Introduction

Forensic accounting is the tripartite practice of utilizing accounting, auditing and investigative

skills to assist in legal matters. It is the speciality practice area of accounting that describes

engagements that result from actual or anticipated disputes or litigation. Forensic accounting is

the science that ideals with the relation and application of financial, accounting, tax and auditing

knowledge to analyze, investigate, inquire, test and examine matters in civic law, criminal law

and jurisprudence (http://www.pueleibowtz-andchickllc.col11/1 itigation .shtml). Forensic

accounting can, therefore, be seen as an aspect of accounting that is suitable for legal review,

offering the highest level of assurance and including the generally accounted connotation of

having been arrived at in a scientific fashion.

(htt://www.edwardspub.com/journals/JFAlstudents.html. Forensic accounting 'is the fastest

growing area of accounting today. Despite the recent spotlight, forensic accounting is not new.

Its roots have been traced as far back as the early 1800's to Glasgow, Scotland that,

notwithstanding forensic accounting as a profession remained relatively unknown until the

plethora of high-profile corporate scandals and stricter reporting and internal control regulations

which brought to light its importance to the business world

(htt://www.norcrossgroup.com/forensicacct.html). Wallace (1991), opined that forensic

accounting, until recently, was usually hidden away in the investigation department, but in recent

years, it has emerged from the closet and become a recognized and growing source of income.

Forensic accounting is more than accounting ..... more than detective work ..... it's a combination

that will be in demand for as long as human nature exists (htt://www.forensic-accounting-

infon11ation.com/). The primary orientation of Forensic accounting is explanatory analysis

(cause and effect) of phenomena-including the discovery of deception (if any), and its effects -
introduced into an accounting system domain. The primary methodology employed by forensic

accountants is objective verification. Forensic accounting is focused, therefore, upon both the

evidence of economic transaction and reporting as contained within an accounting system and

the legal framework which allows such evidence to be suitable for the purpose(s) of establishing

accounting and or valuation.

Accountability, in this context implies, application of strong financial and operational controls,

respect for the rule of law and application of high ethical standards. The increase in the number

of fraud and fraudulent activities in Nigeria and around the world has been on alarming increase,

emphasizing the visibility of forensic accounting services. Frauds are acts of dishonest, deceit,

falsifications and manipulations perpetrated to gain under monetary and or non-monetary

benefits. Ojaide (2000), stated that fraudulent practices include frauds and all other illegal means

of acquiring and possessing an asset to the disadvantages of another person. In The Nigerian

Academic Forum Volume J 7 No J November, 2009 39 Dr. Emma I. Okove and Akamobi,

Ndidika L. accounting, fraudulent activities are illegal acuvrties involving misappropriation of

assets (cash, stocks, bookdebts, fixed assets), and manipulation and falsification of accounting

books and records, etc. forensic accountants utilize an understanding of business information and

financial reporting systems, accounting and auditing standard and procedures, 'evidence

gathering and investigative techniques and litigation processes to perform their work. Some of

their work include: investigating and analyzing financial evidence, developing computerized

application to assist in the analysis and presentation of financial evidence, communicating their

findings in the form of reports, exhibits, and collection of documents, and assisting in legal

proceedings, including testifying in court as an expert witness and preparing visual aids to

support trial evidence. Forensic Accounting Distinguished from Traditional Auditing • The
forensic accountant employs a much higher degree of professional skepticism when conducting

his work. He is not apt to accept explanations and documents at face value. • A forensic

accountant burrow much deeper into the facts and issues than a tradition auditor. • A forensic

accountant is more familiar with how employees can abuse and misuse controls and processes

and with the various types of fraud, schemes and methods used to circumvent internal controls.

• In gathering facts and evidence, a forensic accountant is more experienced in where to look,

what types of evidence to look for, how to extract it and what constitutes relevant and valid

support. For instance, in an auditor malpractice suit, a forensic accountant would be used to

explain what audit procedures, or lack thereof, may have contributed to the company's

misstatements. • The forensic accountant is more adept at interviewing and eliciting information

from company personnel, witnesses and subjects.• A forensic accountant is more experienced at

interpreting facts and evidence as well as presenting his/her findings in a manner that is

meaningful and can be used to support the civil, criminal, administrative and political processes.

In order to combat fraud, a company would bring in a forensic accountant, a professional with a

combination of financial expertise and investigative prowess, to determine exactly what's going

on.• A forensic accountant has a keen understanding and sixth sense for the fact and evidence

that are not, obvious, but that indirectly may verify, support or refute a given explanation,

transaction or activity (htt://www.norcrossgroup.com/forensictl.htl1ll). Since all professional

accountants operate within a' commercial legal environment, all professional accountants are, in

a sense, forensic accountants. What distinguishes forensic accountants in common parlance,

however, are the level of engagements. That is, when a professional accountant accepts an

engagement, where he anticipates that his findings or analysis may be subject to adversarial or

judicial scrutiny or administrative review, the professional account and seeks a level of
evidentiary 'detail and analytical precision which will be sustainable within the legal framework

of such scrutiny or review (htt://www.edwardspub.com/journals/JFA/students.html).

Competencies Requires of a Forensic Accountant Forensic accounting requires a large

repertories of skills in different situations. The following are some of the competencies a forensic

accountant must posses • The first and most important skill is the ability to think, otherwise

known cognitive skill. This allows forensic accountants to exercise skills like innovation,

creativity and ingenuity in the performance of their work. This underscores the point that a

forensic accountant must be versatile in knowledge. He must have an in-dept knowledge of

accountancy, auditing and business operations. He must posses a good communication skills and

intellectual skills and that would make him to be proficient in the practice of the profession.

• A forensic accountant must posses detective (investigative) and financial management skills.

He should be able to identify unusual financial transaction. He should be familiar with business

records and book -keeping practices beyond those used to satisfy financial. requirements. In the

context of legal dispute, the knowledge, skills and experience of a good forensic accountant are

extremely useful as a consultant to litigation counselor judges. 40 Tlte Role of Forensic

ACCOUlltillg ill Fraud blvestigatioll and Litigation Support • A forensic accountant should have

the ability to operate in unstructured situations. He should have be a good team spirit,

interpersonal skills, managerial and commercial skills and public relations capabilities. This is

referred to as affective or attitudinal skills. • A forensic accountant should be a well educated,

well trained and an experienced professional accountant. He should have legal knowledge and a

good knowledge of court-room procedures. Development of such skills required substantial

amount of time, resources and money. A forensic accountant should posses a good theoretical

and practical knowledge of the subject matter. He should be computer literate. Theoretical skills
would enable him to communicate complex theoretical ideas in a manner which would be easily

understandable. Practical (or Psychomotor) skills would help him to compute, re-compute (if the

need arises) and review a large volume of data. Such data may range from the more usual

accounting records and management information systems, to memos, .correspondence and other

less obvious financial data. The ability to manipulate and interpret data is very vital in case of

litigation. Computer literacy skills are indispensable in today's human endeavour. Computer

skills would enable the forensic accounting expert to audit through the computer and or around

the computer if he is not satisfied with the report of the auditors. His analytical abilities and

research skills will be essential to his success as his eventual financial experience including

knowledge of accounting procedure. Approaches to Forensic Accounting Assignment

Each forensic accounting assignment is unique and has a peculiar approach. In general many

forensic accounting assignments will include the steps detailed below.

• Meet with the Client It is very important to meet the client in order to have a clear

understanding of the important facts, players and issues at hand. • Perform Conflict Check A

conflict check should be carried out as soon as the relevant parties are established. • Perform

Initial Investigation Preliminary investigation should be carried out prior to the development of

a detailed plan of

action. This will allow subsequent plans to be based upon a more complete understanding of

the issue.• Develop an Action Plan This plan will take into account the knowledge gained by

meeting with the client in carrying out the initial investigation and will set out the objectives to

be achieved and the methodology to be utilized to accomplish them.

• Obtain the Relevant Evidence .Depending on the nature of the case this may involve locating

documents, economic information, asset, a person of company, another expert or proof of the
occurrence of an event.• Perform the Analysis The actual analysis performed will be dependent

upon the nature of the assignment and may involve. Calculating economic damages

Summarizing a large number of transaction Performing a tracing of assets Performing a present

value calculations by utilizing appropriate discount rates Performing a regression or sensitivity

analysis Utilizing a computerized application such as a spread sheet, data base or computer

model and Utilizing charts and graphics to explain the analysis Prepare the report. Often a report

will be prepared which may include sections on the nature of the assignment, scope of the

investigation, approach utilized, and limitations of scope and findings and' / or opinions. The

report will include schedules and graphics necessary to properly support and explain the

findings. 41 Dr. Emma f. Okove and Akamobi, Ndidika L. The Role of Forensic Accounting ill

Federal Investigations 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. Investigation is the act of determining whether criminal matters such as employee

theft, security fraud (including falsification of financial statements) identify theft and insurances

fraud have occurred. (htt:l/www.forensic.accounting-information.com/). As part of forensic

accountant's work, he must recommend actions that can be taken to minimize future risk or loss.

Fraud examination in forensic accounting differs significantly from that of a traditional auditor

or accountant. Fraud analysis in forensic accounting include a critical element-the intuitive

ability to investigate Fraud. While a traditional accountant may have experience in a particular

industry, they do not necessari Iy have the experiences to perform a competent investigation

(htt://www.sequence-Inc.com/accountinglfraudindex.htm). Engagement of Forensic accountants

on criminal matters typically arise as the aftermath of fraud. Employee fraud investigation often

involves procedures to determine the existence, nature and extent of fraud and may concern the
identification of a perpetrator. These investigations often entail interviews of personnel who had

access to the funds and a detailed review of the documentary evidence. Forensic accountants arc

often engaged to assist in investigations of the theft and defalcation of corporations and

individual assets using their education and experience to ascertain the level of theft or

misappropriation. They are also called upon to review business accounting systems and based

on their experience make recommendations as to how the system of internal control an internal

check can be improved to prevent theft and fraud. They may be involved in recovering proceeds

of crime and relation to confiscation proceedings concerning actual or assumed proceeds of

crime or money laundering (http://en. Wikipedia.org/wiki/forensic accounting). Fraud

investigation is often associated with investigations of criminal matters. A typical investigative

assignment would be an investigation of employee theft. Other examples include securities

fraud, insurance Fraud, kickbacks and proceeds of crime investigations. As businesses and

society become more enlightened and complex, methods of perpetrating frauds become more

sophisticated. A forensic accountant can be of assistance in investigative accounting in the

following ways: Review of the factual situation and provision of suggestions regarding the

possible courses of action Assistance with the protection and recovery of assets; Co-ordination of

other experts, including: • Private investigations • Forensic document examiners; • Consulting

engineers Assistance with the recovery of assets by way of civil action or criminal prosecution.

It should be noted that Forensic accountants arc not legal practitioners. They do not win or

lose cases, rather, they seek only the truth in conducting their evaluations, examinations and

inquiries, reporting the true results of their findings in an unbiased and objective manner

(htt.//www.Pueleibowitzandchickllc.com/1 itigation .shtrnl). The Role of Forensic Accounting

in Litigation Support Forensic accounting provides accounting analysis that is suitable to the
court, which will form the basis for discussion, debate and ultimately dispute resolution. In the

context of legal dispute, the knowledge, skills and experience of a good forensic accountant are

extremely useful as a consultant to litigation counselor judges. Litigation often involves

complex accounting, tax and financial matters requiring the specialized knowledge and expertise

of highly trained accounting, finance and tax professionals (htt'

//www.Pueleibowitzandchickic.com/1 itigation.shtml). Litigation support represents the Factual

presentation of economic issues relating to existing or pending litigation. It provides assistance

of an accounting nature in a matter involving existing or pending litigation. A typical litigation

support assignment would be calculating the economic loss resulting from breach of contract. In

this capacity, the forensic accounting professional quantifies 42 The Role of Forensic

AccouIlti1lg in Fraud Illvestigation and Litigatioll Support damages sustained by parties

involved in legal disputes and can assist in resolving dispute even before they reach the court

room. Not every forensic accounting process ends up in the court of law. However, if a dispute

reaches the court room, the forensic accountant may testify as an expect witness. Omoniyi

(2004), stated that the function of an expert witness is to assist the court reach a conclusion on

matters on which the court itsel F may not have the necessary knowledge to decide. What a

forensic accountant can contribute to litigation will depend substantially on the circumstances

and the nature of each case Litigation consultants are usually engaged in legal action where

financial information requires critical analysis. It typically involves the forensic accountant being

engaged by a lawyer to make an assessment of financial losses involved. Engagements relating

to civil disputes may fall into several categories. Calculating and quantifying losses and

economic damages, whether suffered through tort or breach of contact, disagreement relating to

company acquisitions-perhaps earn-outs or breach of warranties and business valuation. Forensic

commenting on the work of other professionals (http://en.wikipedia.org/wiki/Forensic-

accounting). Messier, Jr(1997), observed that there has been an increase in litigation against

auditors ill recent years. One reason lor such lawsuit is that auditors are perceived as having

'deep pockets' and injured parties hope to recover some or all of their auditors. In auditor

malpractice suits a forensic accountant would be used to explain what audit procedures or lack

thereof, may have contributed to the company's misstatement (http://www.norcrossgroup.colll/

[orensciaccl.ltllll ) In summary, a forensic accountant can be of assistance in litigation support in

the following ways: Assistance in obtaining the key document which should be made available

as evidence. This is very necessary in order to support or refute a claim Review of the relevant

documents in the initial assessment of the case III order to identify possible and probable areas of

loss. Briefing council on the financial and accounting aspects of the case during pre-trial

preparation' Advising lawyers during trials, particularly in relation to cross examination of the

opposing ~pert , Review of the opposing expert's damages report and reporting on both the

strengths and weakness of the position taken Assistance in settlement discussions and

negotiations. Giving oral evidence at trial if the case must be settled in the court of law.

Recommendations The following recommendations are made: • There is need for the inclusion

of forensic accounting in the syllabus of all the tertiary institutional offering accountancy in

Nigeria. Professional accountancy bodies should as well include the course in their syllabus. This

will help to create awareness of its importance • Professional accountants, both in practice,

private or public sectors should be trained and retrained on the relevance of forensic accounting

in Nigeria. They must be aware that they might be summoned by court one day to defend any

opinion given in their reports. Forensic accountants should be trained as early as possible in
order to obtain maximum benefits. They can be retrained by the following groups. Lawyers,

police force, insurance companies, government regulatory bodies and Agencies, Banks, courts

and business community. Their assistance can, if trained early in the process, be significant in

reducing the overall cost and maximization of benefits. Lastly, there is dearth of literature and

texts on forensic accounting in igeria. This may be as result of the fact that it is new area of

study. All hands must be on deck to promote this area of accounting profession which the use

world report called one of the "20 hot job tracks of the future" (11Up:/ Ifinace. monster.co m/arti

c Ies/f orens icacco LI n ti ng) 43 Dr. Emilia J. Okove ami Akamobi, Ndidika L. Conclusion ••

Forensic accounting is the practice of utilizing accounting, auditing and investigative skills to

assist in legal matters. It is a specially practice area of accounting that describes engagements

that result from actual or anticipated disputes or litigation. It comprises litigation support,

investigation and dispute resolution. The increase in number of fraud and fraudulent activities in

Nigeria and around the world has emphasized the need for forensic accountants. The practice\al

and in-depth analysis a forensic accountant will bring to a case helps uncover trends that bring to

light the relevant issues. To this end therefore References

http://www:edwordpub.com/journals/JFA/students.htm I http://www.forensic-accounting-

informatioll.com/ http://www.lill<lllc.ll1ollstel·.coll1//artie les/iorcilsicaccoullt ion/

http://www.nocrossgroup.com/lorclls icaccl. h L1nl

http://www.pueleibowtzanmdchickllc.col1l/1 iti gation.sh till I http://www.sequence-

inc.com/accounting/frauduidex.htm I http://iienn .wi kiped ia. org/wi ki forensciaccounti ng

Messier, Jr, W.F (1997). Auditing: a systematic approach New York. Mcgraw- Hill publishers

Ojaide, F. (2000). Frauds detection and prevention: the case of pension accounts ICAN NEWS
January/March. P8 Omoniyi, S.O (2004). The emerging role of forensic accounting. The

Nigerian accountant April/June pp43-44 Wallace, P (1991). The role of the forensic accountant.

Accountancy. November pIO 44