Detecting Fraudulent Manipulation of Accounting Ratios in Financial Reporting of Nigerian Corporations through Forensic Accounting Technique

Abstract

This study focused on forensic accounting techniques: A tool for detecting fraudulent manipulation of financial ratios in financial reporting. Financial manipulation takes different forms including abuse of materiality principle, round-tripping, back-to-back and swaps, timing of adoption of mandatory accounting standards, and voluntary accounting changes. The research design adopted for the study was a survey design. The data collected were tabulated and analyzed using the Ordinary Least Square (OLS). The study revealed that forensic accounting techniques mirrored by Computer Assisted Audit Technique (CAAT), Data Mining (DM), Relative Size Factor (RSF) and Benford Law (BL) have significant influence on fraudulent manipulation. It is observed that in view of the craze for money in Nigeria, misplace value judgment and the prevailing harsh economic environment, frauds are on the increase and the corporations are losing amount running into millions of naira through fraudulent manipulation of accounts. Based on the findings of the study, forensic experts are expected to consider whether the information presented in the financial statements is relevant, reliable, comparable and understandable. When forming an opinion on whether financial statements fairly represent the financial position, results of operations and cash flows of an entity, experts are required to discuss their judgment about the quality of an entity’s financial statements with the audit committee. It is also recommended that quality assessment report that would add credibility to financial information for users should therefore be included in the statutory auditor’s report.

Keywords: Computer Assisted Audit Technique, Data Mining, Relative Size Factor, Benford Law, Fraudulent Manipulation.