This work is a theoretical study on the application of forensic audit and investigation in resolving tax related fraud and malfeasance.
The work aims to examine the application of forensic audit and investigation in combating fraudulent activities in corporate organization, to determine the characteristics required by forensic auditors as to combat fraudulent activities and to differentiate between forensic auditor and financial auditor.
Based on the findings, this work concludes that forensic auditing has improved management accountability, strengthened external auditor’s independence and assisting audit committee members in carrying out their oversight function by providing them assurance on internal audit. Therefore, the study recommends that the service of forensic auditors should be employed in Nigerian organisations.
Table of Contents
1. Introduction
2. Objectives of the Study
3. Methodology
4. Literature Review
4.1 The Concept of Fraud
4.2 The Concept Misfeasance
4.3 The Concept of Forensic Auditing
4.4 Conceptual Definition of Strategic Tax Behaviors: Tax Evasion, Tax Avoidance and Licit Savings of Taxes
5. Activities being carried out by Forensic Auditors
6. Responsibilities of Forensic Auditors in combating Fraudulent Activities and Malfeasance
7. Detecting Tax related fraud & malfeasance
8. Conclusion and Recommendations
Research Objectives and Core Themes
This paper aims to examine the practical application of forensic auditing and investigation as a mechanism for resolving issues related to tax fraud and malfeasance within corporate organizations, while highlighting the distinct roles forensic auditors play in strengthening corporate governance.
- Analysis of forensic audit applications in mitigating corporate fraudulent activities.
- Identification of essential characteristics and skills required by forensic auditors.
- Comparative study distinguishing between the roles of forensic and financial auditors.
- Exploration of strategic tax behaviors including tax evasion and tax avoidance.
- Evaluation of the forensic auditor's impact on accountability and oversight functions.
Excerpt from the Book
The Concept of Forensic Auditing
The concept forensic auditing and forensic accounting are used interchangeably. The concept has been enunciated by several authors and scholars. According to Dahli (2008), forensic comes from the Latin word ‘for public’ and specifically to ‘forum’. The forum was where the Ancient Romans were taught to do business and settle disputes among other things. He further buttressed that forensic relates to the application of knowledge to legal problems such as crimes. This definition traces the history of forensic accounting and its application in litigation support. Forensic is as old as history but its usage got little attention in the past. It is now becoming prominent because of increase in financial scandals. Joshi (2003) ascribed the origination of forensic accounting to Kutilya, the first economist whom he said mentioned 40 ways of embezzlement centuries ago.
However, he stated that the term forensic accounting was coined by Peloubet in 1946, when he defined forensic accounting as the application of accounting knowledge and investigative skills to identify and resolve legal issues. Crumbley (2003) defined forensic auditing as an accounting analysis that can uncover possible fraud that is suitable for presentation in court. A forensic accountant uses his knowledge of accounting, law, investigative auditing, criminology, and psychology to uncover fraud, find evidence and present such evidence in court if required. According to him person who pretends to be something that he is not is fraud, a snare, a deceptive, trick, cheat and a swindler. Forensic accounting is different from the old debit or credit accounting as it provides an accounting analysis that is suitable to the organization, which will help in resolving the disputes that arise in the organization.
Summary of Chapters
Introduction: Provides the background on the prevalence of tax-related fraud and the subsequent failure of traditional statutory audits to prevent corporate collapse.
Objectives of the Study: Outlines the research focus on investigating forensic audit applications, auditor characteristics, and the differentiation between forensic and financial audit functions.
Methodology: Describes the theoretical nature of the study, which relies on secondary data sources and existing literature regarding forensic investigations.
Literature Review: Explores theoretical foundations including definitions of fraud, misfeasance, the evolution of forensic auditing, and the conceptual differences between tax evasion, tax avoidance, and licit tax savings.
Activities being carried out by Forensic Auditors: Details the primary objectives of forensic activities, specifically regarding management accountability, corporate governance, and reporting systems.
Responsibilities of Forensic Auditors in combating Fraudulent Activities and Malfeasance: Discusses the practical roles of auditors, such as conducting investigations, analyzing financial transactions, and reconstructing records.
Detecting Tax related fraud & malfeasance: Explains how analytical and technological tools, such as Benford's law, assist in identifying fraudulent management practices.
Conclusion and Recommendations: Synthesizes findings and advocates for the formal integration of forensic auditors into Nigerian corporate organizations and tertiary curricula.
Keywords
forensic audit, external auditor, tax evasion, tax avoidance, fraud, malfeasance, corporate governance, financial statements, investigation, accountability, statutory audit, compliance, Benford's law, internal control, litigation support.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on the application of forensic auditing as a tool to detect and prevent tax-related fraud and malfeasance in corporate organizations.
What are the primary themes discussed?
The work covers the conceptual understanding of fraud, the distinct responsibilities of forensic auditors compared to traditional auditors, and the impact of these practices on corporate governance.
What is the main research objective?
The primary goal is to examine how forensic auditing can effectively resolve fraudulent financial issues and what specific characteristics are required for a forensic auditor to succeed.
Which methodology does the author use?
This is a theoretical study that utilizes a secondary source research methodology, gathering and analyzing existing literature on forensic auditing and tax fraud.
What topics are covered in the main body?
The main body examines the definitions of fraud and misfeasance, the technical responsibilities of forensic auditors, and the analytical tools used to detect tax-related crimes.
Which keywords best characterize this work?
The work is characterized by terms such as forensic audit, corporate governance, tax evasion, tax avoidance, and management accountability.
How is a forensic auditor different from a statutory auditor?
A statutory auditor focuses on ensuring financial statements follow GAAP, whereas a forensic auditor is proactive, investigates specific allegations, and prepares evidence for legal proceedings.
Why is forensic auditing considered important for tax compliance?
It acts as a deterrent by creating a fear of being caught, thus encouraging better adherence to tax laws and helping to identify dishonest reporting.
Does the author suggest specific changes for Nigerian organizations?
Yes, the author recommends amending existing statutes to include forensic auditors in the formal audit teams of organizations.
- Quote paper
- Newman Enyioko (Author), 2020, Resolving Tax Related Fraud and Malfeasance with Forensic Audit, Munich, GRIN Verlag, https://www.grin.com/document/537296
