Effect of forensic accounting mechanisms on fraud detection in Federal Ministries, Departments and Agencies (MDAS) in Nigeria

Abstract

This study examined the effect of forensic accounting mechanisms on fraud detection in Federal Ministries, Departments, and Agencies (MDAs) in Nigeria. It was necessitated due to persistent financial fraud in the Nigerian public sector; such as ghost worker syndrome, contract inflation, and misappropriation of funds in Federal MDAs. The study was conducted to ascertain the extent to which forensic data analytics and financial crime investigation enhance fraud prevention and detection accuracy. Forensic data analytics and financial crime investigation were used as the key explanatory variables to address these challenges. It adopted the Fraud Diamond Theory as a theoretical framework. Survey and documentary research designs were adopted. The target populations were Directors of Finance and Accounts, Heads of Internal Audit Units, and Chief Accountants in selected Federal MDAs in Abuja. The total population of the study was 133. A sample size of 107 was determined using the Krejcie and Morgan formula. Primary data were sourced from structured questionnaires while secondary data were sourced from official reports of EFCC and the Office of the Auditor-General for the Federation. The primary method of data collection used the instrument of a structured, closed-ended questionnaire, while the secondary method of data collection used the document inventory checklist to obtain qualitative data from official financial reports. Descriptive statistics were used to present the quantitative data, while multiple linear regression statistical technique was used to analyze and test the hypotheses at a p<0.05 significance level. Findings from hypothesis one revealed that forensic data analytics has significantly enhanced fraud prevention in Federal MDAs, with a p-value of 0.000 (p < 0.05). The result of hypothesis two revealed that financial crime investigation has a significant positive impact on fraud detection in Federal MDAs, with a p-value of 0.000 (p < 0.05). The study concluded that both forensic data analytics and financial crime investigation are indispensable mechanisms that significantly enhance fraud detection outcomes in the Nigerian public sector. The study recommended, among other things, that the Office of the Accountant-General of the Federation should invest in modern technological infrastructure for forensic data analytics and that management of Federal MDAs should establish dedicated in-house forensic investigation units staffed with certified fraud examiners.