Forensic Accounting Techniques and Fraud Investigation in Digital Age- Prof Godwin Oyedokun.pptx

ACFE Forensic Accounting Techniques and Fraud Investigation in Digital Age- Prof Godwin Oyedokun

Being a Virtual Lecture Delivered at the Fraud Awareness Week of the Association of Certified Fraud Examiners (ACFE) Lagos Nigeria Chapter on Wednesday, November 15, 2022.

1. Forensic Accounting Techniques and Fraud Investigation in Digital Age Being a Virtual Lecture Delivered at the Fraud Awareness Week of the Association of Certified Fraud Examiners (ACFE) Lagos Nigeria Chapter on Wednesday, November 15, 202 2 .

2. ND (Fin), HND (Acct.), BSc. (Acct. Ed), BSc (Fin.), BSc. (Bus. Admin), MBA (Acct. & Fin.), MSc. (Acct.), MSc. (Bus & Econs ), MSc (Tax), MTP (SA), PhD (Acct), PhD (Fin), PhD (FA), FCA, FCTI, FCIB, ACS, ACIS, MNIM, FCNA, FCFIP, FCE, FERP, CICA, CFA, CFE, CIPFA, CPFA, ACAMS, ABR, CertIFR , IPA, IFA, FFAR, FPD-CR, FSEAN, FNIOAM, ACIrb

3. Forensic Accounting Techniques and Fraud Investigation in Digital Age

4. Introduction

5. CONCEPT OF FORENSIC ACCOUNTING WHAT IS FORENSIC ACCOUNTING ? The word forensic is derived from the Latin adjective “forensics”, meaning "of or before the forum." Forensic means, "belonging to, used in or suitable to courts of judicature or public discussion and debate" (Webster's Dictionary). Forensic Accounting on the other hand gives an accounting analysis that is suitable to the court which gives the basis for discussion, debate, and ultimately dispute resolution Forensic accounting is then the application of investigative, auditing, procedure, and analytical skills to resolve financial issues scientifically and in a manner that meets standards required by courts of law ( Oyedokun , 2017). This therefore implies that the Litigation process is very paramount to forensic accounting.

6. Forensic Accounting

7. COMPONENT OF FORENSIC ACCOUNTING

8. APPLICATION OF FORENSIC ACCOUNTING

9. 9 Branches of Accounting

10. 10 Branches of Accounting

11. Forensic Accountant Skills

12. Application of Forensic Accounting

13. Application of Forensic Accounting

14. Application of Forensic Accounting

15. Application of Forensic Accounting

16. Forensic Accountant: Required Knowledge, Skills, and Abilities

17. Forensic Accounting, Techniques and Set Skills

18. FORENSIC ACCOUNTING TECHNIQUES

19. Forensic Accounting, Techniques and Set Skills Data Mining

20. Forensic Accounting, Techniques and Set Skills

21. Forensic Accounting, Techniques and Set Skills

22. Forensic Accounting, Techniques and Set Skills

23. Forensic Accounting, Techniques and Set Skills

24. Forensic Accounting, Techniques and Set Skills

25. Forensic Accounting, Techniques and Set Skills

26. FORENSIC ACCOUNTING INVESTIGATION

27. A forensic investigator can be engaged in public practice or employed by insurance companies, banks, police forces, and government agencies like EFCC, ICPC, NDLEA, and other organizations for any of the following functions Investigating and analyzing financial evidence Developing computerized applications to assist in the analysis and presentation of financial evidence Communicating their findings in the form of reports, exhibits, and collections of documents Assisting in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence FORENSIC ACCOUNTING INVESTIGATION

28. INFORMATION GATHERING AND ADMISSIBILITY OF EVIDENCE IN COURT

29. Forensic Accounting Source Document COMPANY DOCUMENT A company is a legal entity, registered for the stated purpose(s ) These purposes of every organization are usually included in her various documents which serve as sources of vital information for forensic investigation PRIMARY BOOKS OF ACCOUNT Books used to register daily business activities are an essential source of information in the forensic accounting process Business transactions are to be recorded as daily as at when effected, failure to record business transactions appropriately may raise serious questions during a forensic investigation PERFORMING INTERVIEWS Interviewing is a critical part of a forensic investigation, as it can assist the forensic accountant in establishing the: who, what, when, where, how, and why A successful interview is an integral part of facts gathering and steering the investigation in the right direction

30. Forensic Accounting Source Document RESEARCH The forensic investigator is burdened with the enormous task of obtaining all the information to put the case together (Manning, 2005). A vast amount of information about individuals and businesses can be sourced from public sources, which states that a wide variety of information has been digitized to be available online. The ACFE (2011) identifies the following searches that can be conducted by the forensic accountant :

31. Forensic Accounting Source Document In forensics, investigators use a big variety of techniques and tools to get this precious information about their targets, as well as locations and data collection software they’ll be using towards the information gathering goal. Social Engineering : This includes in-person chat, phone conversations, and email spoofing attacks. What all these methods have in common is the psychology of human weakness, needed to get maximum data about the target. Search Engines : Web crawlers can be used to fetch information about anything, and this includes companies, persons, services, and even real hacks Social Networks : Facebook, Twitter, Linked In, and other social networks are great sources of information to build a profile, especially when targeting individuals .

32. Forensic Accounting Source Document INFORMATION GATHERING TECHNIQUES DOMAIN NAMES: These are registered by organizations, governments, public and private agencies, and people. Therefore, they’re a great starting point when you want to investigate someone. Personal information, associated domains, projects, services, and technologies can be found by inspecting domain name information INTERNET SERVERS: Authoritative DNS servers are a great source of information, as they often include every single surface point exposed to the Internet which means a direct link to related services such as HTTP, email, etc.

33. PRESERVING EVIDENCE OF GATHERED FOR COURT ADMISSIBILITY The handling of evidence is the most important aspect of digital forensics. This is known as preservation: the isolation and protection of digital evidence exactly as found without alteration so that it can later be analyzed. Information obtained during a forensic investigation must be handled and preserved in such a manner that it’s physical and legal integrity is maintained to ensure that the evidence is sought lawfully and that it is admissible ( Mudaly , 2011; Oyedokun , 2017). Most of the criminals behind fraud use sophisticated technology and accounting tricks to commit complex frauds. This means that forensic accountants need state-of-the-art facilities to uncover fraud. Computers are common tools used by the culprits behind white-collar crimes. To find “the smoking gun,” the forensic accountant will need to be able to dig deep into the company’s computer system. However, without the proper equipment, that process can prove to be very difficult. To facilitate the preservation, collection, analysis, and documentation of evidence, forensic accountants can use specialized software and computer hardware. Many new technologies allow the investigators to recover deleted files, crack encryptions or codes, extract and sort data ( Bigler , 2001).

34. How to preserve Evidence for Court Admissibility

35. ANALYTICS Forensic analytics describes the act of obtaining and analyzing electronic data using formulas and statistical techniques to reconstruct, detect, or otherwise support a claim of financial fraud MICROSOFT ACCESS Access can be used for data sets that are reasonably sized. Access is a Windows-based database program that keeps the tables, queries, and reports neatly compartmentalized. MICROSOFT EXCEL The importation of data is usually easy using Excel, as you can easily import data from Access and a host of other database programs. ANALYSIS OF TRANSACTION T he analysis of transactions is when a comparison or contrast of transactional and pattern-sensitive data is measured to provide a record for forensic analysis. FORENSIC DATA ANALYTICAL TOOLS

36. EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT Evidence, broadly construed, is anything presented in support of an assertion, because evident things are undoubted. In fraud investigation process, it begins with a prediction, circumstances under which a reasonable, professionally trained expert could believe that fraud is taking place. Once there are such indications of fraud, the investigator develops a hypothesis and looks for evidence to prove the hypothesis. Such evidence can come from documents, interviews, observation, and other physical clues like fingerprints. Based on the evidence acquired, the initial hypothesis can be proved or revised. The evidence, therefore, is the means whereby a fact in question may be proved or disproved. Types of Evidence include: CONCEPT OF EVIDENCE

37. EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/2 TESTIMONY This refers to the oral statements made by witnesses under oath. In general, the two types of testimonial witnesses are: Lay witnesses: A lay witness is an ordinary person who testifies based on their knowledge and life experiences. Expert witnesses: An expert witness is someone whose level of specialized knowledge or skill in a particular field qualifies them to present their opinion about the facts of a case during legal proceedings. REAL EVIDENCE It describes physical objects that played a part in the issue being litigated. The term includes documentary evidence such as canceled checks, invoices, ledgers, and letters as well as other types of physical evidence. Therefore, a typewriter or printer in a case involving questioned documents is real evidence, as is a tape recording, since members of the court can experience the sound firsthand . DEMONSTRATIVE EVIDENCE This is a tangible item that illustrates some material proposition (e.g., a map, a chart, a summary). It differs from real evidence in the demonstrative evidence was not part of the underlying event: it was created specifically for the trial. Its purpose is to provide a visual aid for the jury. Nonetheless, it is evident and can be considered by the jury in reaching a verdict. FORMS OF EVIDENCE

38. SIMPLICITY This relationship between evidence and the fact under scrutiny. If a piece of evidence increases or decreases the probability of the fact being proved then it is relevant, otherwise irrelevant. The law does not define a way to tag relevance to a piece of evidence, this is done by logic, common sense, and general knowledge about the world around. The party who produces a shred of evidence, to prove a fact, is obliged to show its relevance. WEIGHT T he extent or the degree of relevance is the weight of evidence. It can also be defined as the degree to which evidence makes a proposition more or less probable. The form of generalization adopted to show the relevance of evidence will affect its weight. CHARACTERISTICES OF EVIDENCE EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/3

39. QUALITIES OF LEGAL EVIDENCE EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/4

40. EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/5 The admissibility of evidence is connected with its relevance and weight. The type of the dispute and the presentation of evidence govern its relativity to the fact being proved ( Gladyshev , 2004). Generally , a relevant piece of evidence is admissible, but sometimes even relevant and weighty evidence might be deemed inadmissible because it violated some formal law ( Routledge 2004). For example, if a conversation has been recorded without the consent of the other party then it might be difficult to admit the recording in the court of law. ADMISSIBILITY OF EVIDENCE IN LAW COURT

41. EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/6 CROSS-EXAMINATION IN EVIDENCE Cross examination is fundamental aspect of every trial to ensure justice in every case. Parties in all proceedings are given the right and chance to cross examine an adverse witness in a case. This is to say that the strength or weakness of every case lies on cross examination. Cross examination is a rudimentary process of fair hearing, failure to allow a party to cross examine can occasion a miscarriage of justice. The decision to cross examine is incumbent on the parties and largely dependent on how he perceived the examination. A party may decide not to cross examine a witness that gave his evidence in chief especially where the evidence is not detrimental to his case. It is not in all cases that cross-examination of witness is necessary. For instance; Where such evidence is self-contradictory and lacks substance. Where the evidence is adverse to the case of the party who called the court. Where the testimony does no harm to the case of the party who should have cross-examined.

42. EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/7 In the case of Onwuka v Owolewa ( ca ) 2001, Karibi Whyte JSC stated inter alia ……” right to cross examination is important under our civil process by virtue of Section 189 Evidence Act Cap 112 Laws of the Federation of Nigeria 1990. A denial of such right of cross examination is denial of fair hearing to appellant was wrongful exercise of judicial discretion. Mike Omhenkc Obomhvnse v Richard Erhahon 1993) 7 SCNJ 479 at 499;(1993) 7 NWLR (Pt.303) 22 SC; Rasaki Salu v. Madam Towuro Egeibon (1994) 6 SCNJ 223 at 237, (1994) 6 NWLR (Pt.348) 23. Cross examination is an integral part of fair hearing, it goes to the root of a case. Denial of that right can vitiate the entire proceedings. This can serve as a ground for appeal. In Onwuka v Owolewa ( ca ) 2001 it was held that under the adversarial system of jurisprudence, the art of cross examination is the greatest weapon to attack an adversary. It is fundamental, it is the pivot, the central hub and gravity of the civil system. This is so because, cross examination is based on the rules of pleadings with its source on the rule of natural justice of audi alteram partem (that is, hear the other side). To deny a party the right to cross-examine his adversary without legal reasons amounts to denial of fair hearing as enshrined in sec. 36 (1) of the 1999 Constitution of Nigeria (P. 713, paras. C-H). Where the adverse party is not in court to cross examine the witness, the party who called the witness is not allowed to close his case nor foreclosing the other party from cross examining the witness. Closing his case will prevent the other party from making an application and the recalling of witness might be denied. Hearing notices therefore must be issued to the adverse party to come to court the next adjourned date for the purpose of Cross examining the witness. When this hearing notice is not issued, foreclosing the party from cross examining would amount to injustice. SIMILAR CASES OF RIGHT IN CROSS EXAMINATION OF EVIDENCE

43. EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/8 However, a party who waves his right to Cross examine cannot subsequently exercise such right. A party who does not apply to cross examine a witness before the party for whom that witness testifies closes his case cannot subsequently during his own case, apply for leave to cross examine such witness. see Onwuka v Owolewa supra P775, Para. F . Waiver is the voluntary relinquishment or abandonment, express or implied, of a legal right or advantage. The party alleged to have waived a right must have had both knowledge of the existing right and the intention of foregoing it. See Edozien v. Edozien (1998) 12 NWLR (Pt.580) 133 referred to] (P. 714, Para. A). See Oniah v. Onyia (1989) 1 NWLR (Pt.99) page 514 wherein Karibi Whyte JSC stated inter alia that: “The concept of waiver presupposed that a person who is to enjoy a benefit or who has the choice of two benefits fully aware of the benefits and has either neglected to exercise his right to the benefit or exercise must be voluntary ”. For a party to be deemed to have waived his right to Cross examine he must have knowledge of the existence of such right. If that party is not in court, the party who called the witness in evidence in chief cannot apply to the court to close his case or foreclose the other party from cross examining the witness without hearing notices issued on the other side and proof of such notice. When the court forecloses the other party from cross examining when such party has not been issued a hearing notice or is deemed to have waived his right, amounts to breach of right to fair hearing . Hearing notice being the only legal means and procedure to get a party to appear in court, it must be properly served. Improper or invalid service or no service at all renders such proceedings a nullity. In the instant case, the proceedings of 21/9195 was a nullity as no valid hearing notice was ordered to be served on the appellant. Odutola v. Kayode (1994) 2 NWLR (Pt.324) SIMILAR CASES OF RIGHT IN CROSS EXAMINATION OF EVIDENCE

44. Insufficient preparation and experience to qualify as an expert witness. Inadequate examination of the issues presented. Improper presentation of the issues to the witness. Suspicion upon the testimony, based upon the witness’s record and character. Use of misleading illustrations, selection of unfair examples, drawing of inferences not justified by facts, and improper emphasis or exaggeration. Impossibility of reaching a conclusion meriting serious consideration on an issue not permitting adequate inquiry. Expression was of an opinion unjustified by the reasons given. Basing the opinion upon vague and trivial facts insufficient to sustain any opinion, and concluding by guesswork. A biased and unfair attitude of the witness in the examination of the facts. The possibility that the problem is so difficult or unusual even a competent and careful witness may be mistaken. Influence of other things rather than technical findings on the opinion of the witness and basing conclusions on reasons other than those given EVIDENCE AND ADMISSIBILITY OF EVIDENCE IN COURT/9 ATTACKS AGAINST EVIDENCE ON CROSS-EXAMINATION

45. PRESERVATION AND ANALYSIS OF INFORMATION GATHERED FOR EVIDENCE ADMISSIBILITY Evidence is a major factor that has aided the delivery of justice in several court cases, Forensic accounting processes, and systematic ways of information gathering, preservation, analysis, and admissibility of evidence in the law court. Evidence is deemed relevant if it has “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable, or less probable, that it would be without the evidence.” Forensic accounting focuses on both financial proof of transactions and reporting which is contained within an accounting system and the legal framework which allows such proof to be suitable for establishing accountability and valuation. Preserving evidence is the most important aspect of digital forensics. This process includes the isolation and protection of digital evidence exactly as found without alteration so that it can later be analyzed. Forensic accountants, therefore, need state-of-the-art facilities to preserve the information gathered, to facilitate the preservation, they should use specialized software and computer hardware as many new technologies allow the investigators to recover deleted files, crack encryptions or codes, extract and sort data. Earlier presented were ways to preserve evidence for court admissibility. Forensic accounting involves analysis of accounting records, interviewing related parties, and acting as an expert witness. The techniques employed to analyze information gathered in the course of an investigation could make or mar the evidence and its subsequent admissibility in court. Forensic data analysis tools such as analytics, Microsoft Access, Microsoft Excel, analysis of transactions could be employed while its interpretation and must be done without bias.

46. The integrity of evidence is usually at the test in the law court, whether a shred of evidence would be admissible or not is connected with its relevance and weight. But sometimes even relevant and weighty evidence might be deemed inadmissible because it violated some formal law. Let’s say, for instance, a conversation recorded without the consent of the other party, it might be difficult to admit such recording in the court of law. For the sake of evidence integrity , evidence is inadmissible if its origin is equally likely to have tampered; the handling of evidence during the entire process must be performed or witnessed by people who are trustworthy, objective, and competent; and lastly, the “chain of custody” which is the history of the evidence from the time of seizure to the time of presentation must adhere strictly. PRESERVATION AND ANALYSIS OF INFORMATION GATHERED FOR EVIDENCE ADMISSIBILITY/2

47. Conclusion

48. Recommendations