Part (a): Distinguishing Forensic Accounting, Forensic Investigation, and Forensic Audit

1. Forensic Accounting:
   • Definition: Forensic accounting involves the use of accounting skills to investigate financial discrepancies, fraud, or financial misconduct. It typically focuses on the preparation and presentation of financial evidence that can be used in legal proceedings.
   • Scope: It includes analyzing financial data, reconstructing financial transactions, and providing expert testimony.
2. Forensic Investigation:
   • Definition: A forensic investigation is a broad inquiry into the facts and circumstances surrounding suspected financial crimes or fraud. It can include various disciplines like accounting, law enforcement, and data analysis.
   • Scope: This can involve tracing financial activities, identifying fraudulent schemes, and gathering evidence for potential legal action.
3. Forensic Audit:
   • Definition: A forensic audit is a specialized audit that is designed to detect and investigate financial fraud, errors, and mismanagement. It aims to uncover financial discrepancies in the company’s financial statements and records, often in response to allegations of wrongdoing.
   • Scope: It involves detailed and thorough examination of financial transactions, verification of records, and reporting findings that can be used in court if necessary.

Part (b): Government Agencies Associated with Forensic Auditing

1. Economic and Financial Crimes Commission (EFCC):
   • This is Nigeria’s primary agency for investigating and prosecuting financial crimes, including fraud, money laundering, and corruption.
2. Independent Corrupt Practices and Other Related Offenses Commission (ICPC):
   • This agency investigates cases related to corruption, fraud, and misuse of public funds, and works closely with forensic auditors to uncover illegal activities.
3. Central Bank of Nigeria (CBN):
   • The CBN may be involved when forensic auditors investigate fraudulent activities related to financial institutions, especially concerning banking transactions or illegal financial dealings.
4. Securities and Exchange Commission (SEC):
   • SEC regulates the capital market and may investigate fraudulent activities in publicly traded companies, working with forensic auditors to detect misstatements and financial malpractices.

Part (c): Fundamental Ethical Principles for Forensic Auditors’ Engagement

1. Integrity:
   • The forensic auditor must be honest and transparent in their conduct, ensuring that their work is free from bias or misrepresentation of facts, and must always act with professional integrity.
2. Objectivity:
   • Forensic auditors must remain impartial and objective throughout the investigation. They must avoid conflicts of interest or undue influence from any party involved in the case.
3. Professional Competence and Due Care:
   • Forensic auditors should possess the necessary expertise and experience to perform the engagement. They must apply their skills diligently and appropriately, following relevant auditing standards and practices.
4. Confidentiality:
   • Forensic auditors must maintain confidentiality and not disclose sensitive information obtained during the investigation unless required by law or authorized by the relevant parties.
5. Professional Behavior:
   • Forensic auditors should adhere to the law and ethical standards, and avoid any actions that might discredit their profession. They must avoid actions that could lead to conflicts or the appearance of impropriety.

Part (d): Procedures to Be Adopted by an Auditor in a Forensic Audit

1. Initial Planning and Risk Assessment:
   • Define the scope and objectives of the forensic audit, considering the allegations or suspected fraud. Identify potential risks and develop a detailed plan to investigate these issues.
2. Gathering Evidence:
   • Collect documentary evidence, including financial statements, bank records, contracts, emails, and correspondence. Forensic auditors may also conduct interviews to obtain statements from key individuals involved in the investigation.
3. Data Analysis and Transaction Tracing:
   • Analyze the financial data using forensic tools to detect irregularities, such as discrepancies in accounts, fictitious transactions, or unauthorized payments. Tracing transactions will help identify any fraudulent activities.
4. Documenting Findings:
   • Maintain thorough and accurate records of all findings, procedures, and evidence gathered during the investigation. Ensure that all evidence can withstand legal scrutiny and be admissible in court if needed.
5. Reporting:
   • Prepare a detailed report that outlines the findings of the forensic audit, including any fraud or financial mismanagement detected, the nature of the impropriety, and any evidence supporting the allegations. The report should include recommendations for further action.