

in an audit

will increase

the cost of

11 28 4 6 1 50


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the audit

2 The Benefits

of using

Forensic

Accountants,

however,

outweigh

their costs

16 23 6 3 2 50

Source: Survey carried out by the Researcher (2011)

Survey on Skill sets required by Forensic Accountants Table 3

S/No Statement Strongly

Agree


Disagree

Total

8 The Forensic

Accountant

should be

analytically

minded and

inquisitive

26 24 0 0 0 50

9 He/ She

should be

23 23 3 1 0 50


24/35

able to

communicate

complex

financial

transactions

in a simple

and easy to

understand

manner

10 He or She

must possess

a sense of

urgency and

commitment

15 27 5 3 0 50

Source: Survey Carried out by the Researcher,2011

Hypothesis Testing

1 H1: Accounting Academics in Nigeria agree to the suggestion that on a cost-benefit basis, the

introduction of forensic techniques in an audit will stem the tide of financial fraud and

thus help in bridging the audit expectation gap.

Table 4

Response Observation

(0)

Expected (E) (O-E) ( O-E) /E


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Strongly Agree 16 10 36 3.6

Agree 23 10 169 16.9

Neutral 6 10 16 1.6

Disagree 3 10 49 4.9

Strongly

Disagree

2 10 64 6.4

50 50 334 33.4

Source: Survey carried out by the Researcher

Using 5% level of significance

Degree of freedom = (R- 1) (C- 1), where R is number of rows and C is the number of columns.

Df = (5-1) (2-1)= 4

X, df 4 = 9.49

Decision: Accept the alternate hypothesis meaning that Accounting Academics in Nigeria agree to the

suggestion that on a cost/benefit basis, the introduction of Forensic Accounting techniques in an audit

will stem the tide of financial fraud and thus help in bridging the audit expectation gap.

Table 5

Hypothesis 2A: Accounting Academics in Nigeria perceive in positive light that Forensic Accountants

should be analytically minded and inquisitive.

Response Observed(0) Expected(E) O-E (O-E) (O-E)/E

Strongly Agree 26 10 16 256 25.6

Agree 24 10 14 196 1.96

Neutral 0 10 -10 100 10

Disagree 0 10 -10 100 10

Strongly Agree 0 10 -10 100 10

50 50 752 57.56

Survey carried out by the researcher, 2011

Df= (R-1) (C-1)=(5-1) (2-1) =4

X, df4= 9.49

Decision: Accept the alternate hypothesis that Accounting Academics in Nigeria perceive in positive light

that Forensic Accountants should have analytical and inquisitive mind


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Table 6

Hypothesis 2B Accounting Academics in Nigeria perceive in positive light that Forensic Accountants

should be able to communicate complex financial transactions in a simple and easy to understand

manner

Response Observed (O ) Expected (E) O- E (O-E) (O-E)/E


Agree 23 10 13 169 1.69

Neutral 3 10 -7 49 4.9

Disagree 1 10 -9 81 8.1

Strongly

Disagree

0 10 -10 100 10

50 50 26.38

Source: Survey carried out by the Researcher, 2011

Df =(R-1) (C-1) = (5-1) (2-1) = 4

X, df4 = 9.49

Decision: Accept the alternative hypothesis that Accounting Academics in Nigeria perceive in good light

that Forensic Accountants should be able to communicate complex financial transactions in a simple and

easy to understand manner.

Table 7 Hypothesis 2C

Accounting Academics in Nigeria perceive in positive light that Forensic Accountants should possess a

sense of urgency and commitment.

Response Observed (O) Expected (E) O- E (O-E) ( O- E)/E


Agree 27 10 17 287 28.7

Neutral 5 10 -5 25 2.5

Disagree 3 10 -7 49 4.9

Strongly

Disagree

0 10 -10 100 10

50 50 48.6

Df = (R-1) (C-1) = (5 -1) (2-1) =4

X, df 4 = 9.49

Decision : Accept the alternative hypothesis that Accounting Academics in Nigeria perceive in good light

that Forensic Accountants should possess a sense of urgency and commitment.


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CHAPTER 5

5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY OF FINDINGS

The following findings among others were made in the course of this research work:

1 All the 14 statements made in the questionnaire for the respondents to comment received their

endorsement

2The respondents endorsed 100% the assertion that the Forensic Accountant should be analytically

minded and inquisitive.

3 The most Controversial of the assertions was the one that stated that the inculcation of the whistle

blowing culture in Nigeria will help the Forensic Accountant in his work. Only 72% of the respondentsfully endorsed the idea, while 16% opted to remain neutral. !2% disagreed.

4 The suggestion that the use of Forensic Accountants in an Audit will increase the cost of the Audit

received the highest dissenters of 14% while 78% agreed with 8% offering to be neutral.

5 The suggestion that Forensic Accounting is a relatively new area of enquiry in Nigeria was

overwhelmingly endorsed by the respondents. 98% said yes while 2% opted to offer no opinion.

CONCLUSION

The following conclusions deriving from the study are made by the researcher:

1 The respondents were serious minded Accounting Academics and made meaningful contributions to

the success of this research effort.

2 The favourable disposition of Accounting Academics to Forensic Accounting has implications for both

Accounting education and Accounting Practice in Nigeria

3 This study has once again confirmed the existence of Audit expectation gap in Nigeria.

4 The skill set identified as germane for the Forensic Accountant in this study is in consonance withsimilar international researches. Analytical mind and inquisitive skill score very high on Nigerian

academics scale of preferences.

5 It appears strange that up to 12% of respondents were persuaded that the infusion of a Forensic

Accounting in an Audit will not increase the cost of the Audit.


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6 Other qualities that a Forensic Accountant should have gleaned from the literature search include

courage, secrecy, knowledge skills in criminology and computer skills.

Recommendations:

The Following recommendations deriving from this study are made to guide practical action:

I) Tertiary institutions in Nigeria that have not introduced the teaching of Forensic Accounting

in their curricula should do so with immediate effect

II) Accounting practitioners, in the same vein, should develop Forensic Accounting mind set

and also inject Forensic Accounting techniques in carrying out Audits.

III) Governments in Nigeria should create an enabling environment for Forensic Accountants to

thrive fighting the pervasive culture of dishonesty in the country.

IV) In the same way, a whistle blowing culture in our environment should be nurtured and

allowed to blossom.V) It will be interesting if this study is replicated using a bigger sample size and a wider

coverage

REFERENCES

Abduiqaderai qarni, A. (2004).Audit expectation gap in saudi Arabia- perceptions of

auditors,preparers of Financial Statements and users. Dundee, Uk.

Anwar, N. (2008, April 20). Forensic accounting: A dynamic tool for combating corruption. The

Financial Express, 1-1. Dhaka.

Chariri, A. (2007). The Relevance of Forensic Accounting in Detecting Financial Frauds.

Journal Organisasi dan Manajem, 3(2), 81-88.

Chui, L. (2011).An experimental examination of the effects of fraud specialist and audit

mindsets on fraud risk assessments and on the development of fraud-related problem

representations. University of North Texas.

Crawford, C. J. (2010). CAN FORENSIC ACCOUNTING PROVIDE THE TOOLS TO

RESTORE CONFIDENCE IN THE FINANCIAL STATEMENT REPORTING

PROCESS?Journal of Business and Accounting, 3(1), 125-133.


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Crumbley, D. L. (2008). What is Forensic Accounting?Journal of Forensic Accounting,IX(1),1

Davis, C., Ramona, F., & Ogliby, S. (2009). Characteristics and Skills of the Forensic

Accountant(p. 277). US: AICPA.

DiGabriele, J. A. (2007). Fishbowl the Forensic Accountant: Are There Differences in the Views

of the Relevant Skills of a Forensic Accountant Among Practitioners, Academics and

Users of Forensic Accounting Services? Mont clair State University.

Gray, O. R., & Moussalli, S. D. (2006). Forensic Accounting and Auditing United Again: A

Historical Perspective.JOURNAL OF BUSINESS ISSUES _, 2, 15- 25.

Hayes, R. S., Schilder, A., Roger, D., & Philip, W. (1998). Principles of International Auditig.

Auditingtext.com. Retrieved August 17, 2011,




(pp. 1113).

Kleeyman, Y. (2006).A Course in Forensic Accounting. Pace, U.S.

Koh, H. C., & Woo, E.-S. (1998).The Expectation Gap in Auditing.Managerial Auditing

Journal, 13(3), 147-154.

Mazumder, M. (2011). Forensic AccountingAn Investigative Approach of Accounting. SSRN

Electronic Library.

McGinn, J. (2009, November 16). The global financial cost of fraud |. Finance Week. Retrieved

August 20, 2011, from http://www.financeweek.co.uk/topic/global-financial-cost-fraud

Ojo, M. (2006). Eliminating the Audit Expectations Gap: Myth or Reality? Munich Personal

RePEc Archive


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Okoye, E. I., & Akamobi, N. (2009). The Role of Forensic Accounting in Fraud Investigation

and Litigation Support. The Nigerian Academic Forum, 17(1), 39-42.

Okoye, E. I, & Akenbor, C. O. (2009). Forensic Accounting in Developing Economies Problems

and Prospects.Advanced Research Journal, (1).

Okoye, Emma I, & Yohanna, J. (2010). An Empirical Investigation of the Relevant Skills of

Forensic Accountants in Nigeria.Journal of Knowledge Management, 1(2). Retrieved

from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1797683



Pirraglia, W. (2011). The Advantages of Having a Forensic Accountant Within an Organization |

eHow.com. eHOW. Retrieved August 20, 2011, from

http://www.ehow.com/list_6292827_advantages-forensic-accountant-within-

organization.html

Quffa, H. C. (2011). Financial Statement Fraud.Hanna Associates.

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Forensics conference (p. 175). Presented at the 8th Australian Digital Forensics

Conference, Cowan University.

Appendix

Questionnaire

Topic: Forensic Accounting and Audit Expectation Gap- The Perception of Accounting Academics

Dear Respondent,

The Research work with the above title is being undertaken by a fellow Accounting academic currently

pursuing a Doctoral programme in Accounting.

Forensic accounting has been defined as an accounting analysis that can uncover possible fraudthat is suitable for presentation in court A forensic accountant uses his knowledge ofaccounting, law, investigative auditing and criminology to uncover fraud, find evidence andpresent such evidence in court if required to. Audit expectation gap is defined as the perceptionof members of the public as to what the auditors responsibility ought to be and what the auditorsare prepared to assume as their responsibilities in accordance with their professional standards.For some time now, audit failures have been rife and many members of the public ascribe it tothe existence of the expectation gap syndrome. Consequently, the suggestion is that an averageexternal audit should have as a member of the team a forensic accountant to grapple with the

issue of fraud and thus significantly narrow the expectation gap. This study is meant to elicityour views on this important subject as efforts are made to restore the confidence of the investingpublic on the battered image of the audit function in Nigeria. I thank you for your cooperationand assure you that your views will be treated with utmost confidentiality.

Yours truly,S. C Okaro

.Instructions:

Please tick () as appropriate in the box provided and

b) Make brief comment/s where required.

Section A (PERSONAL DATA)

(1) SEX: Male ( ) Female ( )


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(2) Age: Less than 30years ( ) 30 to less than 40 years ( ) 40 years to less than 60 years ( ) Over 60 years (

)

(3) Professional Accounting affiliation: ICAN ( ) ANAN ( ) OTHERS--- Specify

(4) Academic Position currently held--- Specify

(5) Name of your Institution

(6) Number of years experience as an Accounting Academic

SECTION B

Please tick your preference for the following statements that are intended to ascertain your views on

forensic accounting and audit expectation gap.

Statement Strongly

Agree


Disagree

Forensic

accounting is

a relatively

new area of

enquiry

The Forensic

accountant isdifferent from

the traditional

auditor

While

auditors

express an

opinion on

the financial

statementsbased on their

audit work,

members of

the public

believe that

they certify


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the

statements

Members of

the public

believe thatauditors

perform a

100%

verification of

amounts in

the financial

statements

while often

auditors

obtainevidence for

such amounts

through

taking of

samples

The average

investor

expects the

auditor as amatter of his

duty to

discover all

material fraud

The auditor,

however,

believes that

his primary

duty is not

fraud

detection

The forensic

accountant

who is not

affected by


34/35

the

limitations of

the audit

process is in a

better

position to

discover fraud

and thus

bridge the

expectation

gap between

the auditor

and investors

The forensic

Accountantshould be

analytically

minded and

inquisitive

He/She

should be

able to

communicate

complexfinancial

transactions

in a simple

and easy to

understand

manner

He/ she must

possess a

sense of

urgency and

commitment

The use of a

forensic

Accountant in

an audit will


35/35

increase the

cost of the

audit

The benefits

of usingforensic

Accountants,

however,

outweigh

their costs.

The forensic

Accountant in

Nigeria is up

to a hard jobbecause of

the high rate

of dishonesty

in the country

Inculcation of

whistle

blowing

culture in

Nigeria will

help the

forensic

Accountant in

his work

Please make any general comment you think relevant on the above subject matter

forensic accounting and audit expectation gap - the perception of accounting academics

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