EMPLOYERS’PERCEPTION ON NECESSARY SKILLS OF FORENSIC ACCOUNTANTS: THE NIGERIAN CASE
BY
PROF CHIZOBA MERCELLA EKWUEME
DEPARTMENT OF ACCOUNTING,
NNAMDI AZIKIWE UNIVERSITY,
AWKA
AND
DR YOHANNA GYANG JUGU
DEPARTMENT OF ACCOUNTING
UNIVERSITY OF JOS,
JOS
JULY, 2013
ABSTRACT
This study is set out to empirically investigate the perceptions of employers on the necessary skills of Forensic Accountants. The study is descriptive in nature and used surveyed techniques. Accordingly, 348 respondents across four key major stakeholders-Professional Accountants, Accounting Academics, Lawyers and Prosecutors were surveyed. To achieve this objective, data were collected from the research respondents with the aid of a structured questionnaire. Data collected for the study were correlated and analysed using descriptive statistics, while the propositional statement was tested using T-test and ANOVA statistical tools. From our analysis, we discovered thatskills of Forensic Accountantsas suggested by Academics and Professional Accountants will meetLawyers and Prosecutors expectations. We recommend that accounting educators and professionals should use theidentifiedskills whichare most common with the ones indicated by employers of forensic accounting servicesas a guide to fashion out academic and practical curricula with the proper outcome objectives.
Key Words:Forensic Accounting, Employer, Necessary Skill, Stakeholder, Financial and Economic Crimes
1.1Background of the Study
Given the high level of criminality, emerging social anomie, and preponderance of economic and financial crimes in Nigeria, and the importance of Forensic Accounting in relation to these, it is imperative that a professional Forensic Accountant be equipped with skill sets (Nigerian Institute of Advanced Legal Studies, 2010). This calls for a search of appropriate skills and knowledge from various disciplines such as Accounting, Law, Investigation, General Business Knowledge, Criminology, Information and Communications Technology, Sociology and Psychology (AbdulRahman, 2011). The need for eclectic approach also requires that professionals in these fields should cooperate with eachother, particularly accountants and lawyers, to fight fraud given the high degree of inter-dependence. Lawyers, being one of the employers and users of forensic accounting output, have shown increasing concern on the prevalence of economic and financial crimes and the need for accounting professionals and academics to come up with appropriate skills to tackle the menace of this monster (Nigerian Institute of Advanced Legal Studies, 2010).
Nigeria, with all its endowed natural resources has remained an under-developed nation as a result of fraud and corruption. The Nigeria Deposit Insurance Corporation (NDIC) Annual Report for 2008 revealed that the banking sector alone lost N18 billion to fraudsters in that year and similar other billions of naira in years before and after this. No wonder, cases of bank distress, consolidation, merger, bailout and liquidation often occur (Pam, 2007; Gonji, 2008). According to Bureau for Public Procurement (BPP, 2008), Nigeria is losing 60 kobo to unwholesome practices out of every N1.00 (100 kobo) spent by government. An average of $10 billion is lost to corruption annually (BPP, 2008).
It has been observed with dismay that private sector operators in Nigeria were covering up and conniving with individuals and firms implicated in corruption cases (Okeke, 2012).The scandal in the oil sector where trillions of naira are said to have been fraudulently paid to petroleum marketers and the embezzlement cases of billions of naira in the Nigerian Pension sector are some of the evidences that corruption in the country has reached an unprecedented level and urgent action is needed to be taken (Nigerian Institute of Advanced Legal Studies, 2010).
In a recent international conference on fraud held in Orlando, USA, Dr. Whitacre recalled, with regret, how he and three of his colleagues amateurishly/foolishly lost US$660,000.00 to a Nigerian email scam in 1992 (Asein, 2012). According to a recent fraud survey by Ernst & Young West Africa (2012), eight out of ten Fraud cases in the United Kingdom affects Nigeria, and that perception of the high level of corruption in Nigeria is a key barrier for overseas investment (Okeke, 2012).
Given all these economic and financial crimes statistics, it is glaring that while fraud cases are increasing and are becoming sophisticated; fraud detection, prevention and deterrence are becoming more complex and difficult, particularly in our country Nigeria (Ekoja, 2012). The “bone of contention” here is having professionals with the appropriate skills for tracking and trapping down these criminals. The current number of professionals with the requisite skills is grossly inadequate in meeting employers’ expectations (The Nigerian Institute of Advanced Legal Studies, 2010).
Forensic Accounting is the study and practice of rigorous data collection and analysis in the areas of litigation support, consulting, expert witnessing, and fraud examination. It touches almost all disciplines especially, Accounting, Auditing, Investigation, Law and Psychology (Zysman, 2008 and Boleigha, 2011). Forensic Accountancy involves a financial detective (Forensic Accountant) with a suspicious mind, a financial bloodhound, someone with a ‘sixth sense’ that enables reconstruction of past accounting transactions and an individual who looks beyond the numbers (Mehta and Mathur, 2007).
The study, which is tagged “Employers’ Perception on the Necessary Skills of Forensic Accountants: The Nigerian Case” has a special focus on lawyers and prosecutors who are the major employers of forensic accounting services.
1.2Statement of the Problem
The specific problem with financial and economic crimes is the increasing negative effect on public funds and corporate earnings and a loss to both local and foreign investors’ confidence (Wells, 2007). This, no doubt, givesincreasing heartache to patriotic Nigerians. Government is putting fruitless efforts in tackling this monster, perhaps using the wrong skills. From the available literature, lawyers and prosecutors have not been used in this country – Nigeria to determine the appropriate skills for fighting this evil in our society. No wonder, the Nigerian Institute of Advanced Legal Studies organised a successful and thought provoking Round Table on the 19th of July, 2010, on the pressing need for forensic and investigative accounting to support the effort at reducing criminality in the banking industry. The Round Table was timely and germane given the emerging social anomie and preponderance of fraud within the private and public sectors of the Nigerian economy. They lamented the persistent increasing proportions of the incidence of economic crime in the banking industry and indeed the entire economy despite attempts to combat same by law and administrative measures.
The institute went further to lament that the Nigerian justice system in place has proved largely incapable of solving these crimes and ensuring that perpetrators are adequately punished because support from appropriate quarters is not readily available. The forum cried that the trend of this evil in our society has turned Nigeria into a 'low trust' society with damaging consequences for capital formation through local capital mobilisation and foreign direct investment (Nigerian Institute of Advanced Legal Studies, 2010). Hence, the issue of identifying appropriate skills to be inculcated in the would-be forensic accountants should not be left in the hands of the accounting profession alone, opinion of other key stakeholders like lawyers and prosecutors should be sought. Controversies have been looming the society on what the appropriate forensic accounting skills should be. With a study like this, opinions of academics and practitioners would be correlated with that of employers of forensic accounting services so as to identify the necessary skills required for conquering this evil call “Fraud” in our society.
1.3 Objective of the Study
The main objective of this study isto identify and evaluate the skills that would be necessary for forensic accountants to meet the expectations of employers, while the specific objectives are:
- To determine whether the necessary skills of forensic accountants as identified by both academics and professionals will meet employers’ expectations.
- To establish the appropriate accounting curriculum for the training and practice of forensic accounting in Nigeria.
1.4 Research Questions
The research questions posited here guided the researchers of the study and
provided a mechanism that linked the appropriate research method and design (Maxwell, 2005): Predicated on this, the research raised the following research questions to guide the study, thus:
- Will the necessary skills, as identified by both academics and professionals, meet employers’ expectations?
- To what extent is the present accounting curriculum suitable for forensic accounting education and practice in Nigeria?
1.5Hypothesis of the Study
To fully achieve the objective of the study, a propositional statement was formulated, thus:
H0: The necessary skills of forensic accountants as identified by both academics and professionals will not significantly meet employers’ expectations.
1.6Significance of the Study
In light of growing importance of forensic accounting in the national economy and business environment, this study also provides useful information for faculty members and Universities working hard to complement the efforts of the NUC in curriculum development by identifying appropriate skills and introducing forensic accounting education in their course contents.
Accounting professional institutions, the legal profession, Central Bank of Nigeria (CBN), Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices Commission (ICPC), Commercial Banks and Insurance companies stand to benefit immensely from the results of this study as the eventual training of Nigerians in this area will bring about the needed manpower with built up capacities in fraud prevention, detection and deterrence, litigation services and expert witnessing.
2.0REVIEW OF RELATED LITERATURE
2.1Conceptualizing Economic and Financial Crimes
Deregulation, liberalization, reformation, and globalisation had over time redefined the economic landscape in Nigeria. The bad news, however, is that the process also provides opportunities for criminal activities. Financial crime is one of the negative and dark sides of these developments which auditors have not been able to conquer (Okoye & Jugu, 2008).
The Economic and Financial Crimes Commission Act (EFCC, 2004) of Nigeria defines economic and financial crimes as "non-violent criminal and illicit activity committed with the objective of earning wealth illegally either individually or in a group or in an organized manner, these include any form of fraud, narcotic drug trafficking, money laundering, embezzlement, bribery, looting and any form of corrupt practices, illegal arms deal, smuggling, human trafficking andchild labour, oil bunkering and illegal mining, tax evasion, foreign exchange malpractice, including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes, and prohibited goods, etc". In this connection, financial crime encompasses almost all forms of organized transnational crime. It refers to theoffer or acceptance of any benefits to do or not to do certain things or carry out any act that is prohibited by law or 'morality'.
2.1.1Economic Crimes – These have damaging effects on the economic and political system of a country as manifested in crimes such as; corruption, embezzlement of public funds, currency counterfeiting, smuggling, drug trafficking, etc. Regrettably, the damage to the image of the Country overshadows the direct financial loss (Mustapha, 2011).
2.1.2Financial Crimes - These are crimes which in addition to getting financial benefits are targeted directly on funds and financial instruments. These include among others; advance fee fraud (419), currency trafficking and counterfeiting. Therefore, while all financial crimes are economic crimes, not all economic crimes are financial crimes (Mustapha, 2011).
2.2Existing Theories on Forensic Accounting Skills
In this section, related empirical literatures on the subject matter were reviewed with a view to showing vividly the gab in knowledge. Countering the scourge of economic and financial crimes in Nigeria demands the possession of requisite skills by Accountants and Auditors in relation to fraudinvestigations and Forensic Accounting Services. Even in countries where forensic accounting started some 30 years ago, competitive pressures, technology and global environment have led to changed expectations in terms of the skills, attributes and competencies required of Forensic Accountants.
Concurrently, researchers began to question what the important specialized skills and technical abilities of forensic accountants are (Cohen, Crain, & Sanders, 1996; Harris & Brown, 2000, Messmer 2004, Ramaswamy, 2005), and experience levels (Grippo & Ibex, 2003). DiGabriele (2008) extended these studies by surveying accounting academics, forensic accounting practitioners and users of forensic accounting services to further define the relevant skills of forensic accountants. DiGabriele identified nine competencies from the three major stakeholder groups and had the participants rated their agreement/disagreement with the importance of those competencies. DiGabriele was able to group the competencies into those related to knowledge and ability and those related to performance. DiGabriele’s results suggest that the three major stakeholder groups differ on all of the knowledge and ability items but agree on all of the performance items. His results also suggest that academics and practitioners have more agreement over the importance of the forensic accountant’s skills than the users of forensic accounting services (DiGabriele, 2010).
Researchers such as Hodges and Burchell (2003) suggest that accounting graduates need to possess a combination of cognitive skills (technical knowledge, expertise and abilities) and personal or behavioural characteristics (principles, attitudes, values and motives) which are a function of individual personality. In recent years, some academics have been suggesting that a skill such as emotional intelligence (the ability to recognize, use and manage emotions) is critical for engaging with the world and that emotions are central in all rational decision making processes (McPhail, 2004). Others have suggested that emotional intelligence has become a skill that may allow Accountants to perform better in a variety of areas such as leadership, client relations, and even decision making (Bay & McKeage, 2006). Furthermore, Akers and Porter (2003:65) advocate that ‘the AICPA and the Institute of Management Accountants recognize emotional intelligence skills as critical for the success of the accounting profession.
There have been several studies undertaken across industries that reflect the views of employers. Lloyd (2008) suggests that the UK current skills policy should centre on the need to drive up qualification obtained and make the system more employer-led. Lloyd study also discovered that social skills are generally found to be vital and are often claimed to be lacking in the labour market. However, social skills are very difficult to define, and if these are the skills that employers want, it will be very difficult to meet these through qualifications (Lloyd, 2008).
Several studies have involved employers in an attempt to identify stakeholder expectations of university graduates. Bennett et al (2006) in a project for the UK Economic and Social Research Council explored employers’ perspectives on the role of generic skills in the workplace and the different uses, purposes and contexts for their development in the first few years of graduate employment. They found that employers and employees alike had varying understandings of the importance of generic skills in the workplace. Other findings by Bridges (2000) and Holmes (2001) emphasize employers’ stated needs for graduates to be able to function in the workplace, that employers expect accounting graduates to be confident communicators, good team players, critical thinkers, problem solvers and, in addition, to be adaptive, adaptable and transformative people capable of initiating and responding to change (Harvey et al., 1997). Even though the desirable graduate attributes in these lists are similar to those of 20 years ago (Harvey, 1999), the lists are getting longer and more complex.
Many researchers have indicated that technical skills are regarded as implicit in the skills base of a person entering an accounting career, but that it is a range of broader ‘personal characteristics’ that facilitate career success and make accounting graduates more valuable to employers (Agyemang & Unerman, 1998; Mathews et al., 1990; Collier & Wilson, 1994).
Ahadiat(2010) conducted a study of which he asked respondents to rate the following skills expected of an Accountant and auditor: ability to synthesize, accounting technical skills, analytical skills, computer competency, creative ability, critical thinking, ethical behavior, general business skills, initiative, leadership skills, people skills, presentation skills, sales skills, team orientation, verbal communication, written communication, and personal demeanor. The results from the study shows that accounting curricula across the United States were revised to include instructions aimed at improving students’ knowledge, skills, and abilities which would go beyond their technical knowledge. These skills included, communication skills, analytical skills, presentation skills, team orientation, critical thinking, among others.
Furthermore, Lee and Blaszczynski (1999) suggested that employers expected accounting students to learn a multitude of skills, not simply how to generate and use accounting information. These skills include being able to communicate, work in a group environment, solve real world problems, and use computer and Internet tools.
The challenge of delivering graduates with a more extensive and special skill sets is highlighted in a recent European study (Lloyd, 2008). Their research points to similar employer demands for non-technical skills (beyond the necessary technical accounting skills), but reported at the same time that employers were unsympathetic with claims from universities that they had limited capacity to deliver on these greater demands. Consequently, a special training process can be fashioned out to give interested accounting graduates an opportunity to acquire these special skills that will make them specialists.
In searching for the skills area of Forensic Accounting, DiGabriele (2007 & 2008) in a US study found that both academics and practitioners agreed that critical thinking, unstructured problem solving, investigative flexibility, analytical proficiency, and legal knowledge are important and basic skills for Forensic Accountants.
Harris and Brown (2000) have identified specialized skills and technical abilities of Forensic Accountants. Forensic Accountants are usually familiar with criminal and civil law and understand courtroom procedures and expectations. These researchers also stressed investigative skills, including theories, methods, and patterns of fraud abuse. Forensic Accountants think creatively to consider and understand the tactics that a fraud perpetrator may use to commit and conceal fraudulent acts. Additionally, they need to clearly and concisely communicate findings to various parties, including those with less knowledge of accounting and auditing. Grippo and Ibex (2003) illustrated that the most important skills of Forensic Accountants come from experience in accounting and auditing, taxation, business operations, management, internal controls, interpersonal relationships, and communication.