Dynamic Research Journals

Journal of Economics and Finance (DRJ-JEF)

Volume 6 ~ Issue 1 (January, 2021) pp: 34-37
ISSN (Online): 2520-7490
www.dynamicresearchjournals.org

Relevance of Forensic Accounting in Detecting and Deterring Fraud

Leonard Mudimba
Faculty of Commerce and Law, Department of Accounting and Auditing, Zimbabwe Open University, Harare,
Zimbabwe

Abstract:- The study is on the relevance of forensic accounting in deterring fraud with reference to state owned
enterprises in Zimbabwe. The main research question is How relevant is forensic accounting in detecting and
deterring fraud in Zimbabwe state owned enterprises. The study adopted a positivism research philosophy with
quantitative research design however supported by qualitative where narrative was required on interview
responses. The study used the questionnaire and interviews for data collection. The study population was 300
people from which a sample size of 50 was selected using purposive sampling technique. The major findings
include that Forensic accounting is a relevant tool in detecting and deterring fraud. The study recommended
among others the engagement of the service of forensic accounting to compliment efforts of deterring and
detecting fraud in Zimbabwe state owned enterprises.
Key terms:- Forensic Accounting, Fraud, State Owned Enterprises

I. Introduction / Background of the Study

Series of fraud has been witnessed both in the private and public sectors of economies across the globe.
In Zimbabwe state owned enterprises has been the most hit especially after the adoption of the hard currency in
2009 and pushed by advancement in technology which oils fraudsters. What is surprising is that the fraud cases
are perpetrated under the nose of internal and external auditors. The state-owned enterprises spend large amounts
of money on internal and external auditors yet there seems to be no value coming from them in terms of mitigating
financial crimes. The internal auditors, external auditors and the chief financial officers lack requisite forensic
training to deter and detect Morden sophisticated crimes such as bankruptcies, money laundering, amongst others.
Also, whilst both internal and external auditors have reduced themselves to mere number crunchers behind their
desks, investor confidence has been shaved off in most economies due to corruption and other forms of fraud.
Indeed, there is need for a new guard to ferret fraud and provide litigation support to organisations which fall prey
of fraudulent misdemeanours (Magombedze 2016). Forensic accounting new as it is, has become a complex area
of concern for the accounting profession adoption of which it seems can detect and deter fraud in developing
nations such as Zimbabwe and world over.

1.1 Statement of the Problem

Incidences of fraud has made a lot of headlines in the Zimbabwean media, where state owned enterprises
are affected drastically. These cases are perpetrated at the nose of internal auditors and accountants. Hence
attributable to the failure of traditional accounting profession and auditing gap. According to Zaba (2018)
Zimbabwe’s Auditor- General Mildred Chiri report that 23 State owned enterprises are on the verge of collapse
due to financial fraud, poor corporate governance, mismanagement and political interference among other
irregularities. Investor confidence has been shelved. This has put the profession of traditional accounting and
auditing into disrepute. One wonder whether or not forensic accounting is relevant in deterring and detecting
fraud.

1.2 Objective
The objective of this study is to examine the relevance of Forensic Accounting in deterring and detecting
fraud and generate new insight weather or not Forensic Accounting is an effective tool for detecting and deterring
fraud in Zimbabwe.

II. Empirical Literature Review

Many researchers have attempted to examine the effects of forensic accounting on fraud detection and
prevention for example Madumure and Onumah (2013) examined the effect of forensic accounting on corporate
fraud and performance outcome in Nigerian manufacturing sector. Using a match sample of 306 manufacturing
firms registered with the Nigerian manufacturing sector, three hypotheses proposed and tested and the findings
revealed that forensic accounting is relevant in mitigating fraud.

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 Relevance of Forensic Accounting in Detecting and Deterring Fraud

Aduwo (2016) explored the role of forensic accounting in combating the menace of corporate failure.
Aduwo conceptually reviewed the impact of forensic accounting towards utilising professional judgements,
auditing skills, accounting skills and law procedures to fight the dreaded disease of corporate liquidation and the
paper concluded that forensic accounting could go extra strides to mitigate financial scandals in the corporate
organisations.
Enofe, Utomwen and Danjuma (2015) examined the role of forensic accounting in curbing financial
crimes. The population of the study comprises of staff from selected banks. Primary data was used for the purposes
of that research. The research work employed the use of structured questionnaires in eliciting the required data
needed to test the formulated hypothesis. Regression analysis was used as a method of data analysis and the results
were used in testing the hypothesis specified in that study. The study revealed that there is need for some forensic
accountants in the Nigerian banking fraternal, forensic accounting is an effective tool for addressing fraud and
other financial crimes in the banking sector.
Imoniana, Antunes and Formigini (2013) aimed at analysing the characteristics of forensic accounting
services performed by accounting firms in Brazil, using an exploratory approach. Their findings conclude that the
idea that fraud has been least detected by auditors begins to gain shape as auditors are more adequately trained to
detect frauds instead of emphasizing the traditional segregationally of duties and safeguard the firm’s assets.
Most researchers have attempted to examine the effect of forensic accounting on fraud detection and
prevention for example Madumere and Onumah (2013) revealed that corporate fraud is on rampage in the
economy and the reason managers want to be independent at the expense of their employers. Aduwo (2016)
concluded that forensic accounting can move a long way to influence detection and deterrence of financial
scandals in the corporate organisations. Modugu and Anyaduba (2013) found that there is significant agreement
among stakeholders on the effectiveness of forensic accounting in fraud prevention, detection control and financial
reporting and internal quality control.

III. Methodology
The study adopted a positivism research philosophy with quantitative research design which however
was supported by qualitative research methodology where narrative was required on interview responses. The
study used the questionnaire and interviews for data collection. The study population was 300 people comprising
of the office of the auditor general, institute of internal auditors, external auditors, Zimbabwe Republic Police
fraud section, anti-corruption commission of Zimbabwe and the management of state-owned enterprises. A
sample size of 50 was selected from the population categories using purposive sampling technique.

IV. Data Presentation, Analysis and Discussion

The possibility of reducing the occurrence of fraud cases using forensic Accounting in Zimbabwe
Key 5= strongly agree, 4 =Agree,3=Not sure,2=Disagree and 1= strongly disagree
Table 4.1: Evaluation of Forensic Accounting in Zimbabwe’s
Statement 5 4 3 2 1
Forensic accounting is an important investigative tool for detection
80% 17% 7%
of fraud

Forensic accounting is playing a vital role in detecting and reducing

6% 21% 75%
accounting frauds in Zimbabwe's public sector

Poor corporate governance and weak internal controls is one of the

70% 30%
reasons why fraud cases emerge in Zimbabwe’s public sector

The forensic auditing department in Zimbabwe lacks material

13% 13% 62% 12%
resources and technical know- how

Forensic auditing in Zimbabwe’s public sector is confronted with

84% 12% 4%
interference from senior government officials

The forensic accounting profession has no clear recognition in

62% 26% 12%
Zimbabwe
Source: Researcher (2020)
Respondents were asked how far they agreed with the statements in table 4.1 above and they responded
as shown in the table.

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 Relevance of Forensic Accounting in Detecting and Deterring Fraud

From table 4.1 it is shown that 80% strongly agreed, 17% agreed and 7% were not sure with the statement
that forensic accounting is an important investigative tool for detection of fraud. This means that the majority of
the respondents were in agreement with the statement that forensic accounting is an important investigative tool
for detection of fraud.
Data from table 4.1 reveals that, 75% of the respondents strongly disagreed, 21% disagreed and 6% were
not sure with the statement that forensic accounting is playing a vital role in detecting and reducing accounting
frauds in Zimbabwe's public sector. This means that the majority of the respondents were in support of the
statement that forensic accounting is playing a vital role in detecting and reducing accounting frauds in
Zimbabwe's public sector.
Table 4.1 highlighted that 70% of the respondents strongly agreed while 30% agreed with the statement
that poor corporate governance and weak internal controls are the major reasons why fraud cases emerge in
Zimbabwe’s public sector. This implies that the majority of the respondents were in favour of the statement that
poor corporate governance and weak internal controls are the major reasons why fraud cases emerge in
Zimbabwe’s public sector. This is regardless of the introduction of the corporate governance framework for state
enterprises and parastatals introduced in 2013 to improve corporate governance. Further, this shows a poor level
of law enforcement by the government of Zimbabwe in the public sector. This could also be one of the reasons
why forensic auditing has failed to produce the required results in the public sector.
Table 4.1 reveals that 13% of the respondents agreed, 13% were not sure while 62% of the respondents
disagreed and 12% strongly disagreed with the statement that the forensic auditing department in Zimbabwe lacks
material resources and technical know- how. This means that the forensic auditing department in Zimbabwe has
the know-how and resources. Hence there are other reasons why the department is failing to produce the desired
results.
Still from table 4.1 84% of the respondents strongly agreed, 12% agreed and 4% were not sure with the
statement that forensic auditing in Zimbabwe’s public sector is confronted with interference from senior
government officials. This means that the majority of the respondents were in support with the statement that
forensic auditing in Zimbabwe’s public sector is confronted with interference from senior government officials.
This could be the major reason why forensic auditing has been failing to produce the desired results and why there
has been no prosecution so far related to fraud in the public sector of Zimbabwe.
Lastly, table 4.1 show that 62% of the respondents strongly agreed, 26% agreed and 12% were not sure
with the statement that the forensic accounting profession has no clear recognition in Zimbabwe. This means that
the majority of the respondents were in favour of the statement that the forensic accounting profession has no
clear recognition in Zimbabwe. This could be as a result of the government interference as highlighted above
which would affect the integrity and legitimacy of the forensic auditing function in the public sector, hence, poor
recognition.

V. Findings and Recommendations

It was established that Forensic Accounting significantly reduces the occurrence of fraud cases in
Zimbabwe. Although it came out clear that forensic accounting is an important investigative tool for fraud
detection. These findings condures with the studies carried out by Madumure and Onumah (2013), Aduwo (2016),
Enofe, Utomwen and Danjuma (2015).
The study recommends that organisations should effectively make use of forensic accounting in dealing
with fraud. The government of Zimbabwe through the Ministry responsible for State Owned enterprises, needs
to prioritize the strengthening of internal control systems of all State-owned enterprises. This would work
especially if corporate governance is also prioritized. The corporate governance framework for State owned
enterprises, need to be properly instituted in the running of State owed enterprises so that the benefits of forensic
accounting are to be achieved.

References
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International Journal of Economics, Commerce and Management United Kingdom Vol. IV, Issue 1,
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[5]. Government of Zimbabwe (2018) Performance Management Guidelines for State Enterprises & Parastatals
in Zimbabwe
[6]. Institute of Certified Public Accountants of Pakistan (ICPAP, 2017) Forensic Accounting. Specialization.
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 Relevance of Forensic Accounting in Detecting and Deterring Fraud

[7]. Madumure and Onumah (2013) The effect of forensic accounting on corporate fraud and performance
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