FORENSIC ACCOUNTING AS A TOOL FOR FRAUD
DETECTION AND PREVENTION IN THE PRIVATE
UNIVERSITIES
(A STUDY OF SELECTED UNIVERSITIES IN UGANDA)
SSEKITTO BAKER
A RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR A PH.D-DOCTORATE OF PHILOSOPHYACCOUNTING AND FINANCE OF UNICAF UNIVERSITY
NOVEMBER 2017
1. Abstract
With the increased demand for higher University education in Uganda, private universities have
a role to play but due to financial mismanagement caused by mostly fraud, most of them are
either on the verge of collapsing, facing permanent closure by the National Council for Higher
Education in Uganda or absorbed by the government. Unearthing fraud and bringing it to light in
both public and private universities can be difficult but not an impossible task. The aim of this
study is to examine forensic accounting as a tool for fraud detection and prevention in the
selected private Universities of Uganda. The study adopts a research survey design. Both primary
and secondary data sources will be used. This study will employ the use of well-structured
questionnaires that will generate the required data needed to test the formulated hypothesis
specified and these will be administered to a sample of 240 respondents. Data collected will be
analysed with descriptive statistic using regression analysis and Chi-square.
Keywords: Forensic Accounting, Financial Fraud, Fraud Detection, Fraud Prevention, External
Auditors.
2. Scope of the Study
The study examines forensic accounting as a tool for fraud detection and prevention in selected
private Universities in Uganda; Kampala International University (KIU), Nkumba University,
Ndejje University, Uganda Christian University – Mukono, Uganda Technology and Management
University (UTAMU) and Islamic University in Uganda - Mbale. The scope of the research will
therefore cover a period of 2013 to 2017.
3. Aims of the Study
The main aim of this study is to examine Forensic Accounting as a tool for fraud detection and
prevention in selected private Universities in Uganda.
4. Statement of the Problem
The six private universities under study and like many private universities in Uganda face a
problem of fraud and in most cases this fraud is unknown due to the nature of traditional
auditing which gives low priority to fraudulent practices.
According to International Auditing Standard 240 (redrafted), The Auditor’s Responsibilities
Relating to Fraud in an Audit of Financial Statements, makes it clear who has the main
responsibility for prevention and detection of fraud and therefore it states, ‘The primary
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responsibility for the prevention and detection of fraud rests with both those charged with
governance of the entity and management.’ paragraph 4. This implies that auditors have a
secondary responsibility and for as long as they obtain reasonable but not absolute assurance
that the financial statements as a whole are free from material misstatement, whether due to
fraud or errors, they are at liberty to report that the information contained in the financial
statements is free and fair. Not forgetting that most of the information they rely on is obtained
majorly from management representations. This sometimes renders complex fraud especially if
there is management collusion to go undetected. All this evidence justify that fraud detection
and prevention is of low priority on the part of external auditors. Bhasin (2013) submitted that
audits would only detect approximately 10% of fraud. The Association of Certified Fraud
Examiners further maintains that audits are ineffective although it is the most widely used
mechanism to detect and prevent fraudulent activities.
Universities do employ Internal Auditors to help strengthen internal controls and prevent fraud
from occurring but due to their inherent nature and the fact that they are employees of the same
University, their independency is not guaranteed and usually fraud is perpetuated under their
supervision.
The inadequate training, skills and experience by both traditional internal and external auditors
and the lack of timely response to the ever growing Information Communication Technology (ICT)
has paved way for fraud to happen in the Universities and have created a “bed of roses” for
fraudsters to continue grooming their own tactic towards fraudulent practices.
In light of the above, traditional auditing seems to have its own limitations and challenges and
private Universities should look toward new approaches, and the best available alternative
approach so far in resolving these challenges is instituting Forensic accounting as a tool for fraud
detection and prevention. The fact is that very little has been written in this area and reason why
a study of this nature is necessary on the use of Forensic Accounting as a tool for fraud detection
and prevention in private universities in Uganda.
5. Research questions
The study is expected to answer the following questions:
a. Is there a possibility of using Forensic Accounting to combat fraud in private Universities
in Uganda?
b. How significantly different are the duties of Forensic accountants and External Auditors?
c. To what extent does Forensic Accounting as a tool affect fraud detection and prevention
in private Universities in Uganda?
d. How much awareness has been created on the use of Forensic Accounting as a tool for
fraud detection and prevention in Private Universities in Kampala, Uganda?
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6. Objectives of the Study
The general objective of this study is to assess whether the use of forensic accounting as a tool
will help effectively to prevent and detect fraudulent practices within private Universities in
Kampala Uganda.
The Specific objectives are to:
a. Examine the possibility of combating the occurrence of fraud using Forensic Accounting
as a tool in private Universities in Uganda.
b. Examine if there is a significant difference between Forensic Accountants and Traditional
External Auditors in private universities in Uganda.
c. Find out the manner in which Forensic Accounting as a tool affect fraud detection and
prevention in Private Universities in Uganda.
d. Ascertain the level of awareness of the use of Forensic Accounting as a tool for fraud
detection and prevention among selected private universities in Uganda.
7. Statement of Hypothesis
In order to archive the set objectives, the following hypothesis will be tested:
H01: Forensic Accounting does not combat the occurrence of fraud in private Universities in
Uganda.
H02: There is no significant difference between Forensic Accountants and Traditional External
Auditors.
H03: Forensic Accounting does not affect fraud detection and detection in private Universities in
Uganda.
H04: There has not been significant awareness of Forensic Accounting as a tool for fraud
prevention and detection in private Universities in Uganda.
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8. Justification of the Study
Apparently Uganda boosts of over 30 private Universities and more are about to be introduced
as the growing demand of higher education increases from both within and outside the country.
Most if not all of these private universities are fully privately owned and at the same time they
are financed by individual shareholders who want to maximize profits and be assured of the
return on the investment and to see their investment continue in the foreseeable future.
Recently there has been a takeover by the Ugandan government two private Universities,
Mountain of the Moon and Kabale University due to poor financial management yet research has
shown, this has been attributed to complex fraud that exists and cannot be unearthed by normal
traditional external auditing . This means that unless, Shareholders and Investors in private
universities are ready to embrace Forensic Accounting as a tool in unearthing these complex
fraudulent practices and to prevent the vice, their investments are bound to fail, hence the
justification of this study.
9. Significance of the Study
The study will be significant in many ways;
a. To lay a solid framework for the design and implementation of Forensic Accounting in
private Universities in Uganda.
b. To aid future students and independent researchers who may be interested in this subject
area.
c. It is the researchers’’ hope that the findings of this study will be of great importance to
the targeted private Universities.
d. The study is also hoped to enrich the researcher’s’ experience in Forensic Accounting.
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10. Literature Review
Since time immortal, there have always been a number of humans who are bent in their ethics,
morals, sociological makeup, psychological makeup, or sense of justice, and are ready, willing,
and able to commit crimes of all types, including white-collar crimes. But hard economic times
seem to cause a few more than normal to crumble under the economic pressure and give in to
the temptation to commit a fraud (Singleton and Singleton, 2010). Defining fraud is as difficult as
I identifying it as there is no definite definition has been laid down as it surprise, tricks, cunning
and unfair way by which one another is cheated.
Joshi (2003) traced the origination of forensic accounting to Kutilya, the first economist to openly
recognize the need for the forensic accountant whom he said, mentioned 40 ways of
embezzlement centuries ago. He however stated that the term “forensic accounting was coined
by Peloubet in 1946. He said, forensic accounting is the application of accounting knowledge and
investigative skills to identify and resolve legal issues. Joshi (2003) further sees forensic
accounting as the application of specialized knowledge and specified skill to stumble up on the
evidence of economic translations
Forensic accounting also called investigative accounting or fraud audit is a merger of forensic
science and accounting. Forensic science according to Crumbley (2003) “may be defined as
application of the laws of nature to the laws of man.” He refers to forensic scientists as examiners
and interpreters of evidence and facts in legal cases that also requires expert opinions regarding
their findings in court of law.
According to the Association of Certified Fraud Examiners (ACFE) forensic accounting is the use
of skills in potential or real civil or criminal disputes, including generally accepted accounting and
auditing principles; establishing losses or profit, income, property or damage, estimations of
internal controls, frauds and others that involve inclusion of accounting expertise into the legal
system.
According to Singleton and Singleton (2010), forensic accounting dates back to the days of
pharaoh in Egypt as his eyes and ears were people who watched over his inventories of grain,
gold and other assets.
It is agreeable that an auditor does not have the absolute duty to uncover fraud, but is expected
to practice fair and true reporting to ensure that the interests of the public as well as the
employees are protected (Enofe, Okpako, and Atube, 2013). Companies should look towards new
approaches rather than follow the traditional approach as forensic accounting may be the next
best alternative in resolving financial problems (Enofe, Okpako, and Atube, 2013).
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11. Research Methodology
The objective of the study is to examine forensic accounting as a tool for fraud detection and
prevention in the selected private Universities in Uganda. The study adopts a research survey
design. The research design was adopted because it is likely to generate information required
and because it deals with evaluation of opinions of respondents which is the focus of this study,
this will provide a good basis for the generalization of the findings.
The study population of this research will be based on six selected private universities in Uganda
and these are; Kampala International University (KIU), Nkumba University, Ndejje University,
Uganda Christian University – Mukono, Uganda Technology and Management University
(UTAMU) and Islamic University in Uganda - Mbale. The population of study is that group about
whom we want to be able to draw a conclusion (Asika, 1991)
In order to gather sufficient and reliable information for this research, the researcher will use
both Primary and Secondary Sources of Data collection.
In considering sample size, Saunders and Thornhill, (2003) suggest that a minimum number of
thirty (30) for statistical analyses provide a useful rule of thumb. The researcher will adopt a
sample of 240 respondents that will include among others; Professional accountants, internal
and external auditors, top management staff, shareholder as well as academicians of the selected
private universities in Uganda. The sampling was done using both the purposive and simple
random sampling.
Being that the well- structured questionnaires are the most widely used data collection
techniques in a survey, it is also what the researcher will apply to this research under study along
with interviews as they are special form of correspondence developed to procure authoritative
information from a number of persons through the medium of well-directed questions and
interactions.
Data Collected from both primary and secondary sources will be analysed using chi-square
statistical software and the ordinary least square regression analysis to invalidate or validate the
hypothesis.
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12. Tentative Work Plan
Year One – Literature
Months 1-6
Develop understandings of
qualitative
research
methods
suitable
to
research. Dedicate time to
explore existing literature
surrounding
Forensic
Accounting as a tool for
Explore
theoretical
fraud
detection
and
approaches
surrounding
prevention.
fraud,
understanding
Forensic Accounting and
methodological challenges.
Refine Research Questions.
Review and Theoretical
Development
Months 6-12
Year Two - Fieldwork
Months 12-18
Begin
participants.
recruiting
Maintain and/or re-establish
links with past participants
to facilitate and promote
this research.
Months 18-24
Year Three – Writing up
Months 24-30
Research
Months 30-36
13. Reference
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Critically engage in existing
literature and re-examine
according to progression of
research.
Analyse and write up
findings and build links from
existing
research
and
theoretical perspectives.
Finalise
theoretical
approaches. Reflect on
research
practice,
challenges within method
and create suggestions for
further research. Complete
thesis.
Singleton, T. W., & Singleton, A.J. (2010). Fraud Auditing and Forensic Accounting, (3rd ed.).
New York: John Wiley & Sons.
Joshi, M.S. (2003). Definition of Forensic Accounting; http://www.forensicaccounting.com
Albrecht, W.S. (2005). Identifying fraudulent financial transactions: A framework for detecting
financial statement fraud, Brigham: Brigham Young University.
Association of Certified Fraud Examiner (ACFE) (2012). Report to the Nations on Occupational
Fraud and Abuse. Austin, TX: Association of Certified Fraud Examiners.
Crumbley, D.L, Heitger, L. E. & Smith, G. S. (2009). Forensic and investigative accounting. CCH
Group: 3-5.
Houck M., Kranacher, M., Moris B., & Robertson, J. (2006). Forensic Accounting as an
Investigative Tool: Developing and Model Curriculum for Fraud and Forensic Accounting
(ethnics). The CPA Journal, 12 (5).
Bologna, G.J., & Lindquist, R.J. (1987). Fraud auditing and forensic accounting: New tools and
techniques, Hoboken, New Jervey: Wiley.
Gray, D. (2008). Forensic accounting and auditing: compared and contrasted to traditional
accounting and auditing. American Journal of Business Education, 1(2), 115-126.
Ghosh, I. and Banergie, K.K. (2011). Forensic Accounting - Another Feather in that hat of
Accounting. The Chartered Accountant, October, pp. 60 – 63.
Mehta, G.S. and Mathur, T. (2007). Preventing Financial Fraud Through Forensic Accounting.
The Chartered Accountant, pp. 1575 – 1580.
Moyes, G. and Baker, C.R. (2003). Auditor’s Belief About the Fraud Detection Effectiveness of
Standard Audit Procedures. Journal Forensic Accounting, 4(2), pp. 199 – 216.
Okoye, E.I. and Gbegi, D.O. (2013). Forensic accounting: A Tool for Fraud Detection and
Prevention in the Public Service. (A Study of Selected Ministries in Kogi State).International
Journal of Academic Research in Business and Social Sciences, 3(3), pp. 1-18.
Akhidime A. E. &Uagbale-Ekatah R. E. (2014). The Growing Relevance of Forensic Accounting
as a Tool For Combating Fraud and Corruption: Nigeria Experience. Research Journal of Finance
and Accounting, Vol.5, No.2
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