INVESTIGATING FORENSIC AUDIT AS A PANACEA FOR PREVENTING CORPORATE FRAUD IN CAMEROON'S PUBLIC SECTOR

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The proliferation of financial crimes in these developing economies is concerning and catastrophic, as numerous commercial organisations have collapsed as a result of incidents of financial fraud and misrepresentation of funds. The ongoing battle against the proliferation of financial crimes should be a top priority for scholars and business owners worldwide. Similar to the commercial sector, the public sector in Cameroon also requires forensic auditing as a result of the failure of statutory audits. This is done to investigate any reported instances of fraud allegations or theft of assets. People within organisations and ordinary individuals are engaging in a range of financial crimes, such as various forms of fraud, money laundering, bribery, embezzlement, extortion, and corruption (Obidi, 2017). Identifying certain crimes through statutory audits poses a challenge, and these crimes are typically not reported due to the fear of negative publicity (Adeniyi et al., 2019). Corruption and other financial crimes are prevalent worldwide, but their prevalence in underdeveloped nations, such as Cameroon, is particularly alarming (Williams, 2018).  The efficacy of internal controls and statutory audits is insufficient in combating their proliferation. Implementing appropriate forensic audit procedures can effectively combat global financial misconduct and facilitate the prosecution of those responsible (Gbegi et al., 2017). The increase in economic crimes worldwide has made it necessary to employ forensic audit techniques for the purpose of detecting fraud.

Fraud is a violation of the law and is not considered a part of accounting principles. Consequently, accountants have historically opted to see fraud as a concept that is unrelated to their field. Contemporary society places significant emphasis on upholding a fair and just atmosphere. This is achieved through the enactment of laws, the establishment of regulatory bodies, the recruitment of law enforcement personnel, the education of ethics and morals in schools and businesses, and the imposition of penalties on criminals, including the confiscation of their unlawfully obtained assets and loss of personal freedom. These measures aim to discourage, identify, and penalise individuals involved in fraudulent activities and corruption (Habila, 2023). The undeniable reality is that the primary catalyst for fraud and corruption is the inherent inclination towards personal advantages or profit. Fraud is a global phenomenon that involves distorting the truth or disrupting the proper management of someone else's financial resources. It occurs when one party persuades another to give up valued possessions or forfeit a legal entitlement (Okoye, 2017).Modugu & Anyaduba (2023) concurred that fraud constitutes a violation of the anticipation of equitable treatment by fellow individuals and, therefore, no one appreciates being deceived. They stated that the profession of auditing emerged in society as a means to guarantee fair and accurate commercial and government transactions.

Enofe & Atube (2022) highlighted that the increasing need for forensic auditing is a common feature among firms worldwide, resulting from the correlation between fraud, financial loss, and human-made technology errors. Based on the findings of the Association of Certified Fraud Examiner (ACFE, 2017) and Abdullahi, Mansor & Nuhu (2017), it has been observed that fraud has experienced significant growth in recent years. Moreover, there is an increasing inclination among large organisations to employ experts like forensic auditors/accountants to mitigate the risk and likelihood of occupational financial frauds. Mantu (2018) asserts that forensic auditing in Cameroon is increasingly being acknowledged as stakeholders recognise the importance of the services provided to the economy. Companies have become aware that the incidence of white collar crimes has significantly risen.

The occurrence of corporate fraud in the public sector is a substantial obstacle that inhibits economic progress, public confidence, and institutional honesty. Forensic auditing, a sophisticated auditing technique that specifically targets the identification and prevention of fraudulent activities, has become an essential instrument in the fight against such misconduct (Okpako, 2023). The objective of this study is to examine the effectiveness of forensic auditing as a means of mitigating corporate fraud in the public sector of Cameroon. Forensic auditing is the utilisation of auditing, accounting, and investigative expertise to scrutinise financial transactions and records in order to detect evidence of fraud and financial malfeasance. Forensic auditing goes beyond the scope of standard auditing, which mainly concentrates on ensuring the integrity of financial statements and compliance with regulations. Instead, forensic auditing examines financial activity in detail to uncover and prevent fraudulent schemes. Forensic auditors employ a range of methodologies, such as data analysis, interviews, and scrutinising documents, to detect anomalies and gather evidence for use in court processes (Ashpeng, 2021).

The public sector in Cameroon, which includes government ministries, state-owned firms, and other public organisations, has a crucial impact on the country's economy (Okpako, 2023). Nevertheless, it has been afflicted by problems of corruption, mismanagement, and financial impropriety. Notable instances of fraud and embezzlement have undermined public trust and emphasised the necessity for stronger methods to identify and stop such actions. Forensic auditing is viewed as a viable approach to improve openness, accountability, and financial integrity in this particular environment. Hence, the necessity for doing this investigation.

1.2 Statement of the problem

Corporate fraud is a substantial obstacle in Cameroon's public sector, eroding trust, financial stability, and efficient governance. Although there are multiple mechanisms in place to prevent fraud, it nonetheless remains a significant problem that affects the effectiveness and honesty of public sector operations. This persistent problem underscores the necessity for more efficient measures to prevent and tackle fraudulent activities.

In Cameroon, there have been instances of ongoing fraud in both the commercial environment and the public sector. Forensic auditing, as a specialised field, effectively addresses cases of financial misrepresentation by focussing on prevention, identification, and finally, recovery and resolution (Ejovi, et. al., 2023). Insufficient study has been conducted on public sector fraud, which refers to intentional fraudulent activities carried out by public sector management that harm investors and creditors by providing materially misleading financial statements (Modugu, et. al., 2017). An auditor's capacity to produce a precise evaluation of fraud in the public sector. The evaluation of risk is essential in the initial assessment of risk during an audit engagement (Gbegi, & Adebisi, 2023).  According to Ramazani & Rafiei (2020), the presence of inadequate corporate governance and accounting failures contributes to the occurrence of fraud cases. Poor corporate governance enables individuals or groups with shared interests to engage in fraudulent activities within an organisation, even when people are aware of the concept of forensic auditing investigation as a means to prevent fraud and corruption in Cameroon.

Forensic audits, a specialised branch of auditing that concentrates on examining and scrutinising financial inconsistencies and deceitful actions, offers a possible resolution to this issue. Nevertheless, there has been a lack of comprehensive research on the efficacy and suitability of forensic audits in deterring corporate fraud in the public sector of Cameroon. This study aims to investigate the efficacy of forensic audits as a holistic approach to addressing corporate fraud in the public sector of Cameroon. The main objective is to analyse the extent to which forensic audits can improve the identification, prevention, and resolution of fraud, as well as assess their contribution to enhancing the overall integrity and accountability of public sector institutions.

Objectives of the study

The primary objective of this study is to critically investigate forensic audit as a panacea for preventing corporate fraud in Cameroon’s public sector. Specific objectives of this study are to:

To investigate the prevalence of corporate fraud within various public sector institutions in Cameroon

To determine the types of corporate fraud within various public sector institutions in Cameroon

To assess the Role of Forensic Auditing in Fraud Detection and Prevention in public sector institutions in Cameroon

To examine the challenges faced in Implementing Forensic Audits in Cameroon’s Public Sector.

To Propose strategies to improve the efficiency and impact of forensic audits within various public sector institutions in Cameroon

1.4 Research Questions

The following research questions which are in line with the objectives of this study will be answered in this study:

What is the level of prevalence of corporate fraud within various public sector institutions in Cameroon?

What are the types of corporate fraud within various public sector institutions in Cameroon?

What is the Role of Forensic Auditing in Fraud Detection and Prevention in public sector institutions in Cameroon?

What are the challenges faced in Implementing Forensic Audits in Cameroon’s Public Sector?

What are the strategies to improve the efficiency and impact of forensic audits within various public sector institutions in Cameroon?

1.5 Research Hypotheses

To determine the effectiveness of this study, the following research null hypotheses will be formulated to guide the study and it will be tested at 0.05% levels of significance.:

Ho: The level of prevalence of corporate fraud within various public sector institutions in Cameroon is low.

Ha: The level of prevalence of corporate fraud within various public sector institutions in Cameroon is high.

1.6 Significance of the study

This study will have a substantial influence by offering practical insights and recommendations that help boost the efficiency of anti-fraud measures in Cameroon's public sector, strengthen governance, and promote greater public trust in the management of public resources. The study will establish a fundamental reference point for forensic accountants, auditors, policymakers, stakeholders, students, and researchers.

This study aims to analyse the efficacy of forensic auditing in the prevention and detection of corporate fraud in Cameroon's public sector. The paper explores the potential of forensic audits to enhance fraud detection and proposes their application in the development of more resilient anti-fraud tactics. The study will emphasise the ways in which forensic audits can improve openness and accountability in public sector organisations. This can result in enhanced public trust and confidence in government operations, as well as more efficient administration of public resources.

Moreover, the results of the study will provide policymakers and government officials with useful insights, assisting them in creating and executing policies and frameworks that include forensic auditing as a crucial element of anti-fraud measures. The study aims to provide practical recommendations for public sector transformation by identifying best practices and potential problems in forensic auditing. This can result in enhanced governance and improved allocation of public expenditures.

Moreover, by showcasing the influence of forensic audits on the integrity of institutions, the research can motivate public sector organisations to embrace forensic auditing methodologies. This can result in a public sector that is more ethical and accountable. The results will bolster the creation of more extensive anti-fraud strategies by incorporating forensic audits into current frameworks. This can result in the implementation of more efficient and proactive strategies for preventing fraud.

Moreover, the study will offer valuable insights into the necessary resources and training required for the successful implementation of forensic auditing. This can facilitate more efficient distribution of resources and the creation of tailored training programs for auditors and public sector personnel.

In the end, the research will address a notable deficiency in the existing literature about forensic auditing in the public sector of Cameroon. This study will establish a standard against which future research can be compared, making a valuable contribution to the wider academic conversation on forensic auditing and the prevention of fraud.

1.7 Scope of the study

Broadly, this study focus is to critically investigate forensic audit as a panacea for preventing corporate fraud in Cameroon’s public sector. Specifically, this study seeks to investigate the prevalence of corporate fraud within various public sector institutions in Cameroon, determine the types of corporate fraud within various public sector institutions in Cameroon and assess the Role of Forensic Auditing in Fraud Detection and Prevention in public sector institutions in Cameroon. 

Further, this study will focus on examining the challenges faced in Implementing Forensic Audits in Cameroon’s Public Sector and it also seeks to Propose strategies to improve the efficiency and impact of forensic audits within various public sector institutions in Cameroon.

 The study is carried out in Cameroon. 

1.8 Limitations of the study

As with any human endeavour, the researchers experienced many minor constraints during the investigation. The main limitation was the lack of extensive literature on the topic, due to the limited availability of data for studying the effectiveness of forensic audit in preventing corporate fraud in Cameroon's public sector. Hence, a significant allocation of time and exertion was necessary to ascertain the appropriate materials, books, or information and amass data. 

Furthermore, this study is constrained by its small sample size and narrow geographical scope, focussing solely on Cameroon. Therefore, the conclusions of this study cannot be extended to other situations, thus requiring further investigation. 

Moreover, the researcher's restrictions were primarily due to financial constraints, as they are a student without any source of income to sustain themselves. The exorbitant transportation charges at the research location posed a challenge in meeting the expenses for transportation fees.

Furthermore, the researcher faced a time constraint due to the need to do this research while still fulfilling the obligations of attending lectures and participating in other educational activities.

1.9 Definition of terms

Audit: Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organization.

Corporate governance: Corporate governance is the structure of rules, practices, and processes used to direct and manage a company. A company's board of directors is the primary force influencing corporate governance.

Accountability: Accountability is the practice of being held to a certain standard of excellence. It is the idea that an individual is responsible for their actions and, if that individual chooses unfavorable actions, they will face consequences.

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