forensic accounting and quality of financial reporting of

77

Forensic Accounting and Quality of Financial Reporting of

Quoted Banks in Nigeria

1IBANICHUKA, Emmanuel Amaps Loveday;

1*EJIMOFOR, Louis Chidi &

2OKWU, Peter Ifeanyi

1Department of Accounting,

University of Port Harcourt, Choba Nigeria

*Corresponding author: [email protected]

2Department of Accounting

Alex Ekwueme Federal University, Ndufu Nigeria

ABSTRACT The motivation for this study which examined the effects of forensic accounting on financial reporting quality particularly for quoted banks operating in Nigeria was drawn by the spate of poor quality of financial reports by quoted banks and subsequent ratification by external auditors. The major objective was to examine the impacts of forensic accounting on quality of financial or monetary reporting of quoted banks operating in Nigeria. Cross sectional data sourced from audited monetary or financial reports of quoted banks and fact books of Nigeria Stock Exchange from 2009-2018 were used The independent variable was proxied by investigative accounting services while the dependent variables were proxied by accrual quality and value relevance. Ordinary least square (OLS) method was utilized to ascertain the extent to which forensic accounting has effect on quality of financial reporting of quoted banks operating in Nigeria. The study adopted the fixed effect model as being the most appropriate. In model 1, the independent variable explains 71.6 percent of the variation on accrual quality. The F-statistics validated that the model is significant, and the p value of the coefficient showed that the relationship is statistically insignificant. The results showed that investigative accounting negatively impacted on accrual quality. In model 2, the independent variable explains 61.6 percent of the variations in value relevance. The F-statistics validated that the model is significant, and the p value of the coefficient indicated that the relationship is equally statistically insignificant. The results further showed that investigative accounting had a negative effect on value relevance. The study concludes that there is an urgent need to engage the services of forensic accountants and also recommends that forensic accountants should implement the application and required skills of investigative accounting in order to strengthen quality of financial or monetary reporting and build stakeholders’ confidence. Keywords : Accrual Quality, Value Relevance, Financial Reporting Quality, Quoted Banks

1. INTRODUCTION Over the years, corporate organizations and stakeholders had sought the need for quality financial reporting system distinct from financial statement preparation and presentation. Financial reports are organized summaries of detailed information in relation to financial or monetary statements of corporate organizations prepared, presented, and reported in accordance with International Financial Reporting Standards and Financial Reporting Council of Nigeria (FRCN). According to Ofurum, Solomon and Micah (2014), the financial report of any entity is expressed in monetary terms based on the economic realities using the following components of financial statements in conjunction with International

International Journal of Innovative Finance and Economics Research 8(3):77-91, July-Sept., 2020

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Financial Reporting Standards (IFRS) roadmap: Statement of monetary or financial position, statement of alteration in equity, comprehensive income statement, report of cash flow and the accounts notes. Each of these components are prepared to provide insight into specific areas of the financial reports. According to Chris (2019) financial statement is a written report which conveys business operation and monetary performance of any firm. Financial statement is usually audited or checked by government parastatals, accountants, companies, and others to assure transparency and correctness and for tax funding or investing. Chris also maintained that monetary analysts and investors depend on monetary data when analyzing monetary performance of any firm and when predicting future direction of any firm’s stock. Also, creditors, investors and market analysts employ financial or monetary reports when evaluating monetary or financial health of any firm and possible earnings capacities or potentials. According to Siriyama & Norah (2017), quality of monetary or financial reporting is dependent on value of account reporting. It is equally crucial to provide quality monetary reporting to help intended users when making decision that concerns investments to improve market efficiency. Jimoh (2018) stated that quality of monetary or financial report involves standardizing the preparation and presentation of monetary or financial and non-monetary information by financial organization for effective planning and trusted decision. However, the key or main objective of any financial report is to present or provide information which could be beneficial for assessing and evaluating effectiveness of management as it concerns utilization of resources set in their control to gratify their owners. The utilization of quality accounting details and information are supposed to enhance services of forensic accounting. However, quality financial or monetary report would minimize management possibility of engaging in manipulations, window dressing and conspiracy. Thus, this is achievable because the board of directors’ holds correct and accurate information that improves their capacity to monitor activities or operations of managers and their investment decision. The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) in 2008 expressed their desirability of measuring financial or monetary reports quality and this was followed up basically by two basis of central features which are; fundamental qualitative features indicated as relevance and authentic representation and 2 - enhanced qualitative features which are understandability, verifiability, comparability and timeliness as means to assess quality of monetary or financial report. Due to past corporate scandals and collapse of corporate organizations, so much have been reported on lack of credible monetary or financial reports of statutory firms. Consequently, so many factors contributed to corporate failures witnessed in Adelphia, Enron, WorldCom, Cadbury, and Afribank Plc. The banks failure is due to inadequate internal control and other manipulations. The ability to put things effectively require fair deals. Banks these days are noncompliance with financial report systems set up by Central Bank of Nigeria (CBN). Besides, banks are exposed to several risks while doing their businesses. Such risks include intentional and deliberate falsification of accounting records for personal gains which will impact negatively on the financial reports. Chief Executive Officers (CEO) of some banks faced several investigations by anti- graft parastatals, one of which is the Economic and Financial Crimes Commission (EFCC), largely due to irregularities in their firms and fraudulent monetary report. In 2009, the Central Bank of Nigeria (CBN) sacked five bank managing and executive directors for mal-handling and supposed frauds. This move affected stability and growth of Nigeria financial sector since some of these banks are not operational till date. It is therefore argued that this practice of fraudulent monetary report is unfriendly to sustainable growth of Nigeria financial sector and the operations within these organizations create more opportunities for fraudulent activities. Despite perceived and documented importance of quality monetary or financial report, empirical evidence, overtime, emerged about shortcomings that are still observed on quality of monetary or financial report system. A good number of high-profile banks that failed and collapsed had been linked to top management manipulations and distortion of quality of financial statements to satisfy their selfish interest to the detriment of shareholders who appointed them. Hence, incorporating the forensic accountant specialist is a necessity towards detection of such fraudulent activities often perpetuated by top management level, which invariably affects the financial reporting system and quality assurance.

Ibanichuka et al.….. Int. J. Innovative Finance and Economics Res. 8(3):77-91, 2020

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Globally, there is high demand for providing clearer and better definition for quality of monetary or financial report, and to provide ideal procedure for assessing or evaluating quality of monetary or financial report is another universal demand because high quality of monetary or financial report triggers significant benefits to investors and business users. Previous related studies adopted the use of desirability measures of quality of financial statements which includes fundamental and enhancing characteristics as prescribed by the IASB in association with the FASB in 2008 to measure qualities of financial reporting. These attributes include relevance, faithful representation, timeliness, completeness, comparability, true & fair view, and understandability. The researchers are not contending the use of these attributes to measure quality of financial reporting but there has been wide criticism that some of them are unobservable (Abernathy, 2010). Also, all the empirical studies reviewed for this study used primary data which is faced with wide criticism. This present study, as a point of departure, adopted secondary data obtained from audited monetary/financial reports of quoted banks operating in Nigeria and the Fact Book of Nigeria Stock Exchange (NSE). Therefore this study makes distinction by drawing inferences on forensic accounting and quality of financial reports of quoted banks operating in Nigeria applying services of forensic accounting proxied by investigative accounting and quality of financial reporting proxied by indirect or modern measures of accrual quality and value-relevance. In order words, the study intends to validate the modern measures of quality of financial reporting of quoted banks as a panacea to solving the age long problem to determine whether forensic accounting has any significant effect on quality of financial reporting in Nigeria. The study, therefore, intends to establish what effects investigative accounting has on both accrual quality and value relevance as proxies for quality of financial reporting. The study is the first, to the best of the researchers’ knowledge, to adopt average market share price (AMSP) which no other previous study have adopted to measure and validate value relevance as a proxy to quality financial reporting. The study is in five sections, the first is the introduction, the second is the literature review, the third is the methodology, the fourth is the result and discussion while the fifth is the conclusion and recommendations. 2. THEORETICAL FRAMEWORK Positive Accounting Theory (PAT)

This theory is an accounting theory that is concerned with predicting unobserved phenomenon. It predicts the actions of choices of accounting policies by any firms and how these firm responds to novel accounting standards. It attempts to explain what informed certain choices of any stipulated or accounting policy and predicts their future based on facts and does not accept assumptions. It examines and distinguishes certain ramifications and reasons for expenditures then compares income against expenditures to determine if and why businesses are operating at gains or losses while building from their knowledge of the enterprises, predict their future transactions. It is among most powerful theories and is seen as a novel shift from normative accounting which is theory based and allows everyday practices to evolve and ensures that they do not move away entirely from economic theories. According to sponsors or proponents of this theory (Ball and Brown, 1968); Watts and Zimmerman (1986), PAT started with investigation of some assumptions underlying normative accounting practices during 1960s. PAT is an accounting theory that could be employed in explaining and predicting or forecasting accounting practices that are appropriate for any particular firm. This theory explains decisions of accounting policy by examining certain relationship or contracts between businesses, their owners, management, and debt holders who are rationale wealth maximizers. Information Asymmetry Theory This theory is the possession of relevant information about an entity in different ways or levels between agent (managers) and shareholders (principal) and other stakeholders in which agents have different behaviors and different decisions that may affect performance of the firm. It is an agency relationship which exists between economic actors who are managers and principal who are business-owners where welfare of principal is affected by actions of the agent. There seems to be mistrust when information is not suitably shared among stakeholders. This theory is related to popular agency theory that is commonly


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referred to principal and agent relationship propounded by Jensen & Michelin (1976). The concept of information asymmetry was first introduced in Akerlof (1970) on a paper about automobile products in America. He pointed out that asymmetry of information exists where buyers cannot accurately assess quality or value of product via examination before sale is made and sellers could accurately measure quality or value of their product before sale. The information asymmetry in this context is a situation whereby the managers have more relevant information and took advantage over investors and other interested parties about the current and future prospects of the entity or the business and thus chooses when to disseminate such information.

Forensic Accounting Techniques The origin of forensic accounting is dated back to the old Egyptian clerks who took account of Pharaoh's assets who are called "eyes and ears of Pharaoh.” In 1817, forensic accounting was reviewed for the first time in court when a certain accountant was needed to testify in bank scam hearing in Scotland. However, Pouloubet in 1946 was the first to present report on the phrase “forensic accounting” which was later introduced by western nations in the 1980s based on developments in market economy and to support judicial system. It is a science which is different from conventional accounting which results from getting accounting facts using procedures and checking methods which dealt with legal issues and monetary attributes (Keskin & Ozturk 2013). It utilizes accounting, auditing, and investigating procedures when handling any form of investigation. This accounting procedure is the three-way practice of using accounting, checking and investigative procedures to help in law-based issues (Olola, 2016). In the view of Dhar and Sarkar (2010) this accounting procedure involves applying accounting ideas and procedures to law-based issues. It requires reporting where answerability of fraud is established, and its report is taken as proof in law-court or managerial proceedings. According to research conducted by academic experts such as Manning (2005) forensic accounting services are used in areas like accounting, anti-trust, damages, valuation, analysis, and general consulting. This accounting procedures is equally utilized in divorces, bankruptcy, insurance, personal claims, fraudulent cases, construction, royalty checks, and tracing terrorism through investigating monetary records. “The Concept of Financial Reporting” The quality of financial report is concerned with the ability of any firm's reported performance to represent their true earnings or income. Investors, analysts, and management deployed several forensic indices which help forensic auditors in assessing and examining probability or chances of performance index being mishandled or manipulated by any firm. Warshavsky (2012), observed that because the monetary report or statement is the duty of firm's management to prepare, transactions could be structured to achieve their intended accounting result by presenting key monetary transactions to the advantage of the firms. He stressed that quality of any firm's earnings is one aspect of their investigation which is usually overlooked in the monetary forensic process. The banking sector that is considered sensitive and volatile has gone passed certain moments of crisis with most recent being the imprisonment of Managing Director of Integrated Microfinance Bank Ltd, Mr. Simon Akinteye for 32 years over misappropriation of $166m by Federal High Court, Lagos on 22

nd February, 2019.

Also, in 2010, Chief Executive Officers (CEOs) of five banks were abruptly removed and their board spontaneously dissolved. The problem that triggered this action by Central Bank of Nigeria (CBN) were mostly blamed on poor business governance, which saw abuse of insider resulting in banks having negative account balance in business-owners funds. Following this, CBN carried out forensic check and confirmed that these CEOs filed and reported misleading reports to CBN and other regulators. Their reports saw misstatements and misrepresentation of key and main monetary reporting variables, concealing actual figures which constituted bad loans (Sanusi, 2010). The federal government on the other hand deployed services of anti-graft agencies like Director of Public Prosecution (DPP), Economic Financial and Other Crimes Commission (EFCC), Independent Corrupt Practices And Other Related Offenses Commission (ICPC), and Service Compact With All Nigerian (SERVICOM) who are not


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authorities and professionals on monetary matters and lack basic investigative skills to unravel fraudulent activities and vice versa. Despite all the noises about the use of these agencies, companies including banks continue to collapse due to poor quality of financial reporting. Forensic accountants are crucial for investigating, litigation and detective supports in government and private sectors and they are equally crucial in documentation and reporting. It was noticed that this accounting procedure plays crucial role in reducing crime and corruption in any sector because they present better mechanism for holding people accountable so that people who handle resources in fiduciary capacity do not easily misuse this trust without being detected. The study recommended, that: accounting professionals need to, always act pro-actively so that members are kept on the-know concerning all emerging technologies, especially those in field of forensic accounting. The legislature need to ensure that executive grants complete autonomy to government agencies charged with duty of enforcing this accountability and the office of Auditor-General, EFCC, ICPC and Code of Conduct Bureau need to be completely independent and free to do their work with no unintended interference (Mukoro et al, 2001).

Accrual Quality This is the extent to which accruals plots into net money flow realization or closeness of money flow and reported profit over specified time-period usually the accounting period. Accrual quality methods focused on degree of uncertainty of business cash flows to accrual correspondence. Theoretically, the more the variables between accruals and money flows in any business during operating cycle, the lower the business accruals quality, hence the lower the quality of such business accounting (Pounder, 2013). This is seen as indirect means being that it was based on observations. Also, it was employed by Dechow and Dichev (2002) in measuring discretionary accruals and checking robustness (Gajevszky, 2015). One main function of accrual-basis accounting tools is their capacity to avail forecasting of future money flows. When present net earnings present better information concerning future money flow performance, audited report quality is high (Hope, Thomas & Vyes, 2011). Accruals comprises all adjustments which allows any enterprise to move from cash based to accrual base system whether by allocations, provisions, or by change in accounting procedure. Alterations in operation capital equally form certain part of accruals. A poor match shows low accrual quality and little difference indicates high accrual quality.

Value Relevance This is the ability of information that are disclosed in financial or monetary report to represent or capture the value of the intended firm. This concept is based on relevance and dependability and it entails the ability of any firm’s accounting report to summarize the details underlying their stock / share price. It explains the possible relationship between monetary details and stock price (Lui & Liu, 2007). It also means or entails the ability of monetary or financial information which are presented in monetary or financial report to explain their real market measures. For any financial or monetary reports to be important, their content must be essential in making investment decision. Thus, from perspectives or view of investors, only information which contributes to investment decisions for business owners is crucial (Momkhudu & Ibadin, 2015). Listed firms employed monetary or financial report as their main means for communicating monetary information to their business-owners and the public. Accounting information are described as relevant when they influence their users’ decisions in true sense (Uwalamwa, Uwegbe & Okorie, 2015). It makes firms look and remain trustworthy in the minds of business owner and possible investors. This concept is evaluated to ascertain the usefulness of monetary information to the business owners (Papadak & Siougle, 2007). Therefore, maximizing prices of stock in any firm is the key objective of most listed or named banks in achieving their credibility in the mind of business owners. Consequently, value of any firm is dependent on how the market sees their performances.


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Fig.1: Operational Framework of the Effect of Forensic Accounting on the Quality of Financial

Reporting

Empirical Review

Anuolam, Onyema and Ekeke (2017) examined the extent to which utilization of services of

forensic accounting could help or aid in detecting and preventing fraud or bank-based scam in Nigeria. According to them, the challenges that confront suitable utilization of services of

forensic accounting resided on monetary and economic crime and explain forensic accounting as the needed antidote required to curtail the menace of fraud. The study employed questionnaire completed by respondents and analyzed their data with regression analysis, correlation

coefficient, Ordinary Least Square (OLS) as contained in E-view version 7. They observed that inadequate legal support services by forensic experts is the main bane to Nigeria monetary

development process and they also observed that Nigerian law is not up to date with current technological advancements in this area. They noticed that the essence and relevance of using forensic accounting procedure in unravelling complicated official corruption is increasing in

Nigeria not minding the fact that this practice is considered to be in its early or infancy stage and lack statutory backing and supports.

Onyekwelu, Ugwu and Nnanani (2016) in a study titled; “Does Forensic Accounting Enhance Quality of Financial Reporting”: The study investigated how forensic accounting enhances quality assurance of monetary statement in Nigeria and adopted empirical, survey and

descriptive design with a population of all money deposit banks listed or named in NSE and a sample size of five banks selected randomly. Both primary and secondary data were sourced

from questionnaire and audited monetary report of these five selected banks. The researcher conducted Cronbach Alpha test using SPSS 17 to test reliability and free from error. The primary data was analyzed using Pearson correlation coefficient and multiple regression to draw

FORENSIC

ACCOUNTING QUALITY OF

FINANCIAL

REPORTING

INVESTIGATIVE

ACCOUNTING

ACCRUAL QUALITY

OF QUOTED BANKS

VALUE RELEVANCE

OF QUOTED BANKS


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inferences and secondary data were analyzed using binomial scale. They advocate that forensic accounting possess the capacities that would affect quality of monetary report positively in

Nigeria.

3. METHODOLOGY

The research design employed or adopted in this study is ex-post facto design. Data were

collected from secondary (quantitative) sources. The population of the study consists of the banks whose shares are listed in NSE. They consist namely: First Bank Plc, Eco Bank Ltd, UBA

Plc, Fidelity Bank Plc, Union Bank Plc, Stanbic IBTC Bank Plc, Access Bank Plc, Zenith Bank Plc, FCMB Plc, GT Bank Plc, WEMA Bank Plc, NPF Micro-finance bank Plc, Unity Bank Plc, Sterling Bank Plc, Abbey Mortgage Bank Plc, Aso Savings & Loans Plc and Jaiz Bank Plc. The

researchers employed convenient sampling technique to select ten (10) quoted banks on NSE that met the post consolidation requirements of CBN in 2006. Secondary data were collected

from publications of NSE fact books and audited monetary statements of the quoted banks. Operational Measure of Variables

There are two set of variables in this study: the predictor variable and criterion variables. Forensic accounting services is the independent or predictor variable and is proxied by

investigative accounting (IA); Quality of financial reporting is the dependent or criterion variable represented by accrual quality (AQ) and value relevance (VR).

Table 3.1 – Operational Measure of Variables

Investigative Accounting (IA) Monetary value of investigated fraud cases by each bank for the period under review (Natural Logarithm used to convert absolute values

to real values)

Accrual Quality (AQ) Profit Before Extra-Ordinary Items – Net Operating cash flow from Statement/Average Total Assets (Modified Dechow & Dichev model,

2002)

Value Relevance (VR) Earnings Per Share – Average Market Share Price (AMSP). Modified Edward Bell Ohlson (1995) model

In this study, the data analysis method employed is panel data multiple linear regression using

“Ordinary Least Square (OLS) method”. Multivariate analysis technique is an inferential method for analyzing relationship between many variables.

Model Specification

FA=f (IA, VR); This is split into models 1 and 2 as shown below.

Model I: Forensic Accounting and Accrual Quality The study used panel data analyses method which involves “pool effect, fixed effect, the random effect and the Hausman Test”.

Pooled Effect Model The functional relationship is given as

AQ = f (IA) 3.1 Equation (i) is also expressed in linear form or mathematically expressed as AQ = βo+β1IA 3.2


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By turning equation (ii) into econometric model, to include random term, is expressed as:

0itAQ IA1 + U 3.3

Fixed Effect This effect is focused on whether any disparities exist by using fixed intercept for all cross-sectional structures. When we make assumption that the dummy parameter for a conglomerate company is 0 or 1, then Di, which is the dummy parameter for company i, could be given as:

)4.3......(............................................ 1,

,0

2,

,02

1,

,0

il

otherwiseN

il

otherwise

il

otherwisei DDD

Hence, regressing the total samples could be given as

)5.3.....(........................................24132

1

itoimas

N

i

iioiit sDsDDDY

The dummy parameters could be given as thus: if j = i, then Di= 1; or Di= 0.2

To examine the possible impacts of forensic accounting on quality of monetary or financial report in quoted or named banks operating in Nigeria, Adebayo (2012) examined whether the used independent parameters impact or affect the used dependent parameters, this involves regressing the impact of the used independent parameters on the dependent parameters.

0iAQit IA1 6.3..........U

Considering that fixed effect considers both cross-section and time-series data, increased covariance triggered by any differences in firms is removed or eliminated which increases efficiency of estimation-result. Random Effect This effect is focused on relationship between entire the study samples; thus, samples are selected randomly contrary to using entire population. The entire sample regression which is a function of random effect is given as:

0

1

N

j

itAQ IA1 UT 3.7

If such is expressed using random parameter, then ,0 joj which shows that the disparity

between samples occurs randomly and the expected value for .5

0 isoi )8.3(....................

Where:

AQ=Accrual Quality IA=Investigative Accounting

Ut = Error term

Model II: Forensic Accounting and Value Relevance The study used panel data analysis method which involves “pool effect, fixed effect, the random effect and the Hausman Test”.

Pooled Effect Model The functional relationship for model 2 is expressed as

VR=f (IA) 3.9 Equation (iv) is presented in linear form or mathematically given as VR= βo+ β1IA 3.10


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By turning equation (v) into econometric model, to include random term, is expressed as

0itVR IA1 11.3.U

Fixed Effect This effect is focused on whether any disparities exist by using fixed intercept for all cross-sectional structures. When we make assumption that the dummy parameter for a conglomerate company is 0 or 1, then Di, which is the dummy parameter for company i, could be given as

)12.3.....(............................................ 1,

,0

2,

,02

1,

,0

il

otherwiseN

il

otherwise

il

otherwisei DDD

Hence, regressing the total samples could be given as

)13.3.....(........................................24132

1

itoimas

N

i

iioiit sDsDDDY

The dummy parameters could be given as thus: if j = i, then Di= 1; or Di= 0.2

To examine the possible impacts of forensic accounting on quality of monetary or financial report in quoted or named banks operating in Nigeria, Adebayo (2012) examined whether the used independent parameters impacts or affect the used dependent parameters, this involves regressing the impact of the used independent parameters on the dependent parameters

0iVRit IA1 14.3..........U

Considering that fixed effect considers both cross-section and time-series data, increased covariance triggered by any differences in firms is removed or eliminated which increases efficiency of estimation-result. . Random Effect This effect is focused on relationship between the entire study samples; thus, samples are selected randomly contrary to using entire population. The entire sample regression which is a function of random effect is given as:

0

1

N

j

itVR IA1 UT 3.15

If such is expressed using random parameter, then ,0 joj which shows that the disparity

between samples occurs randomly and the expected value for .5

0 isoi )16.3(....................

Where:

VR= Value relevance IA=Investigative Accounting Ut = Error term

Research Hypotheses

These null hypotheses below are formulated to guide this study based on research questions and specific objectives stated above. Ho1: Investigative accounting practice has no significant effect on accrual quality of quoted

banks operating in Nigeria. Ho2: Investigative accounting practice has no significant effect on the value relevance of quoted

banks operating in Nigeria.


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4 RESULTS AND DISCUSSION Table 4.1 Presentation of Fixed Effect Model

Variable Coefficient Std. Error t-Statistic Prob.

MODEL 1: Forensic Accounting and Accrual Quality

IA -0.015234 0.018045 -0.844227 0.4008

C 0.509553 0.120141 4.241279 0.0001

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.716716 Mean dependent var 0.652200

Adjusted R-squared 0.681306 S.D. dependent var 0.453580

S.E. of regression 0.256059 Akaike info criterion 0.225353

Sum squared resid 5.769847 Schwarz criterion 0.537973

Log likelihood 0.732374 Hannan-Quinn criter. 0.351876

F-statistic 20.24021 Durbin-Watson stat 1.698267

Prob(F-statistic) 0.000000

MODEL 2: Forensic Accounting and Value Relevance

IA -2.415291 4.238320 -0.569870 0.5696

C 140.2249 210.7427 0.665384 0.5068

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.616716 Mean dependent var 0.652200

Adjusted R-squared 0.481306 S.D. dependent var 0.453580

S.E. of regression 0.256059 Akaike info criterion 0.225353

Sum squared resid 5.769847 Schwarz criterion 0.537973

Log likelihood 0.732374 Hannan-Quinn criter. 0.351876

F-statistic 22.24021 Durbin-Watson stat 1.698267

Prob(F-statistic) 0.000000

Table 4.2 Data and Results of Forensic Accounting, Accrual Quality and Value Relevance

S/N BANK YEAR AQ IA VR

1. ACCESS BANK 2009 0.21 7.12 0.77

2010 1.69 7.46 0.89

2011 1 7.53 0.82

2012 1.15 7.72 0.76

2013 1.12 5.65 0.99

2014 0.72 - 0.83

2015 0.92 6.68 0.45

2016 1.09 5.78 1.69

2017 -2 - 0.82

2018 1.15 - 0.87

2. FCMB 2009 -2 6.34 0.76

2010 -1.69 6.72 0.85

2011 -2 6.75 0.72

2012 -1.39 7.36 0.49

2013 2.09 7.50 0.65

2014 -1.69 7.10 0.54

2015 -1.69 6.46 0.34


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2016 -1.69 - 0.03

2017 -2 7.95 0.03

2018 -1.39 7.99 0.29

3. FIDELITY 2009 6.78 0.45

2010 -1.52 6.58 0.35

2011 -0.55 6.16 0.32

2012 -1.39 5 .86 0.01

2013 1.41 6.53 0.41

2014 -1.52 6.52 0.18

2015 -1.15 6.57 0.02

2016 -0.95 6.59 -0.07

2017 -1.30 6.62 0.10

2018 -1.04 6.62 0.18

4. FIRST BANK 2009 -2 8.81 1.18

2010 -1.69 6.61 1.08

2011 - - 1.01

2012 -1.69 - 0.85

2013 1.50 - 1.19

2014 -0.74 - 1.03

2015 -1.09 5.73 0.65

2016 -1.15 6.46 0.33

2017 -2 - 0.73

2018 -1.39 - 0.99

5. QUARRANTY TRUST BANK 2009 -0.85 8.05 1.07

2010 -1 8.17 1.18

2011 -1.52 8.40 1.14

2012 -1.15 8.48 1.14

2013 1.51 8.58 1.36

2014 -0.95 8.65 1.38

2015 -1.30 8.70 1.30

2016 -1.30 8.66 1.21

2017 -1.22 8.72 1.44

2018 -2 8.67 1.54

6. STANBIC IBTC 2009 -0.95 7.49 0.76

2010 -2 8.48 0.94

2011 -1.30 7.77 .095

2012 -2 7.90 0.87

2013 2.78 8.22 1.19

2014 - 8.54 1.41

2015 -1.15 8.60 1.33

2016 0.37 8.19 1.18

2017 -2 9.20 1.43

2018 -2 9.18 1.66

7. STERLING BANK 2009 - 6.57 0.03

2010 -1.39 7.51 0.19

2011 -1.15 6.79 0.09

2012 -1.30 5.41 0.08

2013 1.06 5.41 0.31

2014 -1.69 5.44 0.28


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2015 -1.30 5.42 0.23

2016 - 5.46 0.09

2017 -1.22 5.46 0.13

2018 -1.69 5.46 0.11

8. UNITED BANK FOR AFRICA 2009 1.09 7.19 0.99

2010 -2 8.05 1.02

2011 1.30 8.35 0.76

2012 1.09 7.87 0.38

2013 1.03 8.21 0.80

2014 1.22 7.18 0.74

2015 - 8.64 0.42

2016 0.92 8.68 0.41

2017 - 8.81 0.36

2018 0.88 8.87 0.94

9. UNITY BANK 2009 0.40 6.56 0.35

2010 0.22 6.31 0.16

2011 1.30 6.93 0.69

2012 -1 6.86 0.46

2013 0.86 8.60 0.07

2014 0.92 6.42 0.49

2015 -1 7.39 0.17

2016 1.30 7.39 0.18

2017 1.69 7.58 0.11

2018 1.69 7.56 0.02

10. WEMA BANK 2009 1.15 5.98 0.64

2010 1.09 7.48 0.33

2011 -1 6.82 1.33

2012 1.22 6.23 0.03

2013 1.43 6.94 0.03

2014 0.88 6.95 0.04

2015 1.69 7.18 0.69

2016 1.52 7.18 0.77

2017 1.09 7.20 0.73

2018 -1 7.04 0.71

Test of Hypotheses Decision Rule: Reject or discard null hypothesis when calculated t value is greater than t value in critical value table at 1.080 Ho1: Investigative accounting practice has no significant effect on accrual quality of quoted banks operating in Nigeria.

Table 4.3: Test of hypothesis I R

2 71.6

Adjusted R2 68.1

T calculated 0.844227 T table 1.080 Significant level 5% = 0.025 (two tail) Probability 0.4008 Source: E-view 9.0 Extracts


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Decision Seeing that the computed t value of 0.844227 is less than t value in critical value table of 1.080, the researchers therefore reject the alternate hypothesis and fail to reject the null hypothesis which says that investigative accounting practice has no significant effect on accrual quality of quoted banks operating in Nigeria.

Ho2: Investigative accounting practice has no significant effect or impact on the value relevance of quoted banks operating in Nigeria. Table 4.4: Test of hypothesis II R

2 61.6

Adjusted R2 48.1

T-calculated -0.569870 T-table 1.080 Significant level 5% = 0.025 (two tail) Probability 0.5696 Source: E-view 9.0 Extracts Decision Seeing that computed t value of ± 0.569870 is less than t value from critical value table of 1.080, the researchers reject the alternate hypothesis and fail to reject the null hypothesis which maintained that Investigative accounting practice has no significant effect on the value relevance of quoted banks operating in Nigeria.

5 CONCLUDING REMARKS This study examined “the effect of forensic accounting on quality of financial reporting of quoted banks in Nigeria”. Model one: Forensic accounting and accrual quality of the study found that the independent variable proxied by investigative accounting in the regression model showed that 71% alteration on accrual quality of the banks under study could be explained by changes in forensic accounting variable examined. The F-statistics showed that the model is significant while the coefficient showed that investigative accounting is negatively related with accrual quality and the p value showed that the coefficient is statistically insignificant. Model two: forensic accounting and value relevance of the study found that the independent variable in the regression model showed that 61% alteration or variation in value relevance of the banks studied could be explained by discrepancy in forensic accounting variable examined. The F-statistics showed that the model is significant while the coefficient showed that investigative accounting is negatively related with value relevance and the p value showed that the coefficient is statistically insignificant. Hence, the conclusions drawn from these findings are that there was a negative coefficient of -0.015234 as a parameter for investigative accounting and accrual quality at a p value of 0.4008; the study therefore concludes that investigative accounting have negative but insignificant impact on accrual quality of quoted banks in Nigeria. The study further found a negative coefficient of -2.415291 as parameter for investigative accounting and value relevance of quality of monetary reports and a p-value of 0.5696; the study therefore, concludes that investigative accounting has negative but insignificant effect on value relevance of monetary reports of quoted banks in Nigeria. Finally, the study concludes that there is an urgent need to engage services of forensic accountants by quoted banks in Nigeria.

RECOMMENDATIONS The study found significant connection between forensic accounting and quality of monetary reporting by the values of R-square of 71.6% and 61.6%, therefore, the study recommends that accounting regulators


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in Nigeria like the “Financial Reporting Council” and other relevant accounting agencies and bodies need to design, strengthen, support and promote programs and trainings to ensure certification of forensic accountants especially on investigative skills. Forensic accountants are also advised to enroll for various modules of forensic certification by the Institute of Chartered Accountants of Nigeria (ICAN). Forensic accountants should strive to implement the application of investigative accounting practices, skills and continue to acquire relevant trainings on forensics to improve their skills and be knowledgeable to offer professional advice and services that could unknot those concerns which have dulled quality assurance of financial/monetary reporting. The study also recommends an annual match between cash flow from operations and accruals, Earnings per share (EPS) and market value of shares and also information content of the audited account should be scrutinized by forensic accountant to affirm the quality of the reporting and build stakeholders’ confidence. REFERENCES Akani, F. N., & Ogbide, S. O. (2017). Forensic accounting and fraudulent practices in the Nigerian Public

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