Forensic accounting is currently being applied to tackle issues of fraud in the entire world. Various empirical studies have been performed on the use of forensic accounting methods in fraud investigation. For instance, Dube, Njanke and Mashayanye (2009) in their study regarding the effectiveness of forensic auditing in preventing, detecting and investigating bank frauds, wanted to establish the extent to which the forensic auditors can fulfill their mandate using the forensic accounting techniques. Their study used personal interviews, questionnaires and document review as the data collection instruments. Applying a sample of twenty forensic auditors from ten commercial banks, three audit firms, three building societies in Zimbabwe, they established that the forensic accounting techniques was effective of in detecting, investigating and preventing bank frauds. Additionally, it was discovered that above 75 per cent of the respondents had taken in-service training that helped in enhancing their performance in the skills and knowledge needed for forensic accounting. Also, it was revealed that experience in forensic accounting had some impact on confidence and performance in the delivery of duty to forensic auditors in Zimbabwe.
Generally, forensic accounting techniques involve the reactive and proactive ones. The application of any of these techniques relies very much on the existing situations. The proactive technique is argued to be a totally tactical technique as it vigorously focuses on the types of fraud, searches for symptoms, indicators, or red flags (Shawyer & Walsh, 2007). The five-step detection technique (Bjerstedt, 2006); the fraud hypothesis testing technique (Turkheimer et al. 2004); the strategic fraud detection technique (Sharma, 2012); the breakpoint technique (Doern, 2010) and the Benford’s digital analysis (Nigrini, 2003) are a few examples of generally forensic accounting techniques since they comply with the detective philosophy, which aims at detecting fraud before it actually occurs. On the contrary, the reactive technique inclines towards the philosophy of waiting to see the fraud occurring first and tackling it. This may entail the application of electronic equipment, such as the closed circuit television (CCTV) or mobile and digital cameras (Halbouni, 2015).
The six points internationally recognized forensic audit procedure includes background information and public document review, interview with knowledgeable people, laboratory analysis of the electronic and physical surveillance, and undercover operations. In pursuant of this procedure of forensic audit, there should be a relationship with the detection process so that synergy is created. The key duties of the investigator should be collecting, securing, presenting and considering the evidence on both sides of the issue (being impartial), make findings and recommendations to the relevant authority. Furthermore, the forensic auditors carry out this complex line of operation, which demands situation investigations procedure (Young & Moyes, 2014).
Enyi (2008) used a combination of traditional auditing methods of internal control evaluation tests on randomly selected important transactions, simple variance analysis and simple accounting ratio analysis to arrive at clues that pointed out the right direction to pursue in the investigation to be able to reveal series of fraudulent activities that were covered on incremental basis over a time frame of four years in the financial statements of an organization. However, the application of forensic accounting techniques was able to offer an accounting analysis that nearly disclosed the entire degree to which fraudulent activities in the production and buying divisions affected the organization’s fortunes over the stated time. The key points of the analysis became the major evidence with which the police was able to arrest and prosecute the culprits of the fraud, the result that was an out of court settlement between the accused and the organization.
In his study on the suitability of forensic accounting to financial crimes in both public and private sectors of the third world economies, Kasum (2012) empirically established that forensic or investigative accounting has a significant role to play in fighting financial crimes. Furthermore, the study argued that their services are required more in the public sector. His research methodology used the combination of empirical survey and library where documentary records of organizations that apply the services of forensic accountants and those that coordinate their studies provided the suitable materials for review on the nature in the field. The perceptions of accountants, bankers, economists, lawyers, engineers, contractors and other related professionals on the subject matter were received through the questionnaire. However, the study did not establish the application of forensic accounting techniques in the public service, hence its limitation.
Koh, Arokiasamy and Suat (2009) confirmed that forensic accounting team can uncover a large fraud scheme for their client through applying forensic accounting methods. The team was invited by the client when the organization was undergoing an unexplainable reduction in profits. From the available records and documents, and from the interviews with main employees, a fraud report was produced that disclosed that the actions of the Chief Financial Officer were fraudulent. The Chief Financial Officer was interviewed and in the process confession of fraudulent actions was made. Furthermore, the team helped the client in filing employee dishonesty claim as well as in enforcing the law with the prosecution of the people.
In their work concerning an overview of forensic accounting in Malaysia, Moyes, Young & Din (2013), learned that forensic accounting was still in its early stages. From their study, it was argued that the slow progress in forensic accounting in Malaysia can be due to two major reasons. Firstly, forensic accounting is viewed as expensive service where only the big organizations can afford. Additionally, it will also be costly if the suspected wrongdoing is taken to court particularly if it includes a forensic accountant as an expert witness. Secondly, there is no compulsory requirement to perform forensic accounting even for distress organizations.
Gbegi and Okoye (2013) studied forensic accounting as a tool for fraud detection and prevention in the public sector organizations. Their study was performed concerning Nigerian Kogi State. Data for the study was obtained from both the secondary and secondary resources. They administered 370 copies of the study questionnaire to the staff of five chosen ministries in the state. They also complimented their quantitative method of data collection with oral interviews. They discovered that the application of forensic accounting considerably reduces the occurrence of fraud instances in the public sector. They also concluded that using forensic accountants can assist in preventing and detecting fraud occurrence in organizations and thus recommended that forensic accounting techniques should replace the traditional accounting techniques.
Therefore, it is apparent that forensic accounting techniques help in fraud investigation. They have assisted in uncovering fraudulent activities and prosecution of culprits. Such has resulted in fraud reduction in various organizations, especially the big organizations. This could also be of great assistance to the small organizations in the areas of controlling and preventing fraud.
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