Page 1 of 9

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 01

January 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 74

The Role of Forensic accounting in Decreasing Risk of

Financial Misstatements from Sudanese Academics

Prospective.

Ahmed Yousif Adam Ismael ⃰

Musa Eisa Mohammed Babiker ⃰⃰

⃰Assistant Professor of accounting, Prince Sattam Bin Abdulaziz University, College of Sciences and

Humanitarian Studies, Department of Business Administration. Al-Aflaj, KSA. Email:

ahmed211120@yahoo.com

⃰ ⃰ Associate Professor of accounting, West Kordofan University, faculty of managerial, Economic and

Social Sciences, Accounting and Finance Department. Sudan, Khartoum.

ABSTRACT

The financial corruption represents the biggest danger facing societies in general and the

financial meltdowns of some of the companies increased the spread of this phenomenon which

has a negative impact on the confidence of the financial report.The aim of this study is to explore

the role a forensic accountant can play in the fight against financial misstatements by applying

his investigative skills and providing litigation support service. The data has been collected

through a well-structured questionnaire is designed and will be distributed to a randomly chosen

sample of who working in the accounting field. Descriptive and inferential statistics were used to

generalize the results and conclude the findings. The results suggest that forensic accounting

contributes to the availability of reliable financial reports. Also shows the application of forensic

accounting in Sudan provides a transparent increase the value of corporate financial reports.

Application of forensic accounting adds value to the company through securing and protecting

owners' interest against fraud and financial fraud.

Keywords: forensic accounting, reliability, Financial Reporting, financial misstatements,

company value.

1. INTRODUCTION:

The problem of the study is represented in what is the role that can be played by forensic

accounting in reducing financial reporting misleading? A decade had passed since Enron

collapsed and yet fraud remains a major international problem. Efforts have been made to fully

identify the types of fraud for prevention and investigation purpose without success as there

appears to be new kind of fraud emerging every day. This has created a high demand for forensic

accounting skills globally (Kranacher et al., 2008). Research continuously confirms that

preventing fraud and uncovering deceptive accounting practices are in strong demand as

companies respond to closer scrutiny of their financial activities by shareholders and government

agencies (Kahan, 2006). The main reasons for the growing demand for forensic accounting

services are the rapid economic development and the limited internal and external audits, led to a

demand for judicial accounting services to support the performance levels of the judicial courts

(Galilea, 2012).

The problem-based nature of forensic accounting requires a unique approach in producing

forensic accountants compared to ordinary accountants, the essential attributes that a forensic

accountant needs to possess are mentality, method, and experience. “Mentality” consists of

elements such as the ability to differentiate the right from the wrong, courage to stand up for what

is right, ability to withstand pressures from the works, and puzzle solving mindsets (Hendi, 2013).

However, many of these crimes are difficult to identify because the perpetrators have concealed

their activities through a series of complex transactions, usually, large volumes of financial

Page 2 of 9

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 01

January 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 75

information are involved, and the complexity of these investigations can strain a company’s resources

(Brooks, Riley, & Thomas, 2005; Kahan, 2006). Also Forensic services firms require strong work- based skills such as oral and written communication skills, technology and analytical skills, in

addition to an accounting qualification, as part of their under-graduate or post-graduate degrees

(Jeanette et al 2013).

From business, government, regulatory authorities, and the courts, evidence indicates that a

higher level of expertise is necessary to analyze current complicated financial transactions and

events (Rezaee, Crumbley, & Elmore, 2006). As a result, forensic accounting has been thrown

into the forefront of the crusade against financial deception (Ramaswamy, 2005; Rezaee et al.,

2006). Forensic accountants currently apply their unique expertise to an array of diversion

assignments and are often hired to determine whether there has been any intentional

misrepresentation associated with a company’s financial records. Fraudulent misrepresentation

can range from overvaluation of inventory and improper capitalization of expenses to

misstatement of earnings and embezzlement (Harris & Brown, 2000; Messmer, 2004).

Organizations also hire forensic accountants for guidance when evaluating potential business

transactions. Forensic accountants assess a company’s true worth during a merger or acquisition

and ensure that a purchaser is knowledgeable about the target firm’s financial situation and value

while looking for signs of suspicious accounting activity (Harris & Brown, 2000).

2. THEORETICAL BACKGROUND

(Ahmed, 2013) highlight the role of the forensic accounting in reducing the crime rate, support

the lawsuits, and reduce the recurrence of fraud and financial frauds in the Arab Republic of

Egypt. (Modugu & Anyaduba, 2013) investigate the importance of Forensic accounting in

Nigeria, and found that there is little agreement among stakeholders on the effectiveness

of Forensic accounting in the fight against financial corruption and improve financial reporting

and internal control. (Khalidi, 2014) explain the role of Forensic accounting played by

accountants in the reduction of creative accounting practices when preparing financial

statements. (Eliezer and Emmanuel, 2015) state the role of forensic accounting in prevention and

detection of fraud in Nigeria, and conclude that forensic accounting is important professions in

the light of contemporary of many stakeholders’ circumstances. (Bhasin, 2013) point out the role

of financial reporting in governmental companies systems to limit the phenomenon of

manipulation financial reporting underperformance and meet the owners of conflicting interests in

addition to a global scenario of the actions taken by the governing bodies to curb fraud. (Kubaisi,

2016) assess the importance of Forensic Accounting in the resolution of a financial nature of

conflicts and find that the current reality of Forensic Accounting is far from achieving justice in

the resolution of conflicts. According to Brooks et al., (2005). Forensic accountants play an

important role in government, they work for agencies such as the Federal Bureau of Investigation,

the Central Intelligence Agency, and the Internal Revenue Service. So Forensic accountants in

this role look for signs of suspicious financial activity and fraud by individuals and businesses. In

addition, forensic accountants have assumed a more visible role in helping the government

evaluate accounting and banking records of suspected terrorists. (Ghoneim, 2014) investigate

shortcomings in the discovery of fraud and clarify the concept of judicial review and significance

analysis in addition to the analysis of the reality of professional practice. (Shaaban, 2015) have

dealt with the availability of the elements of the application of forensic accounting to detect

financial fraud in economic units from the auditor’s perspective in Gaza Strip. (Oyedokun, 2015)

show that forensic accounting profession is preventive which provides a percentage of high

confidence and techniques used in the profession of forensic accounting in the prevention,

detection, and deterrence in the field of financial fraud in its all forms. (Akkeren et al., 2013) find

out that forensic accounting firms offer a wide range of fraud and non-fraud related investigative

Page 3 of 9

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 01

January 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 76

services that demand a diverse set of skills, expertise, and experience that constitute the role of a

forensic accountant. These services include fraud investigation, expert witness services,

commercial litigation, valuation assessment, technology services, and forensic advisory services.

(Grippo and Ibex, 2003) illustrated that the most important skills of forensic accountants come

from experience in accounting and auditing, taxation, business operations, management, internal

controls, interpersonal relationships, and communication. (Messmer, 2004) stated that successful

forensic accountants must have analytical abilities, strong written and verbal communication

skills, a creative mindset, and business acumen. They must be able to interview and elicit

information from potentially uncooperative people and possess a strong amount of skepticism.

(Rezaee and Burtin, 1997) concluded that the demand for forensic accounting services will

continue to increase, in addition, Rezaee and Burtin found that the academics and certified fraud

examiners differed in the opinion of how forensic accounting courses should be offered.

Academics preferred to integrate forensic accounting topics in the existing accounting courses,

whereas the certified fraud examiners preferred offering a separate course. (Ramaswamy, 2005)

believed that forensic accountants should have the ability to comprehend the internal control

systems of corporations and be able to assess their risks and understand the impulses behind

criminal behavior that motivate and encourage financial deception. According to Jafaru (2011),

Forensic and investigative accounting should be seen as the application of financial skills and

investigative mentality conducted within the context of the rules of evidence to resolve

unresolved issues. (Bierstaker et al., 2006) investigated the extent to which accountants, internal

auditors, and certified fraud examiners use various fraud prevention and detection methods and

software, as well as their perceptions about the effectiveness of those techniques. (Digabriele,

2009) indicated that forensic accounting has a place in the audit process and that auditors may need to

add some of these skills to their professional profile as the market for audits have changed. So

auditors may seek the acquisition of foundational forensic accounting skills from courses that are

regularly offered by continuing professional education organizations. forensic accounting involves the

application of special accounting skills, auditing, finance and quantitative methods and parts of the

law, research, and skills of investigative to collect, analyze and evaluate evidence and interpret the

results and report forensic accounting lead in the form of either a certificate or consult (AICPA,

2005).

Forensic accounting defined as the application of financial skills and an investigative mentality to

unresolved issues, conducted within the context of the rules of evidence. (Bolgna and Linquist,

1995). Also, forensic accounting defined as using knowledge and skills of accounting, auditing

and investigating in order to uncover the economic damage and the preparation of opinions in the

investigations to support the processes of litigation and accounting retracing. (Weygandt et al.,

2012). So the above forensic accounting can be defined as the field of accounting knowledge that

combines the skills and knowledge of accounting and audit and legal culture, which was able to

collect, analyze and assess the evidence with a view to resolving jurisdictional disputes and future

forecasts and communicating results.

In order to apply forensic accounting, accountant use some methods of accounting, auditing and

investigative techniques suitable for the detection of financial fraud or economic and reduction

operations (Crumbly, 2009). Disciplines s of forensic accounting is Investigation of financial

fraud: detection and fraud detection in the financial statements, including a review of the actual

fraud cases, propose ways to address them, to help protect the assets and retrieval, coordination

and depending on experts in various fields, in the context of the necessary measures to provide the

necessary evidence to do so (Olugbenga, 2013).

Based on literature review, the following hypotheses were generated:

H1: There is a positive relationship between the Application of forensic accounting and the reliability

financial reports.