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Forensic Accounting and Tax Fraud Detection in the Nigerian Public Sector

Forensic Accounting and Tax Fraud Detection in the Nigerian Public Sector Electronic copy available at: https://ssrn.com/abstract=3852045 Electronic copy available at: https://ssrn.com/abstract=3852045 Copyright © CITN January 2021 Alkolam Enterprises 7, Awe Crescent, Onipanu, Lagos. 10, Dabira Street, Palmgrove, Somolu, Lagos. Tel: 08033336784, 08027546223 Electronic copy available at: https://ssrn.com/abstract=3852045 1. FIRM'S BEHAVIOURS AND DISCLOSURE OF ENVIRONMENTAL PRACTICES IN NIGERIA Akinlade, Olayinka Odunayo 1 2. CITIZEN ENGAGEMENTAND TAX COMPLIANCE BEHAVIOR AMONG SMES IN NIGERIA Rabiu, Onaolapo Olowo, Mohammed, Abdullahi Umar and Victor, Olufunsho Hambolu 22 3. IMPACT OF TAX AUDIT AND INVESTIGATION ON REVENUE GENERATION IN EDO STATE Emuze, ljeoma Chioma Blessing, Emuze, Godson andAtu, Kingsley Osaretin Omimi-Ejoor 38 4. GOVERNMENT BUDGET VARIABLES AND ECONOMIC GROWTH IN NIGERIA (1981-2019). Omotosho, Tope and Olaoye, Festus Oladipupo 57 5. AUDITOR-CLIENTRELATIONSHIPANDAUDIT QUALITY: EVIDENCE FROM PUBLICLY QUOTED NIGERIA COMPANIES Ovedje Ogheneovo Helen, Mary Josiah and Egot Tessy Ejuno 79 6. A REVIEW OF CORPORATE GOVERNANCE PRACTICES AND ETHICAL TAX BEHAVIOUR Aiworo, Doris Esohe, Ehiorobo, Osamwonyi and Orunmwense, Kenny Esosa. 96 7. BOARD HETEROGENEITY AND CORPORATE TAX AGGRESSIVENESS Salami, Suleiman and Zaid, Abubakar 110 8. TAX EVASION, AVOIDANCE AND SUSTAINABLE DEVELOPMENT: A LITERATURE REVIEW Umanah, Samuel, Sado,Thankgod Eshikhogie and Oyedokun, Godwin 121 9. EFFECT OF COMPANY INCOME AND VALUE ADDED TAXES ON NET INVESTMENT OF QUOTED HEALTH CARE FIRMS IN NIGERIA Eyide, Michael Ugeoritsete and Ugochukwu,C. Nzewi 138 10. ENVIRONMENTALTAXATION: ISSUES AND BENEFITS 152 Ekpe, Malthus Timothy, Oyedokun, Godwin Emmanuel and Josiah, Mary 11. EFFECT OF TAX ADMINISTRATION AND TAX PAYER EDUCATION ON TAX COMPLIANCE BEHAVIOUR Oba!, Usang Edet Usang and Udofia, Aniekan Etim 166 12. BIG FOUR AUDIT FIRMS AND MARKET PERFORMANCE OF SELECTED MANUFACTURING COMPANIES IN NIGERIA. Ogbole, Philip Osemudiamen, Atu, Omimi- Ejoor Osaretin Kingsley and Okoye, A. E. 176 13. INFORMAL TAXATION AND ECONOMIC DEVELOPMENT IN NIGERIA lormbagah, Jacob A, Eke, Onyekachi A., lhendinihu, John U, Nwaorgu, Innocent A., and Oti, lbiam. 190 14. INSTITUTIONAL OWNERSHIP, GENDER BOARD DIVERSIFICATION AND CORPORATE TAX AGGRESSIVENESS OF LISTED CONGLOMERATES COMPANIES IN NIGERIA Lukman, Lawal, Mamman, Suleiman, Abdulmarooph, 0. Adisa and Aliyu Mohammed 210 Electronic copy available at: https://ssrn.com/abstract=3852045 15. LONG TERM FISCAL SUSTAINABILITY AND SOVEREIGN EXTERNAL DEBT IN NIGERIA: AN EMPIRICAL INVESTIGATION lshaq, Saidu 223 16. TAX AVOIDANCE AND FINANCIAL PERFORMANCE OF LISTED OIL MARKETING COMPANIES IN NIGERIA Lukman, Lawal; Mamman, Suleiman and Habib, Abdulkarim 240 17. DETERMINANTS OF CORPORATE TAX AGGRESSIVENESS IN NIGERIA MANUFACTURING SECTOR OMORUYI, Bright lnuaghata; JOSIAH, Mary and ONAIWU, Uzamere Jim 255 18. AUDIT COMMITTEE MECHANISMS AND FINANCIAL REPORTING LAG IN THE PRE AND POST IFRS ADOPTION PERIODS IN NIGERIA AKHOR, Sadiq Oshoke and OVBIAGELE, Daniel 272 19. TAX PLANNING AND VALUE OF THE LISTED DEPOSIT MONEY BANKS IN NIGERIA SAIFUDDEEN, Ibrahim and MUHAMMMAD, Aminu Isa 303 20. USING TAX AUDIT AND INVESTIGATION TO BOOST REVENUE GENERATION IN NIGERIA IGBODO, Anthony Abhiele; ATU, Omimi- Ejoor Osaretin Kingsley and JOSIAH, Mary 321 21. THE ROLE OF FORENSIC ACCOUNTANTS IN TAX FRAUD PREVENTION IN NIGERIA NWAORGU, Innocent Augustine; IORMBAGAH, Jacob Aondohemba and ABIAHU, Mary-Fidelis Chidoziem 335 22. ASSET-BASED EFFECT OF DIVIDEND PAY-OUT ON FINANCIAL PERFORMANCE OF THE LISTED CONGLOMERATE FIRMS IN NIGERIA UMAR, Dauda and KABIRU, Isa Dandago 355 23. THE DETERMINANTS OF ENVIRONMENTAL DISCLOSURE IN THE FINANCIAL REPORT OF LISTED COMPANIES IN NIGERIA BELLO, Muhammed Akinkunmi 374 24. USING ENVIRONMENTAL TAXATION AS A TOOLS FOR DETERMINATION OF DAMAGE COST FROM CEMENT INDUSTRY AIR POLLUTION REDUCTION: A CONTEXTUAL APPROACH TO SUSTAINABLE ENVIRONMENTAL POLICY (CASE STUDY OF ASHAKA CEMENT INDUSTRIAL SUBURB AREA NIGERIA) ILIYA, Garba and HARUNA, Usman 396 25. COVID-19 PANDEMIC, DIRECT DIASPORA REMITTANCES AND BEHAVIOUR OF MACROECONOMIC AGGREGATES IN NIGERIA NWIDOBIE, Barine Michael 411 26. CORPORATE TAX INCENTIVES AND RE-INVESTMENT PATTERNS OF QUOTED MANUFACTURING FIRMS IN NIGERIA MAIYAKI Yusuf Attahir, SHAGARI Abubakar Chika 429 27. DETERMINANTS OF TAX MORALE AND TAX COMPLIANCE: EVIDENCE FROM NIGERIA Orumwense Kenny Esosa, Josiah Mary and Aiwoho Doris 455 28. ANALYSIS OF THE IMPACT OF FISCAL POLICY ON ECONOMIC GROWTH IN NIGERIA: 1985-2019 Abubakar Mikailu Aminu and Sunday Mlanga 470 29. APPLICABILITY OF FORENSIC ACCOUNTING AND FINANCIAL MISCONDUCTS: EVIDENCE FROM NORTHWESTERN STATES, NIGERIA. Sagir Lawal 478 Electronic copy available at: https://ssrn.com/abstract=3852045 30. FORENSIC ACCOUNTING AND TAX FRAUD DETECTION IN THE NIGERIAN PUBLIC SECTOR Nosiri Hilary, Uwakwe Theresa Nnenna and Abiahu Mary-Fidelis Chidoziem 496 31. IMPACT OF EDUCATION TAX AND INVESTMENT IN HUMAN CAPITAL ON ECONOMIC GROWTH IN NIGERIA Abubakar Mikailu Aminu 507 32. IMPACT OF TAX INCENTIVES ON THE GROWTH OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA Biwei Theodora Awele 519 33. TAX AVOIDANCE AND FINANCIAL PERFORMANCE OF LISTED OIL MARKETING COMPANIES IN NIGERIA Lukman Lawal, Mamman Suleiman and Habib Abdulkarim 537 34. IMPACT OF TAX EDUCATION ON TAX COMPLIANCE IN NIGERIA Obi Happiness ljeoma and Edheku Ochuko Joy 554 35 TAX EVASION AND TAX AVOIDANCE IN NIGERIA: A BY PRODUCT OF ECONOMIC INJUSTICE Oyebolu Olasunbo Abioye and Usifoh Olufunmilayo Omorilewa 568 36. TAX ADMINISTRATION IN DEVELOPING COUNTRIES ABIAHU, Mary-Fidelis Chidoziem, OGODOGUN, College, E., EGBUNIKE, Patrick Amaechi and OBADA, Paradise Josephine 583 37. BOARD CHARACTERISTICS AND ENVIRONMENTAL DISCLOSURES OF LISTED COMPANIES IN NIGERIA CHUKWU, Gospel J. and APPAH, Ebimobowei 599 38. CORPORATE GOVERNANCE MECHANISM AND TAX AGGRESSIVENESS OF LISTED CONSUMER GOODS FIRMS IN NIGERIA CHUKWU, Gospel J., APPAH, Ebimobowei and ADEFISAYO, Awogbade 614 39. EXPLORING THE POTENTIAL OF ADR IN TAX DISPUTE RESOLUTION Umenweke, M.N and Amadi, N.B 632 40. TAX INCENTIVES AND FIRM VALUE IN NIGERIA Soyinka, Kazeem Akanfe, Olasunkanmi, Musibau Lanre and Sunday, Oluwafemi Michael 650 41. THE IMPACT OF IFRS ADOPTION ON ACCOUNTING AND TAXATION: ISSUES AND CHALLENGES IN NIGERIA ldada, Augusta lkponmwonsa, Olufemi, Gina Oghogho and Atu, Kingsley Osaretin 669 42. LIMITING THE RISKS OF FAILURE IN FINANCIAL INSTITUTIONS: EVIDENCE FROM THE NIGERIAN DEPOSIT MONEY BANKS Nana, Ufuoma Joseph and Onodavwerho, Oliver Justice 681 43. SIGNALING EFFECT OF AUDIT FIRM MECHANISM ON AUDITOR SWITCHING: EVIDENCE FROM QUOTED COMPANIES IN NIGERIA AKRAWAH, Dennis Onutomaha, AKHOR, Sadiq Oshoke and OKUNROBO, Samuel Osarobo 695 44. DETERMINANTS OF AUDIT FEES AMONG QUOTED MANUFACTURING COMPANIES IN NIGERIA OHARISI, Anthony Omenasa, JOSIAH, Mary and ALALE, Marlene Tam 716 45. INTERNAL FINANCIAL CONTROL MECHANISM AND MANAGEMENT OF FUNDS IN NATIONAL JUDICIAL COUNCIL OYEDOKUN, Godwin Emmanuel, NABURGI, Musa Mohammed and AKWE, Kennedy Anyapa John 735 Electronic copy available at: https://ssrn.com/abstract=3852045 46. FORENSIC ACCOUNTING AND TAX EVASION IN NIGERIA NOSIRI, Hilary, NWACHUKWU, Michael lkedichi and ADEFISAYO, Awogbade 762 47. SPECIFIC DETERMINANTS OF CAPITAL ADEQUACY RATIO OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA OYEDOKUN, Godwin Emmanuel, NABURGI, Musa Mohammed and PAUL, Vincent 782 Electronic copy available at: https://ssrn.com/abstract=3852045 FORENSIC ACCOUNTING AND TAX FRAUD DETECTION IN THE NIGERIAN PUBLIC SECTOR Nosiri, Hilary Department of Accounting, Gregory University, Uturu, Nigeria. nosirihilary@gmail.com Uwakwe, Theresa Nnenna Department of Accountancy, Alex Ekweme Federal University, Abakiliki, Ebonyi State. austinebliss3@gmail.com Abiahu, Mary-Fidelis Chidoziem Research and Professional Standards Directorate, Chartered Institute of Taxation of Nigeria (CITN), Lagos maryfidelisabiahu@citn.org Abstract Financial fraud had for long been seen as a menace that led to the collapse of many organizations in the world. The Federal Government in a bid to reduce the cases of financial fraud, established many anti-graft agencies but yet the efforts seemed not to have yielded any results. Recently, the Federal Government approved the establishment of a new anti-graft agency, “The Proceeds of Crime Recovery and Management Agency. This goes to buttress that the issue of financial fraud, tax fraud inclusive has overwhelmed the government. Forensic accounting has been conceived as one of the most effective ways of reducing cases of tax fraud in Nigeria. Forensic accounting and tax fraud in the public sector was examined. The results showed that forensic accounting reduces the occurrence of tax fraud in the public sector and recommended that forensic accounting should be adopted by the public sector to meet up with the demand of technology. Keywords: Forensic Accounting, Tax Fraud Detection, Financial Fraud, Public Sector, Nigeria INTRODUCTION Governments all over the world, Nigeria inclusive are confronted with the problem of lack of capital to finance their social responsibilities. These social responsibilities include among others, provision of good roads, pipe bone water, energy and electricity, redistribution of wealth and income to promote welfare of the citizenry and conducive environment for business activities to strive. Meeting these social responsibilities is huge, therefore, government enjoins the citizens to perform their civic responsibilities by paying taxes. Taxation is one of the major ways through which government raises revenue to 496 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 finance its capital or recurrent expenditures. Bahadur (2018) submits that taxation is a primary tool to raise the revenue required by the government to finance its public expenditure responsibilities. The Institute of Chartered Accountants of Nigeria (2014) defined taxation as a compulsory contribution levied by a sovereign power, on the incomes, profits, goods, services or properties of individuals and corporate persons, trusts and settlements. Lamb, Lymer, Freedman, and James (2004) saw it as the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorships and companies by the government. Such taxes when collected are used for carrying out governmental functions, such as maintenance of law and order, provision of infrastructure, health and education of the citizens, or as a fiscal tool for controlling the economy. Taxation has always been seen as a very important tool for national growth and development in most countries. It has been recognized as a major vehicle for long term development of infrastructures of the country or state. The importance of tax cannot be over emphasized yet some believe that paying tax is enriching a selected few at the expense of all others. In Nigeria, despite the enormous benefits of taxation, people still indulge in cases of tax fraud. Tax fraud can be said to have occurred when an individual or corporate organization willingly and intentionally falsifies information on a tax return in order to reduce the amount of tax liability. Tax fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation. Tax fraud includes, claiming false deductions; claiming personal expenses as business expenses; and not reporting income. The term ‘tax fraud’ includes situations in which deliberately false statements are submitted, fake documents are produced, etc. Tax fraud is a form of deliberate evasion of tax which is generally punishable by law. Sanctions may include civil or criminal penalties. Nowadays, tax fraud and other fraudulent activities have become the order of the day in the Nigerian sectors, especially in the public sector where it begins to become a normal way of life in the midst of civil servants (Okoye and Akamobi, 2009 and Gbegi and Adebisi, 2014). However, several reasons have been used to justify tax fraud in our contemporary times. Such reasons include: high tax rates, illiteracy, lack of proper awareness, corruption in public offices, lack of adequate training for tax officials, embezzlement of tax revenues, loopholes in the tax laws, inability to interpret complex tax laws, weak legal framework and failure on the part of the judicial system to enforce relevant statutes against tax defaulters (Mughal and Akram, 2012; Adebisi & Gbegi, 2013; Obafemi, 2014; Onyeka & Nwankwo, 2016; Folayan & Adeniyi, 2018). Despite the tremendous efforts by the anti- graft agencies, the tax authorities and the traditional auditors to eradicate tax fraud and other fraudulent activities, it is indeed discovered that tax fraud in its various natures continues to grow in frequency and severity. The failure of these agencies to tackle this 497 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 canker warm that has eaten deep into the fabrics of the Nigerian economy has given room for a more sophisticated approach to tackle it and such a more effective approach is forensic accounting. According to Baird and Zelin (2009), forensic accounting is important investigative tool for detection of fraud. It provides an accounting analysis to the court for dispute resolution in certain cases and it also provides the court with explanation to the fraud that has been committed. That is why forensic accounting may play a vital role in detecting and reducing tax frauds in the public sector. In this concept, forensic accountants provide an account analysis to determine the facts necessary to resolve a dispute before it is brought before the court or the lawsuit process takes its course (Ozkul & Pamukc,2012). The increasing rate of tax fraud in the Nigerian public sectors has caused grave loss to the development of the Nigerian economy. Tax Fraud and other cases of tax related offences perpetrated by tax payers heavily affect the Nigerian economy, lower investment levels and reduce government revenue generation. The anti-tax fraud and tax authority strategies are often not effective enough to tackle this menace. Damages done to the economy and their budgets as a result of tax fraud can be enormous ranging from financial loss to reduction of economy performance, reputation, credibility and public confidence. Ojaide (2000) reveals that there is a distressing upsurge in the number of tax fraud and other fraudulent activities in the Nigerian public sector, stressing the need for a better approach to handle it. It is based on this that this study was therefore designed to examine forensic accounting and tax fraud detection in the Nigerian public sector. Therefore, the main objective of this study is to examine forensic accounting and tax fraud detection in the Nigerian public sector. This study will sought to ascertain the extent to which forensic accounting is applicable in the public sector of Anambra State; and to determine the extent to which forensic accounting can detect fraud in the public sector of Anambra State. LITERATURE REVIEW The review of related literature in this work was sub-divided into three sections, namely, the conceptual framework, theoretical and empirical framework. CONCEPTUAL FRAMEWORK Financial fraud Financial fraud is seen as when one obtains a gain by deception. It is a fraud involving the unlawful conversion of the ownership of property, (belonging to one person) to one's own personal use and benefit. Financial fraud may involve fraud (cheque fraud, credit card fraud, mortgage fraud, medical fraud, corporate fraud, securities fraud (including insider trading), bank fraud, insurance fraud, market manipulation, payment (point of sale ) fraud, 498 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 health care fraud ); theft; scams or confidence tricks; bribery; sedition; embezzlement; identity theft; money laundering; and forgery and counterfeiting, including the production of counterfeit money, consumer goods and tax fraud. Types of financial Fraud 1. Misappropriating income or assets. Perpetrators obtain and misuse assets or income belonging to someone else. This often occurs when caregivers of seniors take pension and Social Security payments from victims, withholding the funds or using them for personal purposes. 2. Fake relative scams. A phone call is made, pretending to be the call-recipient’s relative who is in trouble. The caller asks for money to be transferred to provide help in an emergency situation. These calls often involve someone calling a senior citizen and pretending to be a grandchild. 3. Identity theft. Personal identifying information is used without the individual’s permission to obtain credit, services, or other benefits. 4. Fraud in connection with financial institutions. A victim is called pretending to be a financial institution that needs help fighting fraud in the call-recipient’s accounts or that needs help finding an employee committing a fraud crime. The purpose of these scams may be to obtain the victim’s Social Security number or financial information, or to obtain cash from the victim by claiming the money will be used as part of a trap to catch the criminal employee. 5. Power of attorney fraud. A victim is convinced to give general or limited power of attorney to the person committing the fraud crime. The person who is given power of attorney may pose as an asset manager or otherwise have an official title, but ends up using the victim’s money and assets for personal gain. 6. Charity scams. This scam involves obtaining donations for a fake charity, or using a fake charity to obtain identifying details of the victims. 7. Advance fee fraud. Victims are persuaded to part with money in anticipation of later receiving even substantial cash or valuable assets. This financial fraud scam often takes the form of foreign lottery fraud, where victims must pay “taxes” on large winnings that never come. However, there are many variations of advance free fraud scams. 8. 419 Fraud. These scams are a type of advance fee scams, in which mail, fax, email, or phone communication is used to convince someone to part with money now in exchange for receiving larger amounts of money or assets later. 499 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 9. Tax Fraud. Tax fraud, according to investopedia (2020) occurs when an individual or a business entity willfully and intentionally falsifies information on a tax return to limit the amount of lax liability. Tax fraud essentially entails cheating on a tax obligation to avoid paying the entire tax obligation. Tax fraud can also be referred to as tax evasion. Tax fraud costs the government millions of dollars a year. Tax fraud can occur in any of the following: claiming of false deductions, claiming of personal expenses as business expenses, using false social security number and not reporting income. A business that engages in tax fraud may knowingly fail to file payroll tax reports, wittingly fail to report some of the cash payments made to employees, fail to report and pay any withheld payroll taxes. Forensic Accounting Dhar and Sarkar (2010) define forensic accounting as the application of accounting concepts and techniques to legal problems. It demands reporting, where accountability of the fraud is established and the report is considered as evidence in the court of law or in administrative proceedings. Forensic accounting is the integration of accounting, auditing and investigative skills (Zysman, 2004). Degboro and Olofinsola (2007) note that forensic investigation is about the determination and establishment of fact in support of legal case. That is, to use forensic techniques to detect and investigate a crime is to expose all its attending features and identify the culprits. In the view of Howard and Sheetz (2006), forensic accounting is the process of interpreting, summarizing and presenting complex financial issues clearly, succinctly and factually often in a court of law as an expert. It is concerned with the use of accounting discipline to help determine issues of facts in business litigation (Okunbor and Obaretin, 2010). Forensic accounting is a discipline that has its own models and methodologies of investigative procedures that search for assurance, attestation and advisory perspective to produce legal evidence. It is concerned with the evidentiary nature of accounting data, and as a practical field concerned with accounting fraud and forensic auditing; compliance, due diligence and risk assessment; detection of financial misrepresentation and financial statement fraud (Skousen and Wright, 2008); tax evasion; bankruptcy and valuation studies; violation of accounting regulation (Dhar and Sarkar, 2010). Curtis (2008) argues that fraud can be subjected to forensic accounting, since fraud encompasses the acquisition of property or economic advantage by means of deception, through either a misrepresentation or concealment. Bhasin (2007) notes that the objectives of forensic accounting include: assessment of damages caused by an auditor’s negligence, fact finding to see whether an embezzlement has taken place, in what amount, and whether criminal proceedings are to be initiated; collection of evidence in a criminal proceeding; and computation of asset values in a divorce proceedings. He argues that the primary orientation of forensic accounting is explanatory analysis (cause and effect) of 500 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 phenomenon- including discovery of deception (if any), and its effects-introduced into the accounting domain. He also noted that forensic accountants are trained to look beyond the numbers and deal with the business realities of situations. Analysis, interpretation, summarization and the presentation of complex financial business related issues are prominent features of the profession. He further reported that the activities of forensic accountants involve: investigating and analyzing financial evidence; developing computerized applications to assists in the analysis and presentation of financial evidence; communicating their findings in the form of reports, exhibits and collections of documents; and assisting in legal proceedings, including testifying in courts as an expert witness and preparing visual aids to support trial evidence. Forensic Accounting and Fraud Detection Fraud is a legal term that refers to the intentional misrepresentation of the truth in order to manipulate or deceive a company or individual (Howard and Sheetz, 2006). David (2005), states that fraud is not a possibility but a probability. He also explains that fraud can be better prevented if decisions are made by a group and not an individual. To define fraud is as difficult as identifying it. There is no definite and invariable rule laid down as a general proposition in defining fraud as it includes surprise, trick, cunning and unfair ways by which another is cheated. Fraud is to create a misjudgment or maintain an existing misjudgment to induce somebody to make a contract. It involves enriching oneself intentionally by reducing the value/worth of an asset in secret. When companies undergo severe financial problems and end up in bankruptcy, fraud by senior management may be involved. Russel (1978 cited in Bello, 2001) remarks that the term fraud is generic and is used in various ways. Fraud assumes so many different degrees and forms that courts are compelled to context themselves with only few general rules for its discovery and defeat. Okafor (2004) also reported that fraud is a generic term and embraces all the multifarious means which human ingenuity can devise, which are resorted to by one individual to get advantage over another in false representation. According to Anyanwu (1993), fraud is an act or course of deception, deliberately practiced to gain unlawful or unfair advantage; such deception directed to the detriment of another. Accounting fraud is an act of knowingly falsifying accounting records, such as sales or cost records, in order to boost the net income or sales figures; accounting fraud is illegal and subjects the company and the executives involved to civil lawsuits (Arokiasamy& Cristal, 2009). Company officials may resort to accounting fraud to reverse loss or to ensure that they meet earning expectations from shareholders or the public. Adeniji, (2004) summarize the types of fraud on the basis of methods of perpetration include the following but not exhaustive as the methods are devised day in-day out to include: defalcation, suppression, outright theft and embezzlement, tampering with reserves, insider abuses and forgeries, fraudulent substitutions, unauthorized, unauthorized lending, lending to ghost borrowers, kite flying 501 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 and cross firing, unofficial borrowing, impersonation, teeming and lading, fake payment, fraudulent use of the firms documents, fictitious accounts, false proceeds of collection, manipulation of vouchers, dry posting, over invoicing, inflation of statistical data, ledger accounts manipulation, fictitious contracts, duplication cheque books, computer fraud, misuse of suspense accounts, false declaration of cash shortages and so on. Detecting tax fraud has been a great concern to the government. This why they introduced the anti-graft agencies to help in the eradication of this social menace but their efforts seemed not to have yielded any benefit. Forensic accounting has been said to be one of the most effective ways of detecting tax fraud in the public sector. The Public Sector Public sectors, according to Wikipedia (2020) include public goods and governmental services such as the military, law enforcement, infrastructure (public roads, bridges, tunnels, water supply , sewers , electrical grids, telecommunications, etc.), public transit , public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service. Public enterprises, or state-owned enterprises, are self- financing commercial enterprises that are under public ownership which provide various private goods and services for sale and usually operate on a commercial basis. Organizations that are not part of the public sector are either a part of the private sector or voluntary sector. The private sector is composed of the economic sectors that are intended to earn a profit for the owners of the enterprise. The voluntary, civic or social sector concerns a diverse array of non-profit organizations emphasizing civil society. The sector has been riddled with cases of tax fraud which tax evasion is inclusive. THEORETICAL FRAMEWORK Benefit Received Theory This study was anchored on the Benefit Received Theory of taxation. This theory was propounded by Wicksell in 1896 and Lindahl in 1919. The theory centers on the efficacy of tax revenue in providing public services and supports government at all levels (federal, state and local) to generate revenue from a multiplicity of sources in order to sufficiently deliver public goods and services to the public. The theory adopts an exchange relationship between the tax-payers and the government in the sense that the governments collect taxes from both individuals and companies for the purpose of providing basic amenities such as water, housing, education, health care services, security, transportation and communication among others (Omodero & Dandago, 2019). The government has the obligation to provide basic facilities to the populace while the public is expected to respond by paying taxes that are commensurate with the benefits derived (Bhartia, 2009). 502 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 EMPIRICAL REVIEW Okoye and Gbegi (2013) studied forensic accounting on fraud detection and prevention in the public sector in Kogi State using survey research methods of 370 questionnaire and analysis of variance. Their result revealed that forensic accounting does significantly reduce the occurrence of fraudulent activities in the public sector. Dauda, Ombugadu and Aku (2016) conducted a study on forensic accounting: a preferred technique for modern fraud detection and prevention in the public sector of Nasarawa State. Their studies showed that forensic accounting is relevant in fraud detection and prevention in Nigeria public sector. Igweonyia (2016) examined forensic accounting on fraudulent practices in Nigeria public sector using questionnaire and chi-square for data analysis. The study revealed that forensic accounting significantly reduces the occurrence of fraud cases in the public sector. In an empirical study conducted by Akani and Ogbeide (2017) on forensic accounting and fraudulent practices in the Nigeria public sector. It was revealed that there is a significant relationship between forensic accounting and reduction of fraudulent practices in the Nigeria public sector. Sidharts and Fitriya (2015) studied forensic accounting and fraud prevention in Indonesia public sector. Their studies showed that the use of forensic accounting significantly reduces the occurrence of fraud cases in the public sector. Flowing from the objectives of the study and relying on the position of extant literature, the following research questions were formulated to ascertain the extent to which forensic accounting is applicable in the public sector of Anambra State and to determine the extent to which forensic accounting can detect fraud in the public sector of Anambra State. METHODOLOGY The study adopted a theoretical research design. Research design is a plan of investigation that specifies the sources and types of information relevant to the research problem. Data for the research was collected through secondary sources. The research made use of content analysis which involves in-depth review of journals, relevant accounting standards, tax laws, periodicals, textbooks, ICAN study Materials, internet materials, ANAN study materials, newspapers, articles and other books on the subject matter.\ CONCLUSION AND RECOMMENDATIONS Conclusion The study examined forensic accounting and tax fraud detection in the Nigerian public sector. Fraudulent activities, including tax fraud have become a menace in the Nigerian economic development. Edwin (2007) hinted that tax fraud can also be referred to as tax evasion which simply refers to an intentional effort by people, corporate bodies, trust and other institutions to illicitly refuse to pay their tax and reporting true and fair value of their earnings by a means of evasion. Forensic accounting has been discovered to be a very strong mechanism in detecting fraud, particularly tax fraud in the public sector. In 503 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 conclusion, it is therefore adduced that forensic accounting reduces the occurrence of tax fraud in the public sector Recommendations The Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and other related offenses Commission (ICPC) should encourage adequate training of their staff at all levels on the use of forensic accounting technique. The public sector organization should be encouraged to embrace the use of forensic accounting technique especially in the current cutting-edge technology with its attendant high level of fraud. Where there is a suspect of financial fraud, tax fraud include, proper forensic accounting mechanism should be put in place to gather all available evidence surrounding that case. 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European Journal of Business and Management, 8(24), 158- Ozkul, F.U., & Pamukc¸A. (2012). Fraud detection and Forensic Accounting, Istanbul, Turkey. Skousen, C. J., & Wright, C. J. (2008). Contemporaneous risk factors and the prediction of financial statement fraud. Journal of Forensic Accounting, 9: 37- 62. 505 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 Arokiasamy, L., & Cristal-Lee. S. (2009). Forensic accounting: Public acceptance towards occurrence of fraud detection. International Journal of Business and Management. 145-160 Wicksell, K. (1896). Finanztheoretische Untersuchungen. Gustav Fisher: Jena. Wikipedia. 2020. Tax fraud. http://en.wikipedia.org/wiki/fraudulent activities Zysman A (2004) Forensic accounting demystified, world investigators network standard or investigative and forensic accounting engagement. 506 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ARN Conferences & Meetings SSRN

Forensic Accounting and Tax Fraud Detection in the Nigerian Public Sector

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Electronic copy available at: https://ssrn.com/abstract=3852045 Electronic copy available at: https://ssrn.com/abstract=3852045 Copyright © CITN January 2021 Alkolam Enterprises 7, Awe Crescent, Onipanu, Lagos. 10, Dabira Street, Palmgrove, Somolu, Lagos. Tel: 08033336784, 08027546223 Electronic copy available at: https://ssrn.com/abstract=3852045 1. FIRM'S BEHAVIOURS AND DISCLOSURE OF ENVIRONMENTAL PRACTICES IN NIGERIA Akinlade, Olayinka Odunayo 1 2. CITIZEN ENGAGEMENTAND TAX COMPLIANCE BEHAVIOR AMONG SMES IN NIGERIA Rabiu, Onaolapo Olowo, Mohammed, Abdullahi Umar and Victor, Olufunsho Hambolu 22 3. IMPACT OF TAX AUDIT AND INVESTIGATION ON REVENUE GENERATION IN EDO STATE Emuze, ljeoma Chioma Blessing, Emuze, Godson andAtu, Kingsley Osaretin Omimi-Ejoor 38 4. GOVERNMENT BUDGET VARIABLES AND ECONOMIC GROWTH IN NIGERIA (1981-2019). Omotosho, Tope and Olaoye, Festus Oladipupo 57 5. AUDITOR-CLIENTRELATIONSHIPANDAUDIT QUALITY: EVIDENCE FROM PUBLICLY QUOTED NIGERIA COMPANIES Ovedje Ogheneovo Helen, Mary Josiah and Egot Tessy Ejuno 79 6. A REVIEW OF CORPORATE GOVERNANCE PRACTICES AND ETHICAL TAX BEHAVIOUR Aiworo, Doris Esohe, Ehiorobo, Osamwonyi and Orunmwense, Kenny Esosa. 96 7. BOARD HETEROGENEITY AND CORPORATE TAX AGGRESSIVENESS Salami, Suleiman and Zaid, Abubakar 110 8. TAX EVASION, AVOIDANCE AND SUSTAINABLE DEVELOPMENT: A LITERATURE REVIEW Umanah, Samuel, Sado,Thankgod Eshikhogie and Oyedokun, Godwin 121 9. EFFECT OF COMPANY INCOME AND VALUE ADDED TAXES ON NET INVESTMENT OF QUOTED HEALTH CARE FIRMS IN NIGERIA Eyide, Michael Ugeoritsete and Ugochukwu,C. Nzewi 138 10. ENVIRONMENTALTAXATION: ISSUES AND BENEFITS 152 Ekpe, Malthus Timothy, Oyedokun, Godwin Emmanuel and Josiah, Mary 11. EFFECT OF TAX ADMINISTRATION AND TAX PAYER EDUCATION ON TAX COMPLIANCE BEHAVIOUR Oba!, Usang Edet Usang and Udofia, Aniekan Etim 166 12. BIG FOUR AUDIT FIRMS AND MARKET PERFORMANCE OF SELECTED MANUFACTURING COMPANIES IN NIGERIA. Ogbole, Philip Osemudiamen, Atu, Omimi- Ejoor Osaretin Kingsley and Okoye, A. E. 176 13. INFORMAL TAXATION AND ECONOMIC DEVELOPMENT IN NIGERIA lormbagah, Jacob A, Eke, Onyekachi A., lhendinihu, John U, Nwaorgu, Innocent A., and Oti, lbiam. 190 14. INSTITUTIONAL OWNERSHIP, GENDER BOARD DIVERSIFICATION AND CORPORATE TAX AGGRESSIVENESS OF LISTED CONGLOMERATES COMPANIES IN NIGERIA Lukman, Lawal, Mamman, Suleiman, Abdulmarooph, 0. Adisa and Aliyu Mohammed 210 Electronic copy available at: https://ssrn.com/abstract=3852045 15. LONG TERM FISCAL SUSTAINABILITY AND SOVEREIGN EXTERNAL DEBT IN NIGERIA: AN EMPIRICAL INVESTIGATION lshaq, Saidu 223 16. TAX AVOIDANCE AND FINANCIAL PERFORMANCE OF LISTED OIL MARKETING COMPANIES IN NIGERIA Lukman, Lawal; Mamman, Suleiman and Habib, Abdulkarim 240 17. DETERMINANTS OF CORPORATE TAX AGGRESSIVENESS IN NIGERIA MANUFACTURING SECTOR OMORUYI, Bright lnuaghata; JOSIAH, Mary and ONAIWU, Uzamere Jim 255 18. AUDIT COMMITTEE MECHANISMS AND FINANCIAL REPORTING LAG IN THE PRE AND POST IFRS ADOPTION PERIODS IN NIGERIA AKHOR, Sadiq Oshoke and OVBIAGELE, Daniel 272 19. TAX PLANNING AND VALUE OF THE LISTED DEPOSIT MONEY BANKS IN NIGERIA SAIFUDDEEN, Ibrahim and MUHAMMMAD, Aminu Isa 303 20. USING TAX AUDIT AND INVESTIGATION TO BOOST REVENUE GENERATION IN NIGERIA IGBODO, Anthony Abhiele; ATU, Omimi- Ejoor Osaretin Kingsley and JOSIAH, Mary 321 21. THE ROLE OF FORENSIC ACCOUNTANTS IN TAX FRAUD PREVENTION IN NIGERIA NWAORGU, Innocent Augustine; IORMBAGAH, Jacob Aondohemba and ABIAHU, Mary-Fidelis Chidoziem 335 22. ASSET-BASED EFFECT OF DIVIDEND PAY-OUT ON FINANCIAL PERFORMANCE OF THE LISTED CONGLOMERATE FIRMS IN NIGERIA UMAR, Dauda and KABIRU, Isa Dandago 355 23. THE DETERMINANTS OF ENVIRONMENTAL DISCLOSURE IN THE FINANCIAL REPORT OF LISTED COMPANIES IN NIGERIA BELLO, Muhammed Akinkunmi 374 24. USING ENVIRONMENTAL TAXATION AS A TOOLS FOR DETERMINATION OF DAMAGE COST FROM CEMENT INDUSTRY AIR POLLUTION REDUCTION: A CONTEXTUAL APPROACH TO SUSTAINABLE ENVIRONMENTAL POLICY (CASE STUDY OF ASHAKA CEMENT INDUSTRIAL SUBURB AREA NIGERIA) ILIYA, Garba and HARUNA, Usman 396 25. COVID-19 PANDEMIC, DIRECT DIASPORA REMITTANCES AND BEHAVIOUR OF MACROECONOMIC AGGREGATES IN NIGERIA NWIDOBIE, Barine Michael 411 26. CORPORATE TAX INCENTIVES AND RE-INVESTMENT PATTERNS OF QUOTED MANUFACTURING FIRMS IN NIGERIA MAIYAKI Yusuf Attahir, SHAGARI Abubakar Chika 429 27. DETERMINANTS OF TAX MORALE AND TAX COMPLIANCE: EVIDENCE FROM NIGERIA Orumwense Kenny Esosa, Josiah Mary and Aiwoho Doris 455 28. ANALYSIS OF THE IMPACT OF FISCAL POLICY ON ECONOMIC GROWTH IN NIGERIA: 1985-2019 Abubakar Mikailu Aminu and Sunday Mlanga 470 29. APPLICABILITY OF FORENSIC ACCOUNTING AND FINANCIAL MISCONDUCTS: EVIDENCE FROM NORTHWESTERN STATES, NIGERIA. Sagir Lawal 478 Electronic copy available at: https://ssrn.com/abstract=3852045 30. FORENSIC ACCOUNTING AND TAX FRAUD DETECTION IN THE NIGERIAN PUBLIC SECTOR Nosiri Hilary, Uwakwe Theresa Nnenna and Abiahu Mary-Fidelis Chidoziem 496 31. IMPACT OF EDUCATION TAX AND INVESTMENT IN HUMAN CAPITAL ON ECONOMIC GROWTH IN NIGERIA Abubakar Mikailu Aminu 507 32. IMPACT OF TAX INCENTIVES ON THE GROWTH OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA Biwei Theodora Awele 519 33. TAX AVOIDANCE AND FINANCIAL PERFORMANCE OF LISTED OIL MARKETING COMPANIES IN NIGERIA Lukman Lawal, Mamman Suleiman and Habib Abdulkarim 537 34. IMPACT OF TAX EDUCATION ON TAX COMPLIANCE IN NIGERIA Obi Happiness ljeoma and Edheku Ochuko Joy 554 35 TAX EVASION AND TAX AVOIDANCE IN NIGERIA: A BY PRODUCT OF ECONOMIC INJUSTICE Oyebolu Olasunbo Abioye and Usifoh Olufunmilayo Omorilewa 568 36. TAX ADMINISTRATION IN DEVELOPING COUNTRIES ABIAHU, Mary-Fidelis Chidoziem, OGODOGUN, College, E., EGBUNIKE, Patrick Amaechi and OBADA, Paradise Josephine 583 37. BOARD CHARACTERISTICS AND ENVIRONMENTAL DISCLOSURES OF LISTED COMPANIES IN NIGERIA CHUKWU, Gospel J. and APPAH, Ebimobowei 599 38. CORPORATE GOVERNANCE MECHANISM AND TAX AGGRESSIVENESS OF LISTED CONSUMER GOODS FIRMS IN NIGERIA CHUKWU, Gospel J., APPAH, Ebimobowei and ADEFISAYO, Awogbade 614 39. EXPLORING THE POTENTIAL OF ADR IN TAX DISPUTE RESOLUTION Umenweke, M.N and Amadi, N.B 632 40. TAX INCENTIVES AND FIRM VALUE IN NIGERIA Soyinka, Kazeem Akanfe, Olasunkanmi, Musibau Lanre and Sunday, Oluwafemi Michael 650 41. THE IMPACT OF IFRS ADOPTION ON ACCOUNTING AND TAXATION: ISSUES AND CHALLENGES IN NIGERIA ldada, Augusta lkponmwonsa, Olufemi, Gina Oghogho and Atu, Kingsley Osaretin 669 42. LIMITING THE RISKS OF FAILURE IN FINANCIAL INSTITUTIONS: EVIDENCE FROM THE NIGERIAN DEPOSIT MONEY BANKS Nana, Ufuoma Joseph and Onodavwerho, Oliver Justice 681 43. SIGNALING EFFECT OF AUDIT FIRM MECHANISM ON AUDITOR SWITCHING: EVIDENCE FROM QUOTED COMPANIES IN NIGERIA AKRAWAH, Dennis Onutomaha, AKHOR, Sadiq Oshoke and OKUNROBO, Samuel Osarobo 695 44. DETERMINANTS OF AUDIT FEES AMONG QUOTED MANUFACTURING COMPANIES IN NIGERIA OHARISI, Anthony Omenasa, JOSIAH, Mary and ALALE, Marlene Tam 716 45. INTERNAL FINANCIAL CONTROL MECHANISM AND MANAGEMENT OF FUNDS IN NATIONAL JUDICIAL COUNCIL OYEDOKUN, Godwin Emmanuel, NABURGI, Musa Mohammed and AKWE, Kennedy Anyapa John 735 Electronic copy available at: https://ssrn.com/abstract=3852045 46. FORENSIC ACCOUNTING AND TAX EVASION IN NIGERIA NOSIRI, Hilary, NWACHUKWU, Michael lkedichi and ADEFISAYO, Awogbade 762 47. SPECIFIC DETERMINANTS OF CAPITAL ADEQUACY RATIO OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA OYEDOKUN, Godwin Emmanuel, NABURGI, Musa Mohammed and PAUL, Vincent 782 Electronic copy available at: https://ssrn.com/abstract=3852045 FORENSIC ACCOUNTING AND TAX FRAUD DETECTION IN THE NIGERIAN PUBLIC SECTOR Nosiri, Hilary Department of Accounting, Gregory University, Uturu, Nigeria. nosirihilary@gmail.com Uwakwe, Theresa Nnenna Department of Accountancy, Alex Ekweme Federal University, Abakiliki, Ebonyi State. austinebliss3@gmail.com Abiahu, Mary-Fidelis Chidoziem Research and Professional Standards Directorate, Chartered Institute of Taxation of Nigeria (CITN), Lagos maryfidelisabiahu@citn.org Abstract Financial fraud had for long been seen as a menace that led to the collapse of many organizations in the world. The Federal Government in a bid to reduce the cases of financial fraud, established many anti-graft agencies but yet the efforts seemed not to have yielded any results. Recently, the Federal Government approved the establishment of a new anti-graft agency, “The Proceeds of Crime Recovery and Management Agency. This goes to buttress that the issue of financial fraud, tax fraud inclusive has overwhelmed the government. Forensic accounting has been conceived as one of the most effective ways of reducing cases of tax fraud in Nigeria. Forensic accounting and tax fraud in the public sector was examined. The results showed that forensic accounting reduces the occurrence of tax fraud in the public sector and recommended that forensic accounting should be adopted by the public sector to meet up with the demand of technology. Keywords: Forensic Accounting, Tax Fraud Detection, Financial Fraud, Public Sector, Nigeria INTRODUCTION Governments all over the world, Nigeria inclusive are confronted with the problem of lack of capital to finance their social responsibilities. These social responsibilities include among others, provision of good roads, pipe bone water, energy and electricity, redistribution of wealth and income to promote welfare of the citizenry and conducive environment for business activities to strive. Meeting these social responsibilities is huge, therefore, government enjoins the citizens to perform their civic responsibilities by paying taxes. Taxation is one of the major ways through which government raises revenue to 496 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 finance its capital or recurrent expenditures. Bahadur (2018) submits that taxation is a primary tool to raise the revenue required by the government to finance its public expenditure responsibilities. The Institute of Chartered Accountants of Nigeria (2014) defined taxation as a compulsory contribution levied by a sovereign power, on the incomes, profits, goods, services or properties of individuals and corporate persons, trusts and settlements. Lamb, Lymer, Freedman, and James (2004) saw it as the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executorships and companies by the government. Such taxes when collected are used for carrying out governmental functions, such as maintenance of law and order, provision of infrastructure, health and education of the citizens, or as a fiscal tool for controlling the economy. Taxation has always been seen as a very important tool for national growth and development in most countries. It has been recognized as a major vehicle for long term development of infrastructures of the country or state. The importance of tax cannot be over emphasized yet some believe that paying tax is enriching a selected few at the expense of all others. In Nigeria, despite the enormous benefits of taxation, people still indulge in cases of tax fraud. Tax fraud can be said to have occurred when an individual or corporate organization willingly and intentionally falsifies information on a tax return in order to reduce the amount of tax liability. Tax fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation. Tax fraud includes, claiming false deductions; claiming personal expenses as business expenses; and not reporting income. The term ‘tax fraud’ includes situations in which deliberately false statements are submitted, fake documents are produced, etc. Tax fraud is a form of deliberate evasion of tax which is generally punishable by law. Sanctions may include civil or criminal penalties. Nowadays, tax fraud and other fraudulent activities have become the order of the day in the Nigerian sectors, especially in the public sector where it begins to become a normal way of life in the midst of civil servants (Okoye and Akamobi, 2009 and Gbegi and Adebisi, 2014). However, several reasons have been used to justify tax fraud in our contemporary times. Such reasons include: high tax rates, illiteracy, lack of proper awareness, corruption in public offices, lack of adequate training for tax officials, embezzlement of tax revenues, loopholes in the tax laws, inability to interpret complex tax laws, weak legal framework and failure on the part of the judicial system to enforce relevant statutes against tax defaulters (Mughal and Akram, 2012; Adebisi & Gbegi, 2013; Obafemi, 2014; Onyeka & Nwankwo, 2016; Folayan & Adeniyi, 2018). Despite the tremendous efforts by the anti- graft agencies, the tax authorities and the traditional auditors to eradicate tax fraud and other fraudulent activities, it is indeed discovered that tax fraud in its various natures continues to grow in frequency and severity. The failure of these agencies to tackle this 497 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 canker warm that has eaten deep into the fabrics of the Nigerian economy has given room for a more sophisticated approach to tackle it and such a more effective approach is forensic accounting. According to Baird and Zelin (2009), forensic accounting is important investigative tool for detection of fraud. It provides an accounting analysis to the court for dispute resolution in certain cases and it also provides the court with explanation to the fraud that has been committed. That is why forensic accounting may play a vital role in detecting and reducing tax frauds in the public sector. In this concept, forensic accountants provide an account analysis to determine the facts necessary to resolve a dispute before it is brought before the court or the lawsuit process takes its course (Ozkul & Pamukc,2012). The increasing rate of tax fraud in the Nigerian public sectors has caused grave loss to the development of the Nigerian economy. Tax Fraud and other cases of tax related offences perpetrated by tax payers heavily affect the Nigerian economy, lower investment levels and reduce government revenue generation. The anti-tax fraud and tax authority strategies are often not effective enough to tackle this menace. Damages done to the economy and their budgets as a result of tax fraud can be enormous ranging from financial loss to reduction of economy performance, reputation, credibility and public confidence. Ojaide (2000) reveals that there is a distressing upsurge in the number of tax fraud and other fraudulent activities in the Nigerian public sector, stressing the need for a better approach to handle it. It is based on this that this study was therefore designed to examine forensic accounting and tax fraud detection in the Nigerian public sector. Therefore, the main objective of this study is to examine forensic accounting and tax fraud detection in the Nigerian public sector. This study will sought to ascertain the extent to which forensic accounting is applicable in the public sector of Anambra State; and to determine the extent to which forensic accounting can detect fraud in the public sector of Anambra State. LITERATURE REVIEW The review of related literature in this work was sub-divided into three sections, namely, the conceptual framework, theoretical and empirical framework. CONCEPTUAL FRAMEWORK Financial fraud Financial fraud is seen as when one obtains a gain by deception. It is a fraud involving the unlawful conversion of the ownership of property, (belonging to one person) to one's own personal use and benefit. Financial fraud may involve fraud (cheque fraud, credit card fraud, mortgage fraud, medical fraud, corporate fraud, securities fraud (including insider trading), bank fraud, insurance fraud, market manipulation, payment (point of sale ) fraud, 498 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 health care fraud ); theft; scams or confidence tricks; bribery; sedition; embezzlement; identity theft; money laundering; and forgery and counterfeiting, including the production of counterfeit money, consumer goods and tax fraud. Types of financial Fraud 1. Misappropriating income or assets. Perpetrators obtain and misuse assets or income belonging to someone else. This often occurs when caregivers of seniors take pension and Social Security payments from victims, withholding the funds or using them for personal purposes. 2. Fake relative scams. A phone call is made, pretending to be the call-recipient’s relative who is in trouble. The caller asks for money to be transferred to provide help in an emergency situation. These calls often involve someone calling a senior citizen and pretending to be a grandchild. 3. Identity theft. Personal identifying information is used without the individual’s permission to obtain credit, services, or other benefits. 4. Fraud in connection with financial institutions. A victim is called pretending to be a financial institution that needs help fighting fraud in the call-recipient’s accounts or that needs help finding an employee committing a fraud crime. The purpose of these scams may be to obtain the victim’s Social Security number or financial information, or to obtain cash from the victim by claiming the money will be used as part of a trap to catch the criminal employee. 5. Power of attorney fraud. A victim is convinced to give general or limited power of attorney to the person committing the fraud crime. The person who is given power of attorney may pose as an asset manager or otherwise have an official title, but ends up using the victim’s money and assets for personal gain. 6. Charity scams. This scam involves obtaining donations for a fake charity, or using a fake charity to obtain identifying details of the victims. 7. Advance fee fraud. Victims are persuaded to part with money in anticipation of later receiving even substantial cash or valuable assets. This financial fraud scam often takes the form of foreign lottery fraud, where victims must pay “taxes” on large winnings that never come. However, there are many variations of advance free fraud scams. 8. 419 Fraud. These scams are a type of advance fee scams, in which mail, fax, email, or phone communication is used to convince someone to part with money now in exchange for receiving larger amounts of money or assets later. 499 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 9. Tax Fraud. Tax fraud, according to investopedia (2020) occurs when an individual or a business entity willfully and intentionally falsifies information on a tax return to limit the amount of lax liability. Tax fraud essentially entails cheating on a tax obligation to avoid paying the entire tax obligation. Tax fraud can also be referred to as tax evasion. Tax fraud costs the government millions of dollars a year. Tax fraud can occur in any of the following: claiming of false deductions, claiming of personal expenses as business expenses, using false social security number and not reporting income. A business that engages in tax fraud may knowingly fail to file payroll tax reports, wittingly fail to report some of the cash payments made to employees, fail to report and pay any withheld payroll taxes. Forensic Accounting Dhar and Sarkar (2010) define forensic accounting as the application of accounting concepts and techniques to legal problems. It demands reporting, where accountability of the fraud is established and the report is considered as evidence in the court of law or in administrative proceedings. Forensic accounting is the integration of accounting, auditing and investigative skills (Zysman, 2004). Degboro and Olofinsola (2007) note that forensic investigation is about the determination and establishment of fact in support of legal case. That is, to use forensic techniques to detect and investigate a crime is to expose all its attending features and identify the culprits. In the view of Howard and Sheetz (2006), forensic accounting is the process of interpreting, summarizing and presenting complex financial issues clearly, succinctly and factually often in a court of law as an expert. It is concerned with the use of accounting discipline to help determine issues of facts in business litigation (Okunbor and Obaretin, 2010). Forensic accounting is a discipline that has its own models and methodologies of investigative procedures that search for assurance, attestation and advisory perspective to produce legal evidence. It is concerned with the evidentiary nature of accounting data, and as a practical field concerned with accounting fraud and forensic auditing; compliance, due diligence and risk assessment; detection of financial misrepresentation and financial statement fraud (Skousen and Wright, 2008); tax evasion; bankruptcy and valuation studies; violation of accounting regulation (Dhar and Sarkar, 2010). Curtis (2008) argues that fraud can be subjected to forensic accounting, since fraud encompasses the acquisition of property or economic advantage by means of deception, through either a misrepresentation or concealment. Bhasin (2007) notes that the objectives of forensic accounting include: assessment of damages caused by an auditor’s negligence, fact finding to see whether an embezzlement has taken place, in what amount, and whether criminal proceedings are to be initiated; collection of evidence in a criminal proceeding; and computation of asset values in a divorce proceedings. He argues that the primary orientation of forensic accounting is explanatory analysis (cause and effect) of 500 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 phenomenon- including discovery of deception (if any), and its effects-introduced into the accounting domain. He also noted that forensic accountants are trained to look beyond the numbers and deal with the business realities of situations. Analysis, interpretation, summarization and the presentation of complex financial business related issues are prominent features of the profession. He further reported that the activities of forensic accountants involve: investigating and analyzing financial evidence; developing computerized applications to assists in the analysis and presentation of financial evidence; communicating their findings in the form of reports, exhibits and collections of documents; and assisting in legal proceedings, including testifying in courts as an expert witness and preparing visual aids to support trial evidence. Forensic Accounting and Fraud Detection Fraud is a legal term that refers to the intentional misrepresentation of the truth in order to manipulate or deceive a company or individual (Howard and Sheetz, 2006). David (2005), states that fraud is not a possibility but a probability. He also explains that fraud can be better prevented if decisions are made by a group and not an individual. To define fraud is as difficult as identifying it. There is no definite and invariable rule laid down as a general proposition in defining fraud as it includes surprise, trick, cunning and unfair ways by which another is cheated. Fraud is to create a misjudgment or maintain an existing misjudgment to induce somebody to make a contract. It involves enriching oneself intentionally by reducing the value/worth of an asset in secret. When companies undergo severe financial problems and end up in bankruptcy, fraud by senior management may be involved. Russel (1978 cited in Bello, 2001) remarks that the term fraud is generic and is used in various ways. Fraud assumes so many different degrees and forms that courts are compelled to context themselves with only few general rules for its discovery and defeat. Okafor (2004) also reported that fraud is a generic term and embraces all the multifarious means which human ingenuity can devise, which are resorted to by one individual to get advantage over another in false representation. According to Anyanwu (1993), fraud is an act or course of deception, deliberately practiced to gain unlawful or unfair advantage; such deception directed to the detriment of another. Accounting fraud is an act of knowingly falsifying accounting records, such as sales or cost records, in order to boost the net income or sales figures; accounting fraud is illegal and subjects the company and the executives involved to civil lawsuits (Arokiasamy& Cristal, 2009). Company officials may resort to accounting fraud to reverse loss or to ensure that they meet earning expectations from shareholders or the public. Adeniji, (2004) summarize the types of fraud on the basis of methods of perpetration include the following but not exhaustive as the methods are devised day in-day out to include: defalcation, suppression, outright theft and embezzlement, tampering with reserves, insider abuses and forgeries, fraudulent substitutions, unauthorized, unauthorized lending, lending to ghost borrowers, kite flying 501 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 and cross firing, unofficial borrowing, impersonation, teeming and lading, fake payment, fraudulent use of the firms documents, fictitious accounts, false proceeds of collection, manipulation of vouchers, dry posting, over invoicing, inflation of statistical data, ledger accounts manipulation, fictitious contracts, duplication cheque books, computer fraud, misuse of suspense accounts, false declaration of cash shortages and so on. Detecting tax fraud has been a great concern to the government. This why they introduced the anti-graft agencies to help in the eradication of this social menace but their efforts seemed not to have yielded any benefit. Forensic accounting has been said to be one of the most effective ways of detecting tax fraud in the public sector. The Public Sector Public sectors, according to Wikipedia (2020) include public goods and governmental services such as the military, law enforcement, infrastructure (public roads, bridges, tunnels, water supply , sewers , electrical grids, telecommunications, etc.), public transit , public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service. Public enterprises, or state-owned enterprises, are self- financing commercial enterprises that are under public ownership which provide various private goods and services for sale and usually operate on a commercial basis. Organizations that are not part of the public sector are either a part of the private sector or voluntary sector. The private sector is composed of the economic sectors that are intended to earn a profit for the owners of the enterprise. The voluntary, civic or social sector concerns a diverse array of non-profit organizations emphasizing civil society. The sector has been riddled with cases of tax fraud which tax evasion is inclusive. THEORETICAL FRAMEWORK Benefit Received Theory This study was anchored on the Benefit Received Theory of taxation. This theory was propounded by Wicksell in 1896 and Lindahl in 1919. The theory centers on the efficacy of tax revenue in providing public services and supports government at all levels (federal, state and local) to generate revenue from a multiplicity of sources in order to sufficiently deliver public goods and services to the public. The theory adopts an exchange relationship between the tax-payers and the government in the sense that the governments collect taxes from both individuals and companies for the purpose of providing basic amenities such as water, housing, education, health care services, security, transportation and communication among others (Omodero & Dandago, 2019). The government has the obligation to provide basic facilities to the populace while the public is expected to respond by paying taxes that are commensurate with the benefits derived (Bhartia, 2009). 502 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 EMPIRICAL REVIEW Okoye and Gbegi (2013) studied forensic accounting on fraud detection and prevention in the public sector in Kogi State using survey research methods of 370 questionnaire and analysis of variance. Their result revealed that forensic accounting does significantly reduce the occurrence of fraudulent activities in the public sector. Dauda, Ombugadu and Aku (2016) conducted a study on forensic accounting: a preferred technique for modern fraud detection and prevention in the public sector of Nasarawa State. Their studies showed that forensic accounting is relevant in fraud detection and prevention in Nigeria public sector. Igweonyia (2016) examined forensic accounting on fraudulent practices in Nigeria public sector using questionnaire and chi-square for data analysis. The study revealed that forensic accounting significantly reduces the occurrence of fraud cases in the public sector. In an empirical study conducted by Akani and Ogbeide (2017) on forensic accounting and fraudulent practices in the Nigeria public sector. It was revealed that there is a significant relationship between forensic accounting and reduction of fraudulent practices in the Nigeria public sector. Sidharts and Fitriya (2015) studied forensic accounting and fraud prevention in Indonesia public sector. Their studies showed that the use of forensic accounting significantly reduces the occurrence of fraud cases in the public sector. Flowing from the objectives of the study and relying on the position of extant literature, the following research questions were formulated to ascertain the extent to which forensic accounting is applicable in the public sector of Anambra State and to determine the extent to which forensic accounting can detect fraud in the public sector of Anambra State. METHODOLOGY The study adopted a theoretical research design. Research design is a plan of investigation that specifies the sources and types of information relevant to the research problem. Data for the research was collected through secondary sources. The research made use of content analysis which involves in-depth review of journals, relevant accounting standards, tax laws, periodicals, textbooks, ICAN study Materials, internet materials, ANAN study materials, newspapers, articles and other books on the subject matter.\ CONCLUSION AND RECOMMENDATIONS Conclusion The study examined forensic accounting and tax fraud detection in the Nigerian public sector. Fraudulent activities, including tax fraud have become a menace in the Nigerian economic development. Edwin (2007) hinted that tax fraud can also be referred to as tax evasion which simply refers to an intentional effort by people, corporate bodies, trust and other institutions to illicitly refuse to pay their tax and reporting true and fair value of their earnings by a means of evasion. Forensic accounting has been discovered to be a very strong mechanism in detecting fraud, particularly tax fraud in the public sector. In 503 | P a g e Electronic copy available at: https://ssrn.com/abstract=3852045 conclusion, it is therefore adduced that forensic accounting reduces the occurrence of tax fraud in the public sector Recommendations The Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and other related offenses Commission (ICPC) should encourage adequate training of their staff at all levels on the use of forensic accounting technique. The public sector organization should be encouraged to embrace the use of forensic accounting technique especially in the current cutting-edge technology with its attendant high level of fraud. Where there is a suspect of financial fraud, tax fraud include, proper forensic accounting mechanism should be put in place to gather all available evidence surrounding that case. 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ARN Conferences & Meetings – SSRN

Published: Jan 30, 2021

Keywords: Forensic Accounting, Tax Fraud Detection, Financial Fraud, Public Sector, Nigeria

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