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Forensic Investigation and Forensic Audit Methodology in a Computerized Work Environment

Authors:
  • Lead City University Ibadan

Abstract

Resolving the incident of fraudulent activities is not a job for half-baked professional accountant, it involves complicated activities and forensic steps as the complexity of infraction demands the involvement of highly experienced forensic accountants/fraud examiners. Investigation is employed to elicit responses from the victims, accused and collaborative witnesses when the situation is unclear as to the causes of actions, the two major tools of investigation are interview and interrogation. In this paper, the author explore the concept of investigations, forensic investigations, forensic audit investigation methodology, forensic audit and the internal auditor, forensic in computerized work environment, and forensic investigation & audit Reporting using content analysis. This paper recommends that all would be forensic accountants/investigators, fraud/forensic auditors, statutory auditors, and investigative accountants, should be well equipped with forensic accounting techniques in obtaining admissible evidence suitable for litigation purposes as forensic accountants are currently in great demand, with the public needs for honesty, fairness and transparency in reporting increasing exponentially.
Investigation and Forensic Audit Methodology Godwin Oyedokun, ACA, CNA, CFE, FCTI P a g e 1 | 20
Forensic Investigation and Forensic Audit Methodology in a
Computerized Work Environment
1
By:
Godwin Emmanuel Oyedokun
2
ND (Fin), HND (Acct.), BSc. (Acct. Ed), MBA (Acct. & Fin.), MSc. (Acct.), MTP (SA), ACA, FCTI,
ACIB, AMNIM, CNA, FCFIP, FCE, CICA, CFA, CFE, CPFA, ABR, CertIFR
Assistant Director (Head) Education, Research & Technical Directorate
The Chartered Institute of Taxation of Nigeria (CITN)
godwinoye@yahoo.com, info@ogecops.com, +2348033737184, +2348055863944
April 11, 2015
1
Similar topic was delivered as lecture at 2-Day Capacity Building Workshop for the Staff of Internal Audit
Department of Niger Delta Development Commission (NDDC) Held at Golden Tulip Hotel, Evo Crescent,
Port-Harcourt, Rivers State on March 6 - 7, 2015 Organized by Gexim Nigeria Limited
2
Godwin is an Experience Certified Forensic Accountant, Certified Fraud Examiner, Certified Forensic
Investigator, Chartered Accountant, National Accountant, Chartered Tax Professional, Chartered Banker,
Chartered Manager, Insolvency Practitioner, Chartered Economist, and Financial Analyst of good repute. A
registered Professional in Nigeria with the Financial Reporting Council of Nigeria (FRC). He holds a
Certificate in International Financial Reporting (CertIFR) of Association of Certified Chartered Accountant
(ACCA).
Investigation and Forensic Audit Methodology Godwin Oyedokun, ACA, CNA, CFE, FCTI P a g e 2 | 20
Abstract
Resolving the incident of fraudulent activities is not a job for half-baked professional accountant, it
involves complicated activities and forensic steps as the complexity of infraction demands the
involvement of highly experienced forensic accountants/fraud examiners. Investigation is employed
to elicit responses from the victims, accused and collaborative witnesses when the situation is
unclear as to the causes of actions, the two major tools of investigation are interview and
interrogation. In this paper, the author explore the concept of investigations, forensic investigations,
forensic audit investigation methodology, forensic audit and the internal auditor, forensic in
computerized work environment, and f
orensic investigation & audit Reporting using content analysis.
This
paper recommends that all would be forensic accountants/investigators, fraud/forensic auditors,
statutory auditors, and investigative accountants, should be well equipped with forensic accounting
techniques in obtaining admissible evidence suitable for litigation purposes as forensic accountants
are currently in great demand, with the public needs for honesty, fairness and transparency in
reporting increasing exponentially.
Key words:
Forensic Accounting, Forensic Audit, Forensic Investigation Digital Forensic, Computerized
Environment
Word Counts: 145
JEL Classification: M41, M47, M49
1.0. Introduction
It is not a gaining saying that forensic accounting/audit has taken an important role in both private
and public companies since the birth of the 21st century. One can but always remember the avoidable
failure of some formerly prominent public companies like Enron and Tyco in the late 1990s, so also
terrorist attacks of September 11, 2001, contributed immensely to the high demand for forensic
accounting expert that can bring about a new, important and lucrative specialty. Forensic accounting
procedures target financial and operational fraud, discovery of hidden assets, and adherence to
federal regulations (Pirraglia, n.d).
Forensic Investigation and Forensic Audit are better forensic strategies in resolving the allegations
of fraudulent activities as signs of financial crime can be initially detected in a variety of ways; by
Investigation and Forensic Audit Methodology Godwin Oyedokun, ACA, CNA, CFE, FCTI P a g e 3 | 20
accident, by whistle-blowing, by auditors, by data mining, by controls and testing, or by the
organization's top management requesting an inspection on the basis of mere suspicion.
This paper help in understanding the concept of investigations, forensic investigations, forensic audit
investigation methodology, forensic audit and the internal auditor, forensics in computerized work
environment, and forensic investigation & audit reporting.
2.0. Concept of Investigations
Investigation is the act or process of investigating or the condition of being investigated. A searching
inquiry for ascertaining facts; detailed or careful examination (dictionary.reference.com).
Investigation is a vital part of forensic accounting and auditing process but only applied when the
event or transaction is beclouded. It is carried out when lapse has been established to ascertain who
is responsible, the reason for the action including the extent of damage if any. It could be referred to
as a detailed verification and clarification of doubt about a transaction or event.
It is the search and examination of the particulars of an event to determine the hidden, unique, or
complex facts surrounding the event. A deliberate search and review of records in accordance with
the laid down and agreed policies in order to ascertain if and why the keeping of the records resulted
in a gap and the responsible person.
Investigation is a structured gathering of documentary evidence and testimony to resolve an
allegation of improper activity.
In most cases, fraud investigations are investigations of white collar crime, which involves
surveillance and careful consideration of complicated financial records.
3.0. Types of Investigations
3.1. Fraud Investigation
A fraud investigation tries to determine whether fraud has taken place and tries to detect evidence
of fraud has occurred.
Fraud is considered to involve misrepresentation with intent to deceive. If a company makes specific
promises about a product, for example, in order to sell that product, they may be guilty of fraud if
Investigation and Forensic Audit Methodology Godwin Oyedokun, ACA, CNA, CFE, FCTI P a g e 4 | 20
they are aware that the product does not work as advertised. Fraud is a very real and costly problem
in today's world, and it causes not only loss of money but also loss of life and serious injuries.
Most fraud investigations begin with a meeting between the investigator and the client. The person
launching the investigation explains to their investigators why they suspect fraud has taken place
and hand over any evidence they have to the investigator. A good fraud investigator will use this
initial information to find more evidence and more facts. A fraud investigator may use surveillance,
asset searches, background checks, employee investigations, business investigations, and other types
of methods to get to the bottom of a case.
In most cases, fraud investigations are investigations of white collar crime, which involves
surveillance and careful consideration of complicated financial records.
According to ACCA, forensic accountant/auditors could be asked to investigate many different
types of fraud. These are then categorized into three viz: corruption, asset misappropriation and
financial statement fraud:
Corruption
There are three types of corruption fraud: conflicts of interest, bribery, and extortion.
In a conflict of interest fraud, the fraudster exerts their influence to achieve a personal gain which
detrimentally affects the company. The fraudster may not benefit financially, but rather receives an
undisclosed personal benefit as a result of the situation. For example, a manager may approve the
expenses of an employee who is also a personal friend in order to maintain that friendship, even if
the expenses are inaccurate.
Bribery is when money (or something else of value) is offered in order to influence a situation.
Extortion is the opposite of bribery, and happens when money is demanded (rather than offered) in
order to secure a particular outcome.
Asset misappropriation
The common feature is the theft of cash or other assets from the company, for example:
Cash theft the stealing of physical cash, for example petty cash, from the premises of a company.
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Fraudulent disbursements company funds being used to make fraudulent payments. Common
examples include billing schemes, where payments are made to a fictitious supplier, and payroll
schemes, where payments are made to fictitious employees (often known as ‘ghost employees’).
Inventory frauds the theft of inventory from the company.
Misuse of assets employees using company assets for their own personal interest.
Financial statement fraud
This is also known as fraudulent financial reporting, and is a type of fraud that causes a material
misstatement in the financial statements. It can include deliberate falsification of accounting records;
omission of transactions, balances or disclosures from the financial statements; or the misapplication
of financial reporting standards. This is often carried out with the intention of presenting the financial
statements with a particular bias, for example concealing liabilities in order to improve any analysis
of liquidity and gearing.
3.2. Interview and Interrogation
Interview and Interrogation are two major techniques in investigation. That are used to elicit
responses from the suspect or accused. It should however be noted that the investigator (interviewer
or interrogator) cannot usurp the power of the court of competent jurisdiction by pronouncing the
suspect or accused guilty. His/her role is to gather evidence that can be used to prove or disprove the
act in issue (Fred, John, Joseph, Brian, 2004, Oyedokun, 2014).
According to Fred, John, Joseph, Brian (2004), an interview is non-accusatory. Even if the
investigator has clear reason to believe that the suspect is involved in the crime or has lied he should
still not accuse. If the investigator does not accuse the suspect while interviewing him he can
establish a much better rapport with the suspect that will assist him in an interrogation after the
interview.
“Interrogation is an art. You can master it through your study and experience. A good investigator
is not necessarily a good interrogator. To be a good interrogator you need to be a good actor and
must have an insight of human psychology. You should be able to act according to age, profession
and intellect of the individual suspect because a suspect could be a lawyer, doctor, scientist,
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professor, manager or an unskilled laborer and, could be a child, teenager, adult and senior” (Fred,
John, Joseph, Brian, 2004).
The difference between interview and interrogation is that an interview is conducted in a cordial
atmosphere where a witness is more comfortable physically and psychologically. On the other hand,
whenever a person is questioned in an uncomfortable atmosphere (interrogation room) where he is
under the psychological pressure, it is an interrogation. Interrogator, in this case, has more
psychological advantage than his suspect. Interrogation is a kind of psychological warfare between
interrogator and suspect. Only when an interrogator overpowers a suspect psychologically, he gets
a confession or the fact of a case which is not possible otherwise (Becca and Jay, 2004).
4.0. Forensic Audit Investigation Methodology
Forensic investigation is the utilization of specialized investigative skills in carrying out an inquiry
conducted in such a manner that the outcome will have application to a court of law. Forensic
Investigators are be grounded in accounting, medicine, engineering or some other discipline.
Forensic investigation is the examination of evidence regarding an assertion to determine its
correspondence to established criteria carried out in a manner suitable to the court. An example
would be a Forensic Audit of sales records to determine the quantum of rent owing under a lease
agreement, which is the subject of litigation.
Umeraziz (2014) while discussing the methodology to be followed by fraud/forensic
auditors/investigators opines that the examination could be approached from both the angels of
whether the fraud could have occurred and whether it could not have occurred.
The methodology which he believes that is straight forward as as follows (Umeraziz, 2014):
1. Analyzing data which is available
2. Creating a hypothesis based on such data
3. Testing the hypothesis
4. Refining and altering the hypothesis
Analyzing Available Data
This is the most fundamental step as it feeds into the overall investigation and governs whether the
fraud auditor would be able to create a hypothesis close to the actual incident. In small investigations
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involving one or two examiners working on two or three key documents such as agreements,
invoices etc. the step cannot be challenging.
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Creating Hypothesis
There could be infinite number of hypotheses and it is essential to harness one’s imagination and
treat only those fitting the merits of the knowledge and information initially available and as learned
during performance of documentation analysis.
Testing the Hypothesis
This is the phase where the investigators perform targeted testing of the available documentation
and records. They also physical observation of procedures and processes to substantiate or refute
their hypothesis.
Refining and Amending the Hypothesis
Targeted testing may expose circumstances which may entirely change the direction of the audit
process. This is normal thing and should not cause panic for the fraud auditor. The amendments
should be based on the results came from the testing of hypothesis initially developed.
Communicating Results
While reporting the results the auditor should be concise, and deliver the report with concrete facts.
Basing the report on ambiguous evidence would make the report completely useless for the users.
However, a fraud auditor report is distinguished from any other report with one key prominent
feature: No fact unsubstantiated. The auditor should make sure that all evidences in the report are
clearly organized, catalogued and presented as a support to the fraud report.
5.0. Fraud Auditors’ Skills
An effective fraud auditor should know, with some degree of depth, what fraud is from the following
perspectives:
i. Human and individual;
ii. Organizational, cultural, and motivational;
iii. Economic/Competitive;
iv. Social;
v. Regulatory, legal, and evidential (how to discern, detect, and document such frauds)
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Accounting, audit, and internal control (when, where, and how fraud is most likely to occur in
books of account and in financial statements).
An effective fraud auditor should be able to do the following competently:
i. Conduct a review of internal controls.
ii. Assess the strengths and weaknesses of those controls.
iii. Design scenarios of potential fraud losses based on identified weaknesses in internal
controls.
iv. Identify questionable and exceptional situations in account balances.
v. Identify questionable and exceptional transactions (too high, too low, too often, too rare,
too much, too little, odd times, odd places, odd people).
vi. Distinguish between simple human errors, and omissions in entries and fraudulent
entries (international error, such as recurring small errors versus unintentional random
error and ignorance).
vii. Follow the flow of documents that support transactions.
viii. Follow the flow of funds into and out of an organization’s account.
ix. Search for underlying support documents for questionable transactions.
x. Review such documents for peculiarities such as raised amounts; forgery;
counterfeiting; fake billings; invoicing of claims; destruction of data; improper account
classification; irregularities in serial sequences, quantity, pricing, extensions, and
footings; and substitution of copies for original documents.
xi. Gather and preserve evidence to corroborate asset losses, fraudulent transactions, and
financial statements.
xii. Document and report a fraud loss criminal, civil, or insurance claims.
xiii. Be aware of management, administrative, and organizational policies, procedures, and
practices.
xiv. Test the organization’s motivational and ethical climate.
The skills of a criminal investigator are in some respects similar to those of an auditor. An auditor
and a detective both seek the truth of or with respect to the proper accounting of business transactions
and the detective/investigator with respect to the proper (legal) behavior of citizens. Both should
have inquisitive minds and challenge things that appear out of order and out of sequence, such as
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odd times, odd places, and odd places in a word, things that are the opposite of what one would
logically expect.
4.1. Thirteen Principles of Fraud Auditing
1. Fraud auditing is unlike financial auditing. It is more a mind-set than a methodology.
2. Fraud auditors are unlike financial auditors. Fraud auditors focus on exceptions, oddities,
accounting irregularities, and patterns of conduct, not on errors and omissions.
3. Fraud auditing is learned primarily from experience, not from audit text books or last year’s
work papers. Learning to be a fraud auditor means learning to think like a thief “Where
are the weakest links in this chain of internal controls?”
4. From an audit perspective, fraud is intentionally misrepresenting financial facts of a
material nature. From fraud-audit perspective, fraud is an international misrepresentation of
finance facts.
5. Frauds are committed for economic, egocentric, ideological, and psychotic reasons. Of the
four, the economic motive is the most.
6. Fraud tend to encompass the theory structure around the motive, opportunity, and benefit
7. Fraud is a computerized accounting environment can be committed at any state of
processing---input, throughout, or output. Input frauds (entering false and fraudulent data)
are the most common
8. The most common fraudulent schemes by lower-level employees involve disbursement
(payable, payroll, and benefit and expense claims).
9. The most common fraudulent schemes by higher-level managers involve “profit smoothing”
(deferring expenses, booking sales too early, overstating inventory).
10. Accounting-type frauds are caused more often by absence of controls than by loose
controls.
11. Fraud incidents are not growing exponentially, but lose are.
12. Accounting frauds are discovered more often by accident than by financial audit purposes
or design. Over 90 percent of financial frauds are discovered.
13. Fraud prevention is a matter of adequate controls and work environment that places a high
value on personal honesty and fair dealing.
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5.0. Forensic Audit and the Internal Auditor
5.1. Internal Control
To Investopedia, internal control is the methods put in place by a company to ensure the integrity of
financial and accounting information, meet operational and profitability targets and transmit
management policies throughout the organization. Internal controls work best when they are applied
to multiple divisions and deal with the interactions between the various business departments. No
two systems of internal controls are identical, but many core philosophies regarding financial
integrity and accounting practices have become standard management practices.
Internal Control according to Business dictionary is Systematic measures (such as reviews, checks
and balances, methods and procedures) instituted by an organization to:
i. conduct its business in an orderly and efficient manner;
ii. safeguard its assets and resources;
iii. deter and detect errors, fraud, and theft;
iv. ensure accuracy and completeness of its accounting data;
v. produce reliable and timely financial and management information; and
vi. ensure adherence to its policies and plans.
Internal control is “systematic measures (such as reviews, checks and balances, methods and
procedures) instituted by an organization to; conduct its business in an orderly and efficient manner,
safeguard its assets and resources, deter and detect errors, fraud, and theft, ensure accuracy and
completeness of its accounting data, produce reliable and timely financial and management
information, and ensure adherence to its policies and plans” (thebussinessdictionary.com).
Internal control and risk management are fundamental components of good corporate governance.
Good corporate governance means that the board must identify and manage all risks for a company.
In terms of risk management, internal control systems span finance, operations, compliance and
other areas, i.e. all the activities of the company. Controls attempt to ensure that risks, those factors
which stop the achievement of company objectives, are minimized (Kaplan, 2012).
An internal control system (ICS) comprises the whole network of systems established in an
organisation to provide reasonable assurance that organisational objectives will be achieved. The
Internal Control System (ICS) consists of a set of rules, procedures and organizational structures
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which aim to ensure that corporate strategy is implemented, achieve effective and efficient corporate
processes, safeguard the value of corporate assets, ensure the reliability and integrity of accounting
and management data and ensure that operations comply with all existing rules and regulations.
While internal management control refers to the procedures and policies in place to ensure that
company objectives are achieved. The control procedures and policies provide the detailed controls
implemented within the company (Kaplan, 2012, Unicreditgroup, 2012, Oyedokun, 2015).
It is also useful to think of internal control as a system for the management and control of certain
risks, to restrict the likelihood of adverse events or results.
On the limitations of internal control systems, warnings should be given regarding over-reliance on
any system, noting in particular that: a good internal control system cannot turn a poor manager into
a good one; the system can only provide reasonable assurance regarding the achievement of
objectives - all internal control systems are at risk from mistakes or errors; internal control systems
can be by-passed by collusion and management override; controls are only designed to cope with
routine transactions and events; there are resource constraints in provision of internal control
systems, limiting their effectiveness.
5.2. Internal Auditing
According to the Institute of Internal Auditor (IIA) in Millichamp and Taylor (2008), “Internal
Auditing is an independent, objective assurance and consulting activities designed to add value and
improve an organisation’s operation. It help an organization accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of risk management,
control and governance process”.
Internal auditors are different from external auditors because they do not focus solely on financial
statements or financial risks, much of their work is looking at operational or strategic risks
Millichamp and Taylor (2008, p 262).
Internal auditors have two primary effect on a financial statement audit: their existence and work
may affect the nature, timing, and extent of audit procedure; external auditors may use internal
auditors to provide direct assistance in performing the audit. If this is the case the external auditor
must assess internal auditors’ competence (education, experience, professional certification, etc.)
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and objectivity (organizational status within the company) (Hayes, Dassen, Schilder and Wallage,
2005, p.16).
Millichamp and Taylor (2008) asserts that internal audits are conducted by employees of a business
or by external auditors acting as subcontractors. They are becoming increasingly important because
of the development of Corporate Governance. These differ from statutory audits because the
priorities are set by the management who, to some extent, control the work of internal auditors.
“When client has internal auditors, the auditor may request their assistance in conducting the audit.
The decision process the auditors follows is then based on Statement of Auditing Standards no. 64,
“The Auditor’s Consideration of the Internal Audit Function in an Audit of Financial Statement”.
The internal auditors’ work may affect the nature, timing and extent of the audit procedure performed
by the independent auditor. Internal auditors’ works include; reviews, assessment and monitoring
the entity’s controls that are included in the various accounting cycles” (Messier 2000, P. 147).
Millichamp and Taylor (2008), conversed the followings as the role of Internal Audit:
Internal audit look at how organisation are managing their risk, they provide audit
committee and the board of directors with the information about whether risk have been
identified, and how well they are being managed. The responsibility to manage risk always
reside with management. Internal Audit’s role is: to identify potential problem areas;
recommend ways of improving risk management and internal control system; examination
and evaluation of information; to give an opinion on whether internal control are actually
working as intended; review of the economy, efficiency, and effectiveness of operation;
review of compliance with applicable laws and regulation; and review of and advice in
connection with the development of information systems.
6.0. Forensic in Computerized Work Environment
Computer forensics is the practice of collecting, analysing and reporting on digital data in a way that
is legally admissible. It can be used in the detection and prevention of crime and in any dispute where
evidence is stored digitally. Computer forensics follows a similar process to other forensic
disciplines, and faces similar issues. There are few areas of crime or dispute where computer
forensics cannot be applied. Law enforcement agencies have been among the earliest and heaviest
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users of computer forensics and consequently have often been at the forefront of developments in
the field.
Computers may constitute a ‘scene of a crime’, for example with hacking or denial of service attacks
or they may hold evidence in the form of emails, internet history, documents or other files relevant
to crimes such as murder, kidnap, fraud and drug trafficking.
It is not just the content of emails, documents and other files which may be of interest to investigators
but also the ‘metadata’ associated with those files. A computer forensic examination may reveal
when a document first appeared on a computer, when it was last edited, when it was last saved or
printed and which user carried out these actions.
6.2. Stages of computer forensic examination
Computer forensic examination process could be divided into six stages, presented in their usual
chronological order.
Readiness
For the forensic examiner themselves, readiness will include appropriate training, regular testing and
verification of their software and equipment, familiarity with legislation, dealing with unexpected
issues (e.g., what to do if indecent images of children are found present during a commercial job)
and ensuring that the on-site acquisition (data extraction) kit is complete and in working order.
Evaluation
The evaluation stage includes the receiving of instructions, the clarification of those instructions if
unclear or ambiguous, risk analysis and the allocation of roles and resources. Risk analysis for law
enforcement may include an assessment on the likelihood of physical threat on entering a suspect’s
property and how best to counter it.
Collection
The collection stage also involves the labelling and bagging of evidential items from the site, to be
sealed in numbered tamper-evident bags. Consideration should be given to securely and safely
transporting the material to the examiner’s laboratory.
Analysis
Analysis depends on the specifics of each job. The examiner usually provides feedback to the client
during analysis and from this dialogue the analysis may take a different path or be narrowed to
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specific areas. Analysis must be accurate, thorough, impartial, recorded, repeatable and completed
within the time-scales available and resources allocated.
Presentation
This stage usually involves the examiner producing a structured report on their findings, addressing
the points in the initial instructions along with any subsequent instructions. It would also cover any
other information which the examiner deems relevant to the investigation.
Review
A review of an examination can be simple, quick and can begin during any of the above stages. It
may include a basic analysis of what went wrong, what went well, and how the learning from this
can be incorporated into future examinations’. Feedback from the instructing party should also be
sought.
Any lessons learnt from this stage should be applied to the next examination and fed into the
readiness stage.
6.3. Issues facing computer forensics
The issues facing computer forensics examiners can be broken down into three broad categories:
technical, legal and administrative.
Technical issues
1. Encryption
2. Increasing storage space
3. New technologies
4. Anti-forensics
Legal issues
Administrative issues
i. Accepted standards
ii. Fit to practice
7.0.
Forensic Investigation & Audit Reporting
Renick (2007), advised that forensic accountants/auditors should be familiar with the issues of
attorney work product while preparing their reports, analyses, and notes. He added that forensic
accountants must bear in mind that almost everything involved in the process, including their drafts
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and notes, may be subject to discovery by the opposing party. Scrupulous caution is advised
whenever forensic accountants undertake an engagement (Renick, 2007).
Report writing is one of the most important functions in a forensic investigation/fraud examinations
for the following reasons:
i. In many instances, the written report is the only evidence that the work was performed;
ii. Cases can be won or lost on the strength of the written report;
iii. The written report conveys to the litigator all evidence needed to evaluate the legal status of
the case and indicates how best to proceed;
iv. The written report adds credibility to the fraud examination and to the examiner;
v. The written report forces the examiner to consider his actions during a fraud examination by
requiring documentation of uncovered material;
vi. The written report omits irrelevant information gained during the fraud examination, thereby
allowing pertinent facts to be clearly presented and understood;
vii. A satisfactory written report is based upon a satisfactory' examination.
A forensic investigation/fraud examinations report is a document written at the conclusion of a fraud
examination. Generally, an organization will have an allegation or a suspicion of fraud and will
conduct a fraud examination to determine whether fraud occurred, who may have been responsible,
and the amount of loss. It may vary in length and style across entities and types of investigations,
but it generally offers the same message to a similar audience, no matter the entity. Depending upon
the structure of the organization, these reports may be written for management, the board of directors
or audit committee, and possibly the internal audit team. There is customarily an executive summary
at the beginning of the report, which includes the overarching themes of the investigation, as well as
a conclusion, if possible. It also usually includes a detailed explanation of the activities performed
in the investigation, evidence obtained, and justification for the conclusion that the fraud examiner
reached. These reports may be very formal documents or simply internal memoranda (ACFE, 2014,
Oyedokun, 2015).
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8.0.
Conclusion
Increasingly, as various parties perceive the value of evidence, grounded as it is in "accounting
facts," forensic accountants are called upon to play important preemptive roles (as of right, without
cause), offering independent assurance in such diverse areas as audit committee advisory services,
merger and underwriting due diligence, investment analyst research, and enterprise risk
management. The validation and enhancement of the body of knowledge (the models and
methodologies) relating to the evidentiary value of accounting data, within a strict legal framework.
Forensic accounting techniques are useful in prevention, detection, and deterrence in the area of
fraud, money laundering, investigations, crime and terrorist financing (Oyedokun, 2015). These
techniques includes, investigative skills, audit skills, legal skill etc. It is now clear that audit,
investigation and forensic accounting are much related but they cannot be used interchangeably.
It is hereby recommended that all would be forensic accountants/investigators, fraud/forensic
auditors, statutory auditors, and investigative accountants, should be well equipped with forensic
accounting techniques in obtaining admissible evidence suitable for litigation purposes. Forensic
accountants are currently in great demand, with the public need for honesty, fairness and
transparency in reporting increasing exponentially. These forensic accountants need accounting,
finance, law, investigative and research skills to identify, interpret, communicate and prevent fraud.
As more and more companies look for forensic accountants and professional organizations offer
certifications in the area, it is becoming evident that the forensic accountant has a skill set that is
very different from an auditor or a financial accountant.
Investigation and Forensic Audit Methodology Godwin Oyedokun, ACA, CNA, CFE, FCTI P a g e 18 | 20
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... The study concluded that related application level techniques for forensic accounting in public firms of Jordan, was high by the viewpoints of certified accountants, and it affects management practices to manage profits in public shareholding firms . The purpose of the study of Oyedokun (2015), was to show the main activity of the forensic accountant, which includes multiple activities to solve complex financial problems resulting from fraud and outside the work of the legal accountant. The results of the study showed that forensic accounting is considered a preventive profession and offers a high level of confidence in the various services that it provides to beneficiaries, in addition to the importance of the procedures that are used in the forensic accounting profession in the different forms of financial fraud practices. . ...
... Forensic accountants, law enforcement personnel and lawyers work together during investigations and often appear as expert witnessing during trials (Oyedokun, 2015;Rabiu & Noorhayati, 2015;Suleiman et al., 2018). Forensic Accounting is an amalgam of forensic science and accounting and can be described as the use and application of accounting, auditing, investigative and analytical skills for the purpose of resolving financial issues in a manner that meets standards required by court of law (Crumbley, 2006). ...
... In a study about the main activities of a forensic accountant to solve complicated financial problems, Oyedokun (2015) found that forensic accounting is a preventive profession that offers a high rate of faith in the varied services which are presented to the client; in addition, it presents essential techniques that are utilized in prevention and discovery of all types of financial fraud. ...
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Lebanon has long been suffering from corruption among the various public organizations. Recently, there has been a lot of discussion on the urgent need for forensic accounting in the public sector in Lebanon to uncover any suspicious accounts at the Banque du Liban (BDL). Thus, the Lebanese government made a contract with Alvarez and Marsal to conduct a forensic audit at the BDL. At this, many financial and economic experts demanded to let local experts do it and save the high fees that Alvarez and Marsal will charge the government, especially that Lebanon has a problem in the availability of US Dollars. The researchers asked whether or not members of the Lebanese Association of Certified Public Accountants (LACPA) have the necessary requirements to practice forensic accounting. Consequently, this study examines the availability of required skills in LACPA members to practice forensic accounting. A five-point Likert style questionnaire was constructed and distributed to the sample which consisted of 300 LACPA members. The researchers retrieved 261 responses that were valid for testing and analysis. The study rendered some important results, mainly that LACPA members had four of the five main required skills to practice forensic accounting, and there is a lack in the remaining skill which is quick wits and analytical thinking.
... These professionals also provide services in areas such as criminal investigation, shareholders' and partnership disputes, business economic loss, mediation and arbitration, professional negligence, personal Injury claim/motor vehicle accident, accounting, damages, analysis, evaluation, and general consulting (Oluyombo and Okunola, 2018). Forensic accountants, law enforcement personnel and lawyers work together during investigations and often appear as expert witnessing during trials (Oyedokun, 2015;Rabiu and Noorhayati, 2015;Suleiman et al., 2018). Forensic Accounting is an amalgam of forensic science and accounting and can be described as the use and application of accounting, auditing, investigative and analytical skills for the purpose of resolving financial issues in a manner that meets standards required by court of law (Crumbley, 2006). ...
Chapter
This empirical study aims to examine the customer awareness and experience in both commercial and Islamic banks in the UK. It pays attention to the quality of services and the available support given to the customers. Banks pride in their financial services and support for customers. The banks’ mantra is about treating customers as priced assets and providing them with all the necessary support and guidance. Undoubtedly, the customers’ awareness of what the banks offer to them in terms of money safety, transfers, loans and interest rates are very important. The study utilises a questionnaire and focus group of 18 respondents with customers who use both banks to gain an understanding of their experiences. Evidence suggests that there is a general understanding of the banks’ services and commercial banks in particular expose their services more widely using various communication channels. The study found that some customers are aware of the specific charges and the interest rates. However, some were unaware of the services offered by the Islamic banks in relation to mortgage and interest rates and this had impact on customers’ satisfaction and loyalty. The study concludes that both commercial and Islamic banks need to do more to increase their customers services provisions in order to attract and retain existing customers. Offering customers and making them aware of a range of products and services tailored to their needs is way forward to acquire new and to increase customer retention.KeywordsCustomer experienceSatisfactionLoyaltyService chargesIslamic bankCommercial bankQuality of service
Chapter
While the principle of financial fraud remains the same, new methods and means have been developed as a result of the advanced technology. Due to the large financial scandals which have been recorded throughout the history, the need for “Forensic Accounting” has dramatically increased within business sphere. The pandemic of COVID-19 breeds several challenges for both governments and business firms in alleviating corporate scams, corruption, bankruptcy, money laundering, cybercrimes, and the like. The impact of such illegal practices hits the financial reporting and ultimately leads to misleading decisions. In fact, the internal and external auditors play different roles than the forensic accountants do. Seemingly, auditing and forensic accounting function in one area, but each drives its own way. Therefore, it is vital nowadays to assign forensic accountant who is well equipped with adequate knowledge, skills, and experience. Equally, it is essential to introduce forensic accounting education to meet the existed marketplace demands. This chapter is devoted to provide an overview about the concept of forensic accounting and how the entire world has significantly affected by the white-collar crimes especially during the global lockdown. In addition, it will clear the misunderstanding between forensic accounting and auditing. Furthermore, the chapter will explain the most important knowledge and skills a Forensic Accountant should acquire in order to perform successfully despite the fact that there is a lack of offered courses and degrees in Forensic Accounting globally. Finally, there are a number of issues facing the Forensic Accounting field which will be highlighted and discussed to be improved.
Chapter
The auditing profession is changing due to the advent and enforcement of artificial intelligence (AI) in its field. The implementation of artificial intelligence is introducing the advantages of taking over manual processes and promoting effective value-added decision making by the auditors. This chapter discusses the development and use of artificial intelligence in auditing from the prospects of education, profession, and ethical implications. It is not sufficient for the auditors to have professional knowledge only but to also develop the acumen for the implementation of artificial intelligence. Undergraduate and postgraduate degrees are being revamped to include knowledge of AI. Additionally, auditors are catching up on AI developments through professional development courses. The audit process benefits from AI due to the coverage of all the transactions instead of relying only on a sample to make a judgment. Auditing firms are investing in contract analysis software to go through complex documents. However, the ethical implications of AI are new and regulatory authorities are still in the process of providing adequate coverage toward the use of AI. The bottom-line of implementing AI processes is that it is complementary to the function of auditing and not a replacement.
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With the introduction of the International Standard on Auditing number 240 (ISA240) there has been a paradigm shift in auditing as auditors are now required to identify and assess the risks of material misstatements due to fraud at the financial statement level and to evaluate the sufficiency, implementation and the effectiveness of the controls related to those assessed prone to fraud. This, of course, implies that statutory audit must now take the garb of forensic investigations. The problem with the present system of forensic investigation is that it is focused more on financial transactions than on the totality of the entity's operations and often time neglects areas where there have been constant leakages of other organizational resources that are of financial consequences but which are not easily detected with a normal analysis of the financial statement. This paper attempts to offer suggestions using real case problem on how to apply forensic accounting in investigating variances and suspected fraudulent activities in manufacturing processes. It employs both empirical and supervised experimental modules integrated with the normal audit tools in unearthing fraudulent acts perpetrated over many accounting periods.
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The concept of internal control is just as relevant to churches as it is to profit seeking organizations. Inadequate internal controls can hinder the management responsibilities of church officers and employees and place them in a position where they may be tempted to engage in questionable activities and accounting practices, or could subject individuals to unwarranted accusations of such activities. This study was designed to evaluate the effects of church size as well as the polity and hierarchical structure of denominations on systems of internal control. A questionnaire was used to collect data regarding internal controls currently in place in churches. The internal control evaluation scores were found to be significantly different based on church size. Three major denominations with different types of church polity and differing hierarchical structures were included in the study. The internal control evaluation scores were found to be significantly different based on denomination. This suggests that the polity and hierarchical structure of a denomination affect the quality of a local church’s system of internal control.
Article
We examine the relation between internal control quality and the accuracy of management guidance. Consistent with managers in firms with ineffective internal controls relying on erroneous internal management reports when forming guidance, we document less accurate guidance among firms reporting ineffective internal controls. This relation extends to a change analysis, and the impact of ineffective internal controls on forecast accuracy is three times larger when the weakness relates to revenues or cost of goods sold—inputs particularly relevant to forecasting earnings. We conclude that internal control quality has an economically significant effect on internal management reports and thus decisions based on these figures.
Association of Certified Fraud Examiners (Year 2013): 2013 International Fraud Examiners Manual Association of Certified Fraud Examiners
Association of Certified Fraud Examiners (Year 2013): 2013 International Fraud Examiners Manual Association of Certified Fraud Examiners, www.acfe.com Cressey (1940), Other People's Money (Montclair: Patterson Smith, 1973) p. 30.