BINDURA UNIVERSITY OF SCIENCE EDUCATION

FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTANCY

EVALUATION OF THE EFFECTIVENESS OF FORENSIC AUDIT TO RISK

REDUCTION: A CASE OF ZESA NOTHERN REGION – BINDURA

BY

ITAI MBWENDE

(B1646600)

SUBMITTED TO BINDURA UNIVERSITY OF SCIENCE EDUCATION IN PARTIAL

FULFILMENT OF THE REQUIREMENTS FOR BACHELOR OF ACCOUNTANCY

DEGREE

BINDURA, ZIMBABWE

YEAR 2019

ii

RELEASE FORM

Registration Number: B1646600

Dissertation Title:

Evaluation of the effectiveness of forensic audit to risk reduction: A case of ZESA Holdings

(Pvt) Ltd – Bindura

Year granted : 2019

Permission is granted to the Bindura University of Science Education Library and the

Department of Accounting to produce copies of this dissertation in an effort it deems necessary

for academic use only.

Signature of student …………………………………………………………

Date signed

Permanent Address:

3030 AERODROME, BINDURA

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APPROVAL FORM

TO BE COMPLETED BY THE STUDENT

I certify that the dissertation meets the preparation guidelines as presented in the faculty

guide and instruction for preparing dissertation.”

(Signature of student)……………… …………………Date…………………………………

TO BE COMPLETED BY THE SUPERVISOR

“This dissertation is suitable for presentation to the faculty .It has been checked for conformity

with the faculty guideline”.

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TO BE COMPLETED BY THE DEPARTMENTAL CHAIRPERSON

I certify to the best of my knowledge that the required procedures have been fulfilled and the

preparation criteria was met in this dissertation

(Signature of Chairperson ……Date ………………………………..……………………….

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DECLARATION

I, ITAI MBWENDE, declare that am a bonafide producer and owner of this research paper and

the work presented therein is my own. I do also affirm that it has not been submitted by any

other student to any academic institution. The contents of this paper have been submitted in

partial fulfillment of the Bachelor of Accountancy Degree.

Supervisor: ___________________Date: ___/___/___Signature: _______________

Student: ____________________Date: ___/___/____Signature: _______________

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ACKNOWLEDGEMENTS

Firstly, l would like to praise and worship the Almighty God for His daily guidance, leadership

and providence. This piece of work has been made a success through the unfailing support and

assistance of a number of people whom I am heavily indebted to. My heartfelt gratitude and

appreciation goes to my supervisor Mr. ONIAS ZIVANAI for his untiring support, it has been

a pleasure working with you Sir. I would also like to extent my heartfelt appreciation to all

those who afforded me a helping hand be it in responding to my questionnaires or providing

all the relevant information essential for the victorious completion of this project.

To God, the Almighty I thank you for guiding me through up to this present day and affording

me a chance to be surrounded by caring people.

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DEDICATION

I would like to dedicate this project to my beloved family, thank you for seeing me succeed

before even I had started. I greatly appreciate your love and unwavering support throughout

my college life. You loved me when everybody else hated me, you stood by me when

everybody else stood out, you walked in when everybody else walked out and you listened

when everybody else shut me up. I want to thank you and nobody else will ever I compare with

you.

I am truly indebted to you, may God Richly bless you. I love you.

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ABSTRACT

Failure by financial audit to unearth financial crimes committed in many organisations both

private and public entities have called for more advanced methods to reduce these problems

and forensic audit is not an exception. This study sought to evaluate the effectiveness of

forensic audit in risk reduction using ZESA Holdings as a case study. The researcher employed

both quantitative and quantitative research methods. In order to carry out the research a sample

of 50 participants was drawn from a population of 60 employees from auditing department,

accounting, information systems and management departments using stratified random

sampling. Data was collected using both self-administered questionnaires and interviews.

Study findings indicated forensic audit can identify reversible insider transactions, can verify

unauthorised transfer of money and it is effective in assessing, monitoring and evaluation of

internal control systems. Since it was also found out that its application is still limited in

Zimbabwe the study recommended that there is need for providing a comprehensive framework

that involves the use of forensic audit methodology in areas like audit planning and execution

and there is need for an establishment of an independent forensic audit team in all government

owned entities

Key words: auditing, forensic audit, fraud, risk

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TABLE OF CONTENTS RELEASE FORM ...................................................................................................................... ii

APPROVAL FORM ................................................................................................................ iii

DECLARATION ...................................................................................................................... iv

ACKNOWLEDGEMENTS ....................................................................................................... v

DEDICATION .......................................................................................................................... vi

ABSTRACT ............................................................................................................................. vii

LIST OF TABLES ................................................................................................................. viii

CHAPTER 1 .............................................................................................................................. 1

1.0 Introduction .......................................................................................................................... 1

1.1 Background of the Study ..................................................................................................... 1

1.2 Statement of the Problem ..................................................................................................... 4

1.3 Purpose of the study ............................................................................................................. 5

1.4 Objectives of the study......................................................................................................... 5

1.4.1 Primary objective .............................................................................................................. 5

1.4.2 Secondary objectives ........................................................................................................ 6

1.5 Research questions ............................................................................................................... 6

1.6 Significance of the study .................................................................................................. 6

1.6.1 Benefits to the University ................................................................................................. 6

1.6.2 To the researcher ............................................................................................................... 6

1.6.3 To ZESA Holdings Pvt Ltd............................................................................................... 6

1.7 Delimitation of the study ..................................................................................................... 7

1.8 Assumptions ......................................................................................................................... 7

1.9 Limitations of the Study....................................................................................................... 7

1.10 Definition of terms and acronyms...................................................................................... 8

1.11 Project outline .................................................................................................................... 8

1.12 Chapter Summary .............................................................................................................. 8

CHAPTER II ............................................................................................................................ 10

LITERATURE REVIEW ........................................................................................................ 10

2.0 Introduction ........................................................................................................................ 10

2.1.1 What is Auditing ............................................................................................................. 10

2.1.2 Concept of Forensic audit ............................................................................................... 10

2.1.3 Fraud risks in organisations ............................................................................................ 12

2.1.4 Forensic Audit and Fraud risk......................................................................................... 13

2.1.5 Interrelationship between auditing, fraud investigation and forensic accounting .......... 14

2.1.6 Activities undertaken in forensic audit ........................................................................... 16

2.1.6.1 Investigations ............................................................................................................... 16

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2.1.6.2 Analysis of financial statements .................................................................................. 16

2.1.6.3 Reconstruction of incomplete accounting records ....................................................... 16

2.1.6.4 Embezzlement investigation ........................................................................................ 16

2.1.7 Role of a forensic auditor ................................................................................................ 17

2.1.8 Importance of forensic auditing ...................................................................................... 18

2.1.9 How forensic audit help in mitigating risk ..................................................................... 19

2.1.10 Application of forensic auditing in developing countries ............................................. 19

2.2 Theoretical framework ....................................................................................................... 20

2.2.1 Fraud Triangle theory ..................................................................................................... 20

2.2.1.1 Opportunity .................................................................................................................. 21

2.21.2 Pressure/Incentive ......................................................................................................... 21

2.2.1.3 Rationalization ............................................................................................................. 22

2.2.2 White collar crime theory ............................................................................................... 22

2.3 Conceptual framework ....................................................................................................... 23

2.4 Empirical Review............................................................................................................... 24

2.4 Summary ............................................................................................................................ 25

CHAPTER IV .......................................................................................................................... 26

RESEARCH METHODOLOGY............................................................................................. 26

3.0 Introduction ................................................................................................................... 26

3.1 Research Design............................................................................................................ 26

3.1.1 Qualitative research design ............................................................................................. 26

3.1.2 Quantitative research ...................................................................................................... 27

3.2 Target Population ............................................................................................................... 27

3.3 Population sample ......................................................................................................... 28

3.4 Sampling techniques .......................................................................................................... 28

3.4.1 Probability sampling ................................................................................................. 29

3.4.1.1 Stratified random sampling method ............................................................................. 29

3.5 Data collection sources ...................................................................................................... 29

3.5.1 Secondary sources of data ............................................................................................... 29

3.5.2 Primary sources of data ............................................................................................. 30

3.6 Research Instruments ......................................................................................................... 30

3.6.1 Questionnaires................................................................................................................. 31

3.6.1.1 Questionnaire Pre-testing or Pilot testing .................................................................... 31

3.6.1.2 Designing the Questionnaire ........................................................................................ 32

3.6.2 Interviews ........................................................................................................................ 32

3.6.2.1 Structured Interviews ................................................................................................... 33

3.6.2.2 Interview administration .............................................................................................. 33

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3.7 Data collection procedures ................................................................................................. 33

3.8 Data presentation ............................................................................................................... 33

3.9 Data analysis ...................................................................................................................... 34

3.10 Reliability and validity ..................................................................................................... 34

3.11 Ethical considerations ................................................................................................... 35

3.12 Chapter summary .......................................................................................................... 35

CHAPTER IV .......................................................................................................................... 36

DATA PRESENTATION, ANALYSIS AND DISCUSSION ................................................ 36

4.1 Data Presentation and Analysis ......................................................................................... 36

4.2 Response rate ..................................................................................................................... 36

4.3 Demographic information .................................................................................................. 37

4.3.1 Gender distribution ......................................................................................................... 37

4.3.2 Educational qualifications ............................................................................................... 39

4.3.3 Working experience ........................................................................................................ 40

4.3.4 Department worked ......................................................................................................... 41

4.4 Reasons for having a forensic audit ................................................................................... 42

4.4.1 To provide evidence for litigation purposes ................................................................... 42

4.4.2 To attract more stakeholders into the business ............................................................... 42

4.4.3 To improve stakeholder trust and confidence in corporate financial statement ............. 43

4.4.4 To detect errors and deter fraud ...................................................................................... 43

4.5 Awareness of the use forensic audit................................................................................... 43

4.5.1 Forensic auditing is more advanced than financial auditing ........................................... 43

4.5.2 In forensic auditing investigative activities are undertaken ............................................ 44

4.5.3 Application of forensic auditing is still limited in many government entities in

Zimbabwe ................................................................................................................................ 45

4.6 Forensic audit in detecting and preventing risk ................................................................. 46

4.6.1 Forensic audit can identify misappropriated assets ........................................................ 46

4.6.2 Forensic audit can verify unauthorised transfer of money .............................................. 46

4.6.3 Forensic auditing can identify reversible insider transaction ......................................... 47

4.6.4 Forensic auditing can enhance disclosure of forward looting information..................... 47

4.7 Ability of forensic auditing to reduce risks........................................................................ 48

4.7.1 Forensic auditing is solely enough as a tool to prevent suspicious or fraudulent

transactions .............................................................................................................................. 48

4.7.2 Forensic auditing is effective in assessing, monitoring and evaluation of internal control

systems ..................................................................................................................................... 48

4.7.3 Forensic investigations deals directly with fraud investigation and this reduces financial

reporting expectations gap ....................................................................................................... 49

4.7.4 Forensic auditing can help avert corporate failures ........................................................ 49

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4.7.5 Forensic auditing is an effective tool to reduce management theft ................................ 50

4.8 Interviews ........................................................................................................................... 51

4.8.0 Data analysis of the interview ......................................................................................... 51

4.8.1 Causes of fraud in organisations ..................................................................................... 51

4.8.2 Reasons for carrying out forensic audit .......................................................................... 52

4.8.3 Challenges of forensic auditing application .................................................................... 52

4.8.4 The importance of carrying out forensic audit ................................................................ 52

4.8.5 What do you think are the benefits accrued to organisations that employ forensic

auditing .................................................................................................................................... 53

4.9 Summary ............................................................................................................................ 53

CHAPTER V ........................................................................................................................... 54

SUMMARY, CONCLUSION AND RECOMMENDATIONS .............................................. 54

5.0 Introduction ........................................................................................................................ 54

5.1 Summary of the study ........................................................................................................ 54

5.2 Summary of major findings ............................................................................................. 54

5.3 Conclusion ......................................................................................................................... 55

5.4 Recommendations .............................................................................................................. 56

5.5 Suggestions for further research ........................................................................................ 57

5.6 Summary ............................................................................................................................ 57

REFERENCES ........................................................................................................................ 58

QUESTIONNAIRE ................................................................................................................. 62

INTERVIEW GUIDE .............................................................................................................. 64

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LIST OF FIGURES

FIGURE PAGE

Figure 1.1: Project Outline 8

Fig 2.2 Interrelationship between auditing, fraud investigation and forensic accounting 15

Fig 2.1: Fraud triangle 21

Figure 1.1: Conceptual framework 23

Figure 4.1: Gender distribution 39

Figure 4.2 Educational qualification 41

Figure 4.3: Forensic auditing is more advanced than financial auditing 45

Figure 4.4 Application of forensic audit in Zimbabwe 46

Figure 4.4: Forensic auditing can identify reversible insider transactions 48

Figure 4.5: Forensic auditors can help averting corporate failures 51

Figure 4.6: Forensic auditing is an effective tool to reduce management theft 52

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LIST OF TABLES

TABLE PAGE

Table 4.1 Response rate 38

Table 4.2 Working experience 42

Table 4.3 Department worked 42

Table 4.4 Reasons for having a forensic audit 43

Table 4:5: In forensic auditing investigative activities are undertaken 45

Table 4.6 Forensic audit can identify misappropriated assets 47

Table 4.7: Forensic auditing can verify unauthorized transfer of money 47

Table 4.8: Forensic auditing can enhance disclosure for forward looting information 49

Table 4.9 Forensic auditing is tool to prevent suspicious or fraudulent transactions 49

Table 4.10: Forensic auditing is effective in monitoring of internal control systems 50

Table 4.11: Forensic investigations deals directly with fraud investigation 50

1

CHAPTER 1

1.0 Introduction

The level of fraud in Zimbabwean public entities has assumed an epidemic dimension ((Auditor

General Report, 2016). Fraud is the number one enemy of the business world, no company is

immune to it and it is in all works of life. The fear is now rife that the increasing wave of fraud in

the public sector in recent years, if not arrested might pose certain threats to stability and the

survival of individual financial institution and the performance of the industry as a whole and no

area of the economy is immune from fraudsters. The purpose of this study was to evaluate the

extent to which forensic audit can effectively reduce fraud risk in Zimbabwe’s public sector.

The study used ZESA Holdings Pvt Ltd as a case study. This chapter begins by giving the

background of the study; it then gives the statement of the problem, the purpose of the study,

research objectives, research questions, and significance of the study, definition of terms,

assumptions, delimitations and limitations of the study.

1.1 Background of the Study

Fraud and financial crimes are global phenomena. They run across all human race irrespective

of their social and economic status. Financial crime includes money laundering, bribery,

looting, embezzlement, fraud; tax evasion, foreign exchange malpractice and oil bunkering

(Mukoro, Yamusa & Faboyede, 2014). Rise in financial scandals at the beginning of the

twenty-first century was associated with increased fraud incidence and awareness, thereby

questioning the role of auditor in fraud prevention and detection (Bhalla Mohit 2018). Onuorah

and Appah (2016) also affirmed that the widespread frauds in modern organizations have made

traditional auditing and investigation inefficient and ineffective in the detection and prevention

of the various types of frauds confronting businesses world-wide especially in financial

institutions. Fraud is an endemic that are gradually becoming a normal way of life in both

public and private sectors, from the presidential cabinets, down to the political officer, to the

ward councillors, from managing directors of companies, through middle management cadre

and to lower managers (Gbegi and Adebisi, 2014). In order to counter, stop and prevent the

perpetration of such risks comes forensic auditing or accounting.

Forensic auditing is perceived to have evolved to tackle fraud related cases and financial

crimes. According to Zaden and Ramazani (2015), forensic auditing is a specialized field of

accounting which deals with legal claims and complaints. Adegbie and Fakiel (2017) posited

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that forensic auditing is the practice of utilizing accounting, auditing and investigative skill to

assist in legal matter. Forensic auditing is generally acclaimed to be capable of preventing,

detecting and controlling fraud. Forensic auditing is a specialization within the field of

accounting, and forensic auditors often provide expert testimony during trial proceedings

(Strayer, 2015). Forensic tools, techniques and procedures conducted aid auditors in detecting

abnormalities such as misstatement of financial facts, prevention and detection of fraud.

Forensic audit techniques, tools and procedures are used to identify and to gather evidence to

prove a case at a court of law.

United States and Canada were the pioneers in the development and implementation of forensic

auditing. Countries that are utilizing the forensic accounting expertise to address the

different financial fraud cases they are experiencing, have managed to reduce fraud risk.

Owojori and Asoula (2019) states that the failure of statutory audit to prevent and reduce

misappropriation of corporate fraud and increase in corporate crime has put pressure on

the professional accountant and legal practitioner to find a better way of exposing fraud in

business world. The failure by some formerly prominent public companies such as Enron

and Tyco in the late 1990s fuelled the prominence of forensic auditing, creating a new,

important and lucrative specialty (Mandeya, 2019). Forensic auditing procedures target

financial and operational fraud, discovery of hidden assets and adherence to statutory

provisions.

Forensic auditing has proven to be an effective weapon in the fight against financial crimes in

developed countries. Statements recently released by the Director of the Department of

Income and Sales during the dialogue session held by the Transparency International have

shown that the value of tax evasion for 2016 amounted to about 1.5 JD billion while the

value of collected tax revenues reached 3.828 billion dinars for the same year

(http://assabeel.net/news/4947/2017/3/19)). According to Ifath Shaheen et al (2014) Forensic

auditing in India has come to limelight only recently due to rapid increase in white collar

crimes. It helps companies in accomplishing their organization’s objectives, with a systematic,

disciplined approach to evaluate and improve the effectiveness of risk management, control

and governance processes.

Both in US common law or in French codified law, Forensic Accountants aim to serve justice,

by illuminating technical, financial facts in the context of a dispute or a trial (Crumbley, 2016).

According to the American Institute of Certified Public Accountants (AICPA), Forensic

3

accounting services “generally involve the application of specialized knowledge and

investigative skills possessed by CPAs to collect, analyze, and evaluate evidential matter and

to interpret and communicate findings in the courtroom, boardroom, or other legal or

administrative venue. In Africa the use forensic auditing in Nigeria proves that it is an effective

tool for fraud detection and prevention. According to Okafar and agbiogwu (2016) possession

of basic forensic skills significantly reduce the occurrence of fraud cases in the banking sector

in Nigeria and there is a significant difference between services of forensic accountants and

external auditors. They further argued that the presence of forensic accountants in Banks can

aid in reducing fraud cases. Akhidime and Uagbala-Ekatah (2014), in their exploration of the

growing relevance of forensic accounting in Nigeria, found that though forensic accounting in

Nigeria have helped fraud detection, it is lacking statutory back up.

Although forensic audit has been around for a long time now its use in Zimbabwe is still

limited however the rate at which financial irregularities is spreading especially in parastatals

has put the focus on the need for forensic audit techniques to be utilized. Fraud in many

government owned enterprises in Zimbabwe have resulted in government losing millions of

dollars. Regardless of internal auditing as well as external auditing carried out in each and

every publicly owned company in Zimbabwe cases of fraud continues to rise on daily basis.

Findings of the forensic audit by Grant Thornton at the Zimbabwe National Roads Authority

(ZNARA) concluded in 2017 reveals that the parastatal failed to account for expenditure

vouchers amounting to US$2,4 million and other massive financial abuse including payment

of $71 million and R31 million to contractors cherry-picked without going to

tender, among many other irregularities (www.zimferrets.com). In another case a forensic audit

on the operations of the Zimbabwe Revenue Authority (ZIMRA) that covers the period January

2014 to August 2016 has revealed endemic corruption, violation of Government laws and poor

corporate governance among other shenanigans. The audit has unearthed irregularities

regarding the revenue collector’s vehicle loan scheme and the importation of cars by the five

executives, executive perquisites, salaries, loans to senior management, staff secondment and

the procurement of goods and services, among others. Findings of the audit are coming at a

time the government’s revenue collector is losing (www.zimferrets.com).

Zimbabwe Electricity Power Supply Holdings (Zesa) has been rocked by massive tender

scandals. According to the Zimbabwe Independent energy tenders were inflated to over

US$500 million. At one point three solar plants which were initially pegged at US$549 million

4

were inflated to around US$720 million after tenders were awarded and this create a variance

of US$171 million. In addition the Gairezi Project which was initially pegged at US$90 million

was also heavily inflated to US$248 million, creating a variance of US$158 million according

Elton Mangoma former Energy Minister. Further to that the Kariba South Power Extension

project was initially pegged at US$355 million, but shot up to US$533 million. The cost

escalation was US$178 million (www.zimferrets.com). The inflated costs totalled US$507

million.

However the use of forensic auditing in Zimbabwe is still limited as well as its awareness

therefore it is against this background that this study will be undertaken to evaluate the

effectiveness of forensic auditing to risk reduction. This study will use Zimbabwe electricity

Supply Authority Holdings (Private) Limited (ZESA) as a case study since it is among some

of the parastatals that have been affected by financial irregularities and fraud. ZESA Holdings

(Private) Limited is incorporated under the Companies Act [Chapter 24:03]. ZESA Holdings

(Pvt) LTD is a state-owned company whose task is to generate, transmit, and distribute

electricity in Zimbabwe. The Company is governed by the Electricity Act [Chapter 13:19].

1.2 Statement of the Problem

Financial irregularities, frauds and corruptions are a severe problem of concern globally. It is

the major concern to developing nations and as well as Zimbabwe. Serious problems have

emerged in the state enterprises in Zimbabwe from the period 2014 to 2019 (Godana and

Hlatshwayo 2019). It is of key insight to note that the major source of problems encountered

by state owned enterprises is derived from failure of both internal and external audit to detect

and deter risks of fraud and corruptions. Fraud has become one of the major risks that has

entrenched itself in state owned enterprises especially at ZESA holdings PVT LTD. This shows

that internal controls are either non-existent or if they do, they are not serving the intended

purpose. Massive tender scandals at ZESA have resulted in the parastatal losing over US$507

million (Auditor General Report, 2019). Apart from being engulfed in tender scandals

surrounding the controversial energy deals, Zesa is also hamstrung by a giant debt overhang

estimated at US$1 billion in arrears owed to international and domestic suppliers (Auditor

General Report, 2019). This has negatively affected service delivery by the parastatal since one

of the South African power utility Eskom has persistently threatened to switch off its northern

neighbour for non-payment of electricity imports through Zesa. Among the number of

fraudulent deals the Auditors General’s 2018 report revealed that ZESA entered into contracts

5

in 2010 for supply of transformers worth USD 4 962 722 and USD 561 935 in 2016 with Pito

Investments which are not delivered to date (2019) according to AG’s Report. In addition the

company’s subsidiary ZPC paid ZAR 196 064 in 2014 for gas to York International not yet

supplied again. The company’s current liabilities exceeded its current assets by US$65,321,490

(2013: US$67,367,127), by $67 998 471 (2015: $66 178 819), by USD 92 118 178 (2017: USD

84 167 798) and by US$92 118 178 (2018) (Auditor General’s Report on paras tatals,

2015, 2017 and 2019). In addition the company is failing to service its foreign loans

amounting to $29 878 40. ZESA owes its local and international suppliers close to US$1

billion and is only managing to service interest accrued on loans without settling

premiums (Zimbabwe Independent, November 2018). This also has been worsened by

corruption and incompetence at the state entity which resulted in the company reporting loss

before tax of $111 474 084 (2014: $118 312 961) for the year ended December 31, 2015

and as of that date its current liabilities exceeded its current assets by $771 383 372

(2014: $958 567 146) (Audit Report, 2016). According to the Auditor General Chiri

these conditions along with other matters indicate the existence of a material uncertainty

that may cast significant doubt about the ability of the company to continue operating as

a going concern. The financial statements indicate that some of the institutions' debts have

gone for nearly two decades without being repaid and are long overdue (The Independent,

November 2018).

1.3 Purpose of the study

The main purpose of this research study is to find out whether using forensic can be an effective

way of reducing risk.

1.4 Objectives of the study

The objectives of the study are what the researcher aims to achieve at the end of the research.

According to Malhotra (2015) an objective is the short frame goal which is specific,

measurable, achievable, result oriented and time framed (SMART). This study was be guided

by the following objectives.

1.4.1 Primary objective

The primary objective of this study is to assess the effectiveness of forensic audit to risk

reduction.

6

1.4.2 Secondary objectives

1. To determine the reasons for having forensic audits in an organization

2. To ascertain the level of awareness of the use of forensic auditing for risk reduction

3. To establish how well fraud investigation help in detecting and preventing risk.

4. To ascertain whether forensic audit is able to reduce risks.

1.5 Research questions

1. What are the reasons for having forensic auditing in an organisation?

2. What awareness effort has been created on the use of forensic accounting in risk

reduction?

3. What fraud investigation does which can help in detecting and preventing risk?

4. What level of depth can forensic audit go in reducing risks?

1.6 Significance of the study

The significance of the study is its importance to various stakeholders; this study is useful to

the student (researcher), the organization (ZESA Holdings Pvt Ltd) as well as the university.

1.6.1 Benefits to the University

The research will provide valuable literature on forensic auditing and its impact risk reduction.

The research will enrich the University library by adding value and contributing to the existing

body of knowledge as well as providing scope for further research on areas that this research

did not cover in the field of forensic accounting.

1.6.2 To the researcher

The study assisted the researcher in enhancing her researching skills and practical aspects

forensic audit. It enabled her to have a deeper understanding of how forensic audit can be used

to reduce risk in organisations.

1.6.3 To ZESA Holdings Pvt Ltd

This study will be of great importance as it will give a clear picture to the company on the

concept of forensic audit, its importance, and advantages and when it can be used. In addition

to that the findings of the study will shed light on how risks faced by the parastatal can be

reduced through use of forensic audit. Finally management will be able to understand the extent

to which the use of forensic audit can reduce fraud and all sorts of irregularities it faces.

7

1.7 Delimitation of the study

Delimitation of the study is the area to be covered by the study. Suanders (2016) defines

delimitations as the research precise limit of the issues he/she wants to cover. This study was

limited to a geographical entity known as Zimbabwe and specifically ZESA Holdings Pvt Ltd

Particular consideration was ZESA offices in Mashonaland West Region. The study was

limited to investigate the effectiveness of forensic audit to risk reduction. The research covered

the financial period 2014-2019 for ZESA Holdings Pvt ltd and it was undertaken for a period

of one year January 2019 to December 2019.

1.8 Assumptions

Saunders et tal (2015) views an assumption as a condition which is taken without which the

research effort would be impossible. The study was undertaken under the following

assumptions.

Enough information for carrying out the research can be gathered

Internal and external audit fails to uncover some of the irregularities and fraud

committed

Respondents responded wholly and truthfully and were willing to give full information

Sufficient time was available to carry out the research in a stipulated time

1.9 Limitations of the Study

Burker et al (2014) defines limitations as hindrances which block the researcher to go further

than the expected borders or boundaries. The researcher expected to face a time constraint since

this was an academic paper and needs to be completed according to the academic almanac;

hence it was a short period of time for the compilation, review and analysis of the research,

however the researcher effectively managed the available time so as to meet the required

deadlines. Limited financial resources were another hindrance, however cost effective

strategies were employed and concentration was given to important areas of the study so as to

minimize costs. Access to confidential information was also a limiting factor. The researcher

guaranteed confidentiality of volunteered data as this would be used for academic purposes.

1.10 Definition of terms and acronyms

Auditing- is an independent systematic examination, evaluation-and investigation of an

entity’s business transactions, procedures, operations and performance results (Borthakur

Shristi, 2017).

8

Risk- It is a chance of loss or any other negative occurrence that is caused by external or

internal vulnerabilities and that may be avoided through pre-emptive action.

Fraud- means an intentional and dishonest act involving deception or misrepresentation by a

person, to obtain or potentially obtain an advantage for themselves or any other person (CPA

Australia Ltd, 2015). The term “fraud” commonly includes activities such as theft, corruption,

conspiracy, embezzlement, money laundering, bribery and extortion.

Forensic audit- is a technique to legally determine whether accounting transactions are in

consonance with various accounting, auditing and legal requirements and eventually determine

whether any fraud has taken place.

Risk reduction – is the process of reducing the likelihood of occurrence of loss and severity

of loss should it occur.

ZESA - Zimbabwe Electricity Supply Authority

1.11 Project outline

The project outline has been organised as shown in the diagram below, foundation of the entire

study has been constructed in chapter I followed by chapter II, chapter III, chapter IV and

finally chapter V.

CHAPTER V

CHAPTER IV

CHAPTER III

CHAPTER II

CHAPTER I

Source: Researcher

Figure 1.1: Project Outline

1.12 Chapter Summary

This introductory chapter looked at the background of the study, including statement of the

problem, research objectives and questions, research hypothesis, justification of the study,

limitations as well as the assumptions upon which the study is based. The following chapter

(Chapter II) reviews literature on the effectiveness of forensic audit in risk reduction.

Research

problem and its

background

Literature

review

Research

methodology

Data

presentation

and analysis

Summary and

conclusions and

recommendations

9

CHAPTER II

LITERATURE REVIEW

2.0 Introduction

This chapter prompts answers to the sub research questions by taking a comprehensive review

on the literature propounded by various authors and reputable authorities in prior studies on the

effectiveness of forensic audit to risk reduction. Conceptual, theoretical as well as empirical

studies have been reviewed in this chapter

2.1.1 What is Auditing

The word ‘audit’ is usually used to refer to the process of providing an opinion on the accuracy

or validity of some subject matter specifically in this matter, financial information (Chandler

2014). Auditing is also explained as an independent systematic examination, evaluation-and

investigation of an entity’s business transactions, procedures, operations and performance

results (Anichebe, 2015). The international Auditing and Assurance Standard Board defined

an audit as precise examination and coming up with an independent opinion concerning

financial performance of a business by a selected evaluator as stated by those state of the

arrangement and appropriate statutory and execution procurements. In support literature

reviewed by Salome and Rotim (2016) contends that the motivation behind an audit is to

provide sensible certification on whether the financial statement of an entity present fairly in

all material aspects the financial position, performance and cash flows of an entity in

accordance with the generally accepted accounting principles, and also to evaluate internal

control system put in place by management of the entity in question. The auditor is actually an

independent third party who is there to establish a degree of correspondence between the

assertions made and presented by management and user criteria (Soltani, 2017).

2.1.2 Concept of Forensic audit

The term forensic means “relating to the application of scientific knowledge to legal problems

or usable in a court of law” (Chandra Shekhar, 2017). Webster dictionary defines forensic as

belonging to, used in, or suitable to courts of judicature or to public discussions and debate.

Forensic auditing and forensic accounting can be used interchangeably. According to AICPA

(2018) forensic auditing services generally involve application of special skills in auditing,

accounting, quantitative methods, finance, specific areas of the law, information and computer

technologies research and investigative skills to collate, analyze, and evaluate evidential

matter which in the forensic area is called the evidence. Crumbley (2015) defined forensic

10

auditing as an accounting analysis that can uncover possible fraud that is suitable for

presentation in court. Also known as investigative accounting, forensic accounting is a detailed

examination and analysis of financial documents and records for use as evidence in a court of

law. Dalal and Bhakti (2017), described forensic auditing as the utilization of specialized

investigative skills in carrying out an enquiry conducted in such a manner that the outcome

will have application to the court of law. They further stated that the primary aim of forensic

auditing is fraud detection, unlike the traditional auditing that focuses on review of internal

control system, error identification and prevention.

The American institute of certified public accountants defines forensic accounting as “the

ability to identify, collect, analyse, and interpret financial and accounting data and information;

apply the relevant data and information to a legal dispute or issue; and render an opinion”

(AICPA, 2018). Dalal and Bhakti (2017), agree with AICPA definition and buttresses that

forensic accounting is not “accounting for dead people”, rather it is the use of a wide range of

accounting, auditing, and investigative skills to measure and verify economic damages and

resolve financial disputes. Forensic auditing arises from the integration of accounting,

investigative auditing, criminology, and litigation services (Gbegi, D.O and Adebisi, J.F.

2014). Singleton et al (2016) and Levi (2015) concluded that a forensic accountant is part cop,

part lawyer, part auditor and part psychologist and a skeptic. Hence forensic auditing is the

application of accounting, investigative, criminology, and litigation services skills for the

purpose of identifying, analyzing, and communication of evidence of underlying reporting

event. According to Institute of Forensic Accountants of Nigeria (IFA, 2014) Forensic audit

is the activity that consists of data gathering, verifying, processing, analyzing and reporting in

order to obtain material facts and/or evidence in the area of legal or financial disputes and or

financial irregularities including fraud and giving preventive advice.

Forensic auditing is regarded as a comprehensive auditing tool which stakeholders should

capitalize by implementing controls to reduce the risk associated with the event identified as

having material and significant ratings and being most likely to occur. In so doing the strength

of either current preventive or detective controls should be taken into consideration (Gupta and

Gupta, 2015). Forensic auditing combines legalities alongside the techniques of propriety

(VFM audit), regularly, investigate and financial audits (Iyer Sriram, 2018). The main aim is

to find out whether or not true business value has been reflected in the financial statements and

whether any fraud has taken place.

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2.1.3 Fraud risks in organisations

According to Oxford Advanced Learner`s Dictionary, fraud can be defined as the crime

of deceiving somebody in order to get money or goods illegally. EFCC Act (2014)

defines fraud as illegal act that violates existing legislation and these include any form of

frauds, narcotic drug, trafficking, money laundering, embezzlement, bribery, looting and any

form of corrupt malpractices and child labour, illegal oil bunkering and illegal mining, tax

evasion, foreign exchange malpractice including counterfeiting, currency, theft of intellectual

property and piracy, open market abuse, dumping of toxic waste and prohibited good etc.

This definition is all-embracing and conceivably includes financial crimes in corporate

organization (Joshi Apporva (2017).

Naik Devesh (2015), highlighted the types of fraud in occurrence to include tax fraud,

bankruptcy fraud, theft of intellectual property and proprietary information, embezzlement,

fraudulent substitution, unauthorized lending, tempering with reserves, insider abuses and

forgeries, defalcation, suppression, unofficial borrowing, impersonation, teeming and lading,

fraudulent use of the company’s documents, use of fictitious accounts, manipulation of

vouchers, over invoicing, dry posting, inflation of statistical data, ledger accounts manipulation

or falsified account information, duplication of cheque books, fictitious contracts

award/execution, lending to ghost workers, kite flying and cross firing, misuse of suspense

accounts, computer fraud and false declaration of cash shortage.

According to Joshi Apporva (2017), it is seen that fraud committed in businesses are of two

types and these are; personal use of business resources and the drawing up of false financial

statement for the business. The latter is to give the business a robust look in order to boost

investors’ confidence on the business. There are classical examples such as embezzlement of

company’s cash during its collection before it is recorded in the book of accounts. Another

example is when the bank records are tampered with so as to gain advantage of the system in

monetary terms. Added to this is gaining advantage through forgery of documents, making

payments which ordinarily should not be made or payment that has been previously been made

(Olanike, B. & Adebola, J. 2014). The creation of fictitious debt, inventory and scrap theft,

office supplies and fixed assets theft or creating fictitious expenses are avenues through which

fraud is perpetrated.

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2.1.4 Forensic Audit and Fraud risk

Forensic audit’s focus is on the detection, analysis, and communication of evidence of

underlying financial and reporting events. Unlike the traditional audit which is rule-base and

single-event based, forensic audit is not conducted for the purpose of rendering audit opinion.

Hence, forensic audit operates in a principle-based environment (Public Company Accounting

Oversight Board, 2007; Simth and Crumbley, 2014). Basically, forensic accounting aims at

using accounting report in a form suitable for legal purposes (Dhar and Sarkar, 2010). Bhasin

(2017) notes that the objectives of forensic accounting include:

assessment of damages caused by an auditor`s negligence,

fact finding to see whether an embezzlement has taken place, in what amount, and

whether criminal proceedings are to be initiated;

collection of evidence in a criminal proceedings;

Computation of asset values in a divorce proceedings.

Forensic audit is one of the most effective and efficient approach to reduce and prevent

fraudulent activities as it is concerned with the evidentiary nature of accounting data, and as a

practical field concerned with accounting fraud and forensic auditing; compliance, due

diligence and risk assessment; detection of financial misrepresentation and financial statement

fraud (Rasey, 2011)

Fraud is rarely seen, but what is observed or noticed are the symptoms, hence forensic audit

services provide firms with the necessary tools to detect and deter fraudulent practices (Godiwn

2015). Thus forensic audit can be adapted as internal audit strategy to prevent fraudulent

activities. According to Olanike, B. & Adebola, J. (2014) forensic accounting services offer

banks with the necessary tools to deter fraudulent activities. Similarly, Onodi, B. E., Okafor,

T. G. & Onyali, C. I. (2015) agreed that forensic accounting is a critical tool in the fight against

corruption, detection and prevention of fraud. Concurring, Njanike, Dube, and Mashayanye

(2016) recognized forensic accounting as administrative function in Zimbabwe whilst they

identified forensic auditor’s duties to include detection and prevention of fraud as well as

detection of potential red flag. Centre for Forensic Studies (2010) report that forensic

accounting could be used to reverse the leakages that cause corporate failures. Shah Bhavesh

(2014), noted that forensic accounting has to do with the comprehensive fraud investigation

consisting of preventing frauds and analyzing antifraud control, the audit of accounting records

in search of evidence of fraud and fraud audit.

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Many cases against corrupt officers could not be established in the court of law partly as a

result of improper investigation and on the other hand due to the absence of combined skills of

accounting/auditing and legal/litigation services by the investigator (Lokanan, 2014).

However, with the advent of forensic accounting a sigh of relief is expected (Silverstone and

Pedneault, 2013) and that forensic accounting marks the beginning of a new era and with its

investigative techniques perpetrators of corruption can easily be brought to justice. Curtis

(2018) noted that one of the grey areas where forensic accounting is needed most and more

frequently is in the area of investigation and subsequently the prosecution of corrupt

officers. Forensic accounting approach specifically encompasses all other forms of

investigation that have bearing with the discovery of fraud and corruption. The ever increasing

as well as the sophistication of corrupt practices (Tapang, A.T., Bessong, P.K. & Ujah, P.I.

2015) require the use of forensic accounting as the necessary means for successful corruption

investigation and prosecution of fraudsters.

2.1.5 Interrelationship between auditing, fraud investigation and forensic accounting

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Fig 2.2 Interrelationship between auditing, fraud investigation and forensic accounting

Source: National Institute of Justice Special Report 2017

The diagram above shows the knowledge and skills of traditional accounting, auditing, fraud,

and forensic accounting interrelationship is articulated. Traditional auditing procedures address

fraud to the extent as prescribed by Statement on Auditing Standards; however, auditors have

no responsibility to plan and perform auditing procedures to detect misstatements that are not

judged to be material (including those caused by error as well as fraud) (Tapang, A.T., Bessong,

P.K. & Ujah, P.I. 2015). Where fraud issue is reported, the required action is investigation into

the subject matter. This is because it is a more in-depth fact finding in specific area of concern

than the regular audit. Fraud detection and prevention is a specific search to ascertain whether

fraud took place or not to determine the extent of fraud perpetuated. Even though, allegations

of fraud are often resolved through court action that may include calculated estimates of losses

(damages), it suggests that fraud investigation and forensic accounting often overlap. However,

both encompasses activities unrelated to the other: fraud professionals often assist in fraud

prevention and deterrence efforts that do not directly interface with the legal system, and

forensic accountants work with damage claims, valuations, and legal issues that do not involve

allegations of fraud (Soni Bhagwan Lal (2016).

2.1.6 Activities undertaken in forensic audit

2.1.6.1 Investigations

In combating fraudulent activities forensic auditors conduct investigations. The forensic

auditor does not carry out procedural audit, but carries an audit which conducts investigation

as to detect fraud or crime using computer programs or scientific knowledge (Soni Bhagwan

Lal, 2016). Thus by using the computer forensic tools in carrying out his responsibilities,

sophisticated fraudulent activities can be combated.

2.1.6.2 Analysis of financial statements

Forensic auditors analyze financial transaction involving unauthorized transfers of money

between companies (Owojori and Asolu 2016). Cole (2017) opines that forensic auditors are

required to have special skills in inspecting documents for authenticity, alteration, forgery or

counterfeiting. Hence, by possessing such skills, the forensic auditor in carrying out his/her

duties can easily detect errors, fraudulent activities and omissions thereby preventing and

reducing fraudulent activities (Prakash et al (2018). Prakash et al (2018), states that the forensic

15

auditor is responsible for analyzing, identifying the kinds of fraud that could occur and their

symptoms.

2.1.6.3 Reconstruction of incomplete accounting records

In addition forensic auditors reconstruct incomplete accounting records. In carrying out his

function an auditor reconstructs incomplete accounting records as to settle insurance claims,

over inventory valuation, proving money laundering activities by reconstructing cash

transactions (Owojori and Asaolu 2016). With both technological and communication skills an

auditor can combat fraudulent activities by reconstructing incomplete accounting records,

hence helping to detect and prevent fraud and ensuring good internal control system and good

corporate governance.

2.1.6.4 Embezzlement investigation

Forensic auditors also carry out embezzlement investigation in order to detect the culprit and

amount embezzled. According to Cabole (2016) forensic auditors calculate economic damages;

trace income and assets, often in an attempt to find hidden assets or income. The auditor also

reconstructs financial statement that may have been destroyed or manipulated.

2.1.7 Role of a forensic auditor

Basing on several definitions of forensic auditing it could be said that a forensic auditor is an

expert in financial matters who can detect, investigate and deter fraud and white collar crimes

which are to be presented to court for legal action or to public discussion and debate. An

understanding of effective fraud and forensic accounting techniques can assist Professional

Forensic Accountants in identifying illegal activity and discovering and preserving evidence

(Houck et al 2016). Hence, it is important to understand that the role of a forensic accountant is

different from that of regular auditor.

Forensic auditors are experienced auditors, accountants, and investigators of legal and financial

documents that are hired to look into possible suspicion of fraudulent activity within a company

or are hired by a company who may just want to prevent fraudulent activities from occurring

(Crumbley, 2014). It demands reporting, where accountability of the fraud is established and

the report is considered as evidence in the court of law or in administrative proceedings. A

forensic accountant uses his knowledge of accounting, law, investigative auditing,

criminology, and psychology to uncover fraud, find evidence and present such evidence in

court if required (Carnes & Gierlasinski, 2014).

16

The forensic auditor draw conclusions, calculate values and identify irregular patterns or

suspicious transactions by critically analyzing the financial data. This auditor provides an

accounting analysis to the court for dispute resolution in certain cases and also provides the

courts with explanation the fraud that has been committed (Naik Devesh, 2015). Forensic

auditors investigate beyond the figures, make him different traditional accountants and

auditors, in fact, while the traditional accountants look at the numbers, Forensic auditors look

behind the numbers and the mind of the culprits. Forensic audit is a concept that link accounting

system to legal system. Thus, we can say that forensic auditing is an accounting that is used to

help the court to arrive at the truth about a particular case in a court of law.

Krell (2012) says forensic accounting often involves an exhaustive, detailed effort to penetrate

concealment tactics. Seliskar (2013) says, “in terms of the Sheer labor, the magnitude of effort,

time and expense required to do a single, very focused (forensic) investigation –as contrasted

to auditing a set of the financial statements-the difference is incredible. As an investigator a

Professional Forensic Accountant can be seen as those who are specialist in fraud detection,

and particularly in documenting exactly the kind of evidence required for successful criminal

prosecution; able to work in complex regulatory and litigation environments; and with

reasonable accuracy, can reconstruct missing, destroyed, or deceptive accounting records

(Ibrahim Kabir, 2016). In regard to the above arguments, forensic accounting should play an

important role as expert witnesses and fraud investigators. Accordingly, forensic accountant

should possess a specific skills and training that enable them to play their roles as expert

witnesses and fraud investigators. The area of forensic accounting, as Houck et al (2006) argue,

consists of a rather unique skill set that ordinarily requires additional expertise and training

beyond an academic degree in accounting, and beyond being a CPA (Certified Public

Accountant), a CFE (Certified Fraud Examiner) or CIRA (Certified Insolvency and

Restructuring Advisor).

2.1.8 Importance of forensic auditing

Zimbabwe is a country which has a well constituted statutory instruments and national accounting

standards. Despite all these measures still there are financial scams and financial losses due to

company’s practicing creative accounting techniques and able to take advantages of the loopholes

of International Accounting Standards (IAS’s) and Generally Accepted Accounting Principles

(GAAP’s). because of failure by both internal and external audits to unearth some of the scams, it

is better to have a forensic cell and as external audit is mandatory to make such forensic audit also

17

mandatory for the publicly listed companies so that financial scams may be minimized and have a

healthy financial and sound environment of investment and accounting practices.

A basic use of forensic auditing skills can enable an organization to take the proper steps in the

event of a suspected fraud. The point about proactive forensic auditing is worth reinforcing

(Gbegi, D.O and Adebisi, J.F. (2014). Keating further on added that, a forensic audit will

always take the uncovering of misconduct as its primary theme. This is the reason why there

is need for forensic audit in organizations. Stephen (2012), states that a standard accounting

audit is not a true forensic audit designed to uncover wrong doing but rather only a sampling

audit that may entirely miss the problem, this showing that the existence of forensic audit is

really of great help in today's commercial world. There is also need for forensic auditing

because according to, Crumbley and Hitger (2017), forensic auditors are often asked to provide

litigation support where they are called on to give expert testimony about financial data and

accounting activities forensic audit also give a measure of comfort to the shareholders.

According to Smith et al (2012), forensic auditors help is needed in price fixations, stock

market manipulations and at times even manipulation of the financial figures by the

managements to window dress the balance sheet and profit and loss account figures to hide real

facts from the stake holders and general public, for the funds misused or misappropriated by

the top management. Statutory audit is an audit required by law to ensure that proper and

adequate financial records have been maintained as required by statutes an GAAP and also to

lay credence to financial statements (Eyisi and Ezuwsore, 2014).

2.1.9 How forensic audit help in mitigating risk

Forensic auditing plays an important role in detecting, reducing and eliminating risks

(Al-Shami, S. S. A., Majid, A., Bin, I., Rashid, N. A., Hamid, B. A., & Rizal, M. S. 2014).

They added on to say that forensic auditing reduces both overall business risk and information

risks. Some even see forensic accounting as practiced by skilled accounting specialists

becoming part and parcel of most financial audits an extra quality control step in the auditing

process that will help reduce financial statement fraud. Crumbley, et al, (2012) assert that

because of its nature forensic audit reduces risks of misappropriation of assets by management.

Many researchers have attempted to examine the effect of forensic auditing on fraud detection,

for example, Madumere and Onumah, (2013) revealed that corporate fraud is on the increase

because most managers want to be independent at the expense of their employers. Aduwo,

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(2016) further explained that forensic auditing can go a long way to influence financial

scandals in corporate organization. Modugu and Anyaduba (2013) found that there is

significance agreement amongst stakeholder on the effectiveness of forensic auditors in fraud

control, financial reporting and internal control quality.

2.1.10 Application of forensic auditing in developing countries

Though financial fraud in Zimbabwe has witnessed highly publicized cases especially in the public

sector, Kosmas (2017) suggests that the application of forensic accounting applies to all scenes

where fraud is a possibility. Okoye and Akenbor (2013) commenting on the application of forensic

auditing in developing economies and Zimbabwe is not an exception, notes that forensic accounting

is faced with so many bottlenecks. These includes inability to operate more independently and

effectively, lack of technical capabilities and inability of gathering information that is admissible

in a court of law, less focus on offering service quality, conflicting regulatory codes and standards,

lack of harmonization and unification of all the existing sectoral corporate governance codes

applicable (Okoye, 2017).

Crumbly et al (2014) revealed the following challenges confronting the application of forensic

accounting/ in developing countries.

A significant challenge that faces a forensic accountant is the task of gathering

information that is admissible in a court of law.

The admissibility, of evidence in compliance with the laws of evidence is crucial

to successful prosecutions of criminal and civil claims.

Globalization of the economy and the fact that a fraudster can be based anywhere in the

world has led to the problem of inter-jurisdiction.

The law is not always up to date with the latest advancements in technology. Therefore,

lawyers and forensic accountants have to rely on outdated acts, laws that are of

general nature, or on acts that have not yet proven their effectiveness in prosecuting

fraudsters.

Forensic investigations often wind up as evidence in legal proceedings, including full-

fledged trails.

2.2 Theoretical framework

2.2.1 Fraud Triangle theory

Forensic auditing relies on the fraud triangle to identify weak points in the business systems

and find possible suspects in cases of fraud. It consists of three core concepts which together

create a situation ripe for fraud: incentive, opportunity, and rationalization. People must have

19

the incentive and opportunity to commit financial fraud, as well as the ability to justify it

(Rasey, 2015). Recent analysis has suggested adding a fourth concept to make a diamond

capability.

Fig 2.1: Fraud triangle

Source: Kassem and Higson, (2012)

2.2.1.1 Opportunity

Employees use their position to commit fraud when internal controls are weak, or where there

is poor management oversight on internal control implementation. Rae and Subramaniam

(2018) suggested that, if a susceptible individual perceives opportunities due to a lack of or

inefficient internal controls and has the ability or power to exploit these opportunities, that

individual may perpetrate a fraud. Most Employees who commit fraud do so, because they

have the opportunity to access assets and information that allows them obscure their fraudulent

deeds (Hill et al, 2016). It is true that employees need access to certain platform to perform

their jobs. The same access can provide the employee with opportunity to commit fraud.

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2.21.2 Pressure/Incentive

Pressure can be defined as the motivation that leads the perpetrator to engage in unethical

behaviours. Perceived pressures can happen for different reasons and also that it can happen to

employees at any level in companies. Pressure does not only mean financial pressure. Lister

(2017), state that there are three types of motivation or pressure: Personal pressure to pay for

lifestyle, employment pressure from continuous compensation structures, or management’s

financial interest, and external pressure such as threats to the business financial stability,

financier covenants, and market expectations. Akhidime, E. A & Uagbale-Ekatah, R. E. (2014)

argued that although an individual may demonstrate different motives, research has shown that

fraud often occurs as a response to economic pressures, and most pressures involve a financial

need such as greed, living beyond one’s means, large expenses or personal debt, poor credit,

personal financial losses, and an inability to meet a financial. The identified matters are the

motivation that can influence fraud.

2.2.1.3 Rationalization

Rationalization is an attempt by an employee to justify why they commit fraud. Rationalization

is an act of employee who commits fraud to give reasons for his action (Bhalla Mohit, 2018).

It is a way of covering up for the wrong done to the employer. In other words, rationalization

allows the fraudster to view his or her illegal actions as acceptable. Das Sandeep (2016)

concluded that, if a person cannot justify unethical actions, it is unlikely that he or she will

engage in fraud. That person, however, may rationalize those actions in different ways using

various justifications.

2.2.2 White collar crime theory

This theory result from the work by Sutherland in 1949 as cited in Michael (2014). The term

white-collar crime dates back to 1939. Sutherland as cited in Michael (2014) was the first to

coin the term, and hypothesis white-collar criminals, attributed different characteristics and

motives than typical street criminals. According to Sutherland white collar crime is crime

committed by a person respectability and high social status in the course of his occupation

(Sutherland 1949, cited in Michael 2014). Federal Bureau of Investigation (FBI) defines white-

collar crime as those illegal acts which are characterized by deceit, concealment, or violation

of trust and which are not dependent upon the application or threat of physical force or violence.

Sutherland’s goal was to prove a relation between money, social status, and likelihood of going

to jail for a white-collar crime, compared to more visible, typical crimes. According to him

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white-collar criminals are opportunists, who over time learn they can take advantage of their

circumstances to accumulated financial gain. They are educated, intelligent, affluent,

individuals who are qualified enough to get a job which allows them the unmonitored access

to often large sum of money. Compared to blue collar crime, white collar crimes have gone a

long way undetected since it requires more skills to unearth it. According to this theory it is

estimated that a great deal of white-collar crimes is undetected or if detected, it is not reported

(Gangully Jagdish (2015). Because of the high status of the perpetrators of these crimes, a

highly trained and experienced examiner or investigator like the Professional Forensic

Accountant is needed to forestall the occurrence of such high profile fraud (Freidrihs, 2016).

2.3 Conceptual framework

The Conceptual framework was designed to show the relationship between utilisation of

forensic audit and risk reduction. The term forensic means “relating to the application of

scientific knowledge to legal problems or usable in a court of law” (Bolgana and Robert

2015).

Figure 1.1: Conceptual framework

Source: Researcher

Gangully Jagdish (2015) described forensic auditing involves utilization of specialized

investigative skills in carrying out an enquiry conducted in such a manner that the outcome

will have application to the court of law. Forensic auditing is fraud detection, unlike the

traditional auditing that focuses on review of internal control system, error identification and

prevention. Forensic audit’s focus is on the detection, analysis, and communication of evidence

of underlying financial and reporting events. Where fraud issue is reported, the required action

22

is investigation into the subject matter. This is because it is a more in-depth fact finding in

specific area of concern than the regular audit. Fraud detection and prevention is a specific

search to ascertain whether fraud took place or not to determine the extent of fraud perpetuated.

Even though, allegations of fraud are often resolved through court action that may include

calculated estimates of losses (damages), it suggests that fraud investigation and forensic

accounting often overlap. However, both encompasses activities unrelated to the other: fraud

professionals often assist in fraud prevention and deterrence efforts that do not directly

interface with the legal system, and forensic accountants work with damage claims, valuations,

and legal issues that do not involve allegations of fraud (Ibrahim Kabir (2016). When forensic

accounting practices are incorporated into a separate forensic audit, they have the potential to

overcome problems associated with identifying financial malfeasance within the traditional

audit-reporting model.

2.4 Empirical Review

Nigeria

Aduwo, (2016) conceptually review the impact of forensic accounting toward utilizing

professional judgments, accounting skills, auditing and law procedures to fight the dreaded

disease of corporate liquidation and the paper concluded that forensic auditing can go

a long way to influence financial scandals in corporate organization.

Eyisi and Ezuwore (2014) on their paper considered the roles of forensic auditors in

combating fraudulent activities, distinction of forensic auditor and statutory auditor,

characteristic of forensic auditor and impact of forensic auditor on corporate governance. The

paper concludes that forensic auditors having improved management accountability,

strengthened external auditor’s independence and assisting audit committee members in

carrying out their oversight function by providing them assurance on internal audit report

have impacted positively to corporate governance, thereby reducing corporate failure and

impoverishment of investors.

Malaysia

Rosmawati Haron (2014) carries a study on “Forensic accounting and its prospect in Malaysian

public sector”. His findings indicated that forensic auditor draws conclusions which calculate

values and identify irregular patterns or suspicious transactions by critically analysing the

financial data. He added that forensic audit provides an accounting analysis to the court of law

for any dispute resolution and also the economic investigative explanations to the fraud that

has been committed. Due to this, it could be said that forensic accounting plays a vital role in

23

detecting and minimising accounting frauds and finally eliminate it existence in the

organisation. From the above findings, it can be concluded that, in the fast pace current

economic requirement, forensic accountant function is an important measures in an

organisation in order to curtail and eliminate the number of fraud occurrences in public sector

(Haron, 2014). Forensic accountant will avail and investigate beyond the numbers compared

to an ordinary auditor or accountant approaches.

Bangladesh

Dr. Asif Mahbub Karim (2017) examines the importance of the emergence of forensic

accounting as well as the applicability of this technique in detecting frauds committed in

corporate sectors of Bangladesh. It has been established that forensic audit is an efficient and

effective tool against corporate fraud. Based on his analyses and findings, the frequent

utilization of forensic audit services will significantly help in the detection and prevention of

cases of fraud in businesses. Thus, with forensic audit services, incidence of fraudulent

practices in and against businesses would have drastically reduced.

Jordan

Ola Mohammad Khersia (2018) examined the role of the Forensic Accountant in the Detection

of Tax Fraud in Financial Statements in the Jordanian Accounting and Auditing Offices and

Firms and the results show that the forensic accountant uses investigative techniques and

necessary analytical skills objectively and appropriately in order to have a powerful tool that

can detect fraud and manipulation of financial statements in companies that misinform on

revenues, delay reporting on revenues, reduce and misappropriate the values of assets,

manipulate estimates of reserves and other fraudulent methods.

Zimbabwe

Kosmas et al (2014) investigated the effectiveness of forensic auditing in detecting and

preventing bank frauds in Harare, Zimbabwe. The study employed questionnaires, personal

interview and documentary review to obtain information from respondents in thirteen

commercial banks, four building societies, and four audit firms. The study revealed that

forensic auditing department lacked material resources and technical know- how. As well that

forensic auditing is confronted with interference from management and the profession has no

clear recognition.

2.4 Summary

Chapter two has highlighted on what other scholars and other researchers have said about the

effectiveness of forensic auditing in risk reduction. The chapter clearly highlighted the concept

of forensic audit, roles and activities undertaken by a forensic auditor, importance of forensic

24

audit, its application as well as the theories upon which the study was based. The next chapter

will look into the research methodology.

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CHAPTER III

RESEARCH METHODOLOGY

3.0 Introduction

This chapter explains the research methods which were used to accomplish the objectives of

this study. A research methodology defines what the activity of research is, how to proceed,

how to measure progress and what constitute success. It is the process used to collect

information and data for the purpose of making business decisions. It elucidates how the

researcher conducted the research; the research methodologies employed that is primary and

secondary data collection methods and various techniques under these methodologies utilized

and the justifications for their use, and the challenges met and how they were managed.

3.1 Research Design

A research design is a specific method and procedure for collecting information (Saunders

2012). Malhotra (2014) define research design as “a framework or blueprint for conducting

the marketing research project. It specifies the details of the procedures necessary for obtaining

the information needed to structure and or solve marketing research problems.” Farrant (2014)

also explains research design as a set of carefully constructed framework within which data is

collected. It encompasses the methodology and procedures employed to conduct scientific

research. There are various research design methods which include experimental designs, non-

experimental designs (such as surveys), ethnographies, case studies or mixed methods

(Creswell, 2013). This study used descriptive research design. Lavrakas (2015) describes a

descriptive survey research design as a systematic research method for collecting data from a

representative sample of individuals using instruments composed of closed ended and/or open-

ended questions, observations, and interviews. It is one of the most widely used non-

experimental research designs across disciplines to collect large amounts of data from a

representative sample of individuals sampled from the targeted population. In this research

both the quantitative and qualitative were used, even though these research approaches have

their strengths and weaknesses, they can be extremely effective in combination with one

another when interpolated and triangulated.

3.1.1 Qualitative research design

The qualitative research design involves recording what the respondents were saying during

interviews. The qualitative research aims to gather in depth understanding of human behaviour

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and reason that governs such behaviour. Patten (2014) says, ‘that qualitative research produces

richer and more valid data in comparison with data found using quantitative research’. Eisner

(2013), advocates that a good qualitative research study can be helpful in understanding a

situation that would be otherwise mysterious and confusing. The qualitative research is

necessary in recording verbal and written information from the participants. This research

design helped the researcher in the collection of emotional information from the employees.

This was achieved through studying things like postures, gestures, symbols, facial expressions,

words and body movement among other variables.

However according to Cassell and Simon (2013) the qualitative research design have its own

disadvantages such as being subjective and lack of vigour in the techniques used. It is further

stated that qualitative design may depart from the original objectives. Again this method is time

consuming and expensive.

3.1.2 Quantitative research

Quantitative research is a formal, objective, systematic process in which numerical data are

utilised to obtain information about the world (Cormack, 2015). It is applicable to phenomena

that can be expressed in terms of quantity. It is the research that presents results in numbers

(McMillan and Schumacher, 2013). In other words, quantitative research is based on logical

positivist and positivist philosophy that assumes there are social facts with a single objective

reality separated from the feelings and beliefs of individuals (Neumann, 2016). Quantitative

research seeks to establish relationships and explain causes and changes in measured social

facts.

3.2 Target Population

The term population is used to mean the set of elements of interests under considerations for a

particular study (Brink 2012). Fraenkel et al; (2013) claim that it is upon this group that the

researcher would generalize the results of the study. The population includes all individuals

whom the researcher is interested in obtaining the information and making inferences on. The

population can be in two categories, the target and the study population (Fraenkel et al; 2013).

The target population is the actual population to which the researcher would really like to

generalize. The target population was 60 employees at ZESA Holdings Bindura offices in

Mashonaland West Region. The targeted population of the research consist of all Directors,

Chief Accountants, Accountants, Internal auditors, information and technology staff,

Accounting Assistants, Administration Staff and Legal advisors.

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3.3 Population sample

A sample to represent the population was used. Saunders et al; (2012) views a sample as a

“small proportion of a population selected for observations”. A sample is a subset of the target

population from which information is gathered to estimate something about the population.

According to Kato (2015), the aim of sampling is to obtain a representative that looks like the

population within an acceptable margin of error. From a target population of 60 workers the

researcher used a sample of 50 participants. The sample size was determined through the

approach based on precision rate and confidence level as follows: Calculator: Sample Size

Sample size (n) = z2 x p (1-p)

e2

z = confidence level at 95% (standard value 1.96)

p = estimated proportion of the study population with similar characteristics

e= acceptable error,

The estimated confidence level was 95% (z=1.96), estimated proportion of the population set

at 95% and the acceptable error falls within ±6% therefore sample size for the study was

calculated as follows:

Sample size (n) = z2 x p (1-p)

e2

= 1.962 x 0.95 (1-0.95)

0.062

=50

Sample size needed 50

In general the larger the sample size, the more likely the responses will reflect the true picture

of the population under study according to the Central Limit Theorem. For any sample to be a

true representative of the population it must bear some proportional relationship to the

population from which it would have been drawn. The researcher thus developed an adequate

size of sample and made an effort to balance between the dangers of having an under or over-

sized sample, without over straining the limited resources available.

3.4 Sampling techniques

Adams et-al (2013) defines sampling as the process or technique of selecting a suitable sample

for the purpose of determining parameters or characteristics of the whole population. Thus a

sample is a segment of the whole population selected for marketing research to represent the

population as a whole. Kato; (2012) noted that in certain types of sampling strategies, it is

possible to estimate through statistical procedures the margin of error in the data obtained from

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samples. Kato; (2012) further noted that researchers should choose a sampling design that has

the least amount of associated error. The major groups of sample designs are probability

sampling and non-probability sampling:

3.4.1 Probability sampling

Includes some form of random selection in choosing the elements. Greater confidence can be

placed in the representativeness of probability samples. This type of sampling involves a

selection process in which each element in the population has an equal and independent chance

of being selected. Four main methods include: 1) simple random, 2) stratified random, 3)

cluster, and 4) systematic (Kato; 2012). This study adopted stratified random sampling.

3.4.1.1 Stratified random sampling method

Stratified random sampling procedure was used because the population under consideration

contains some well-defined groups. This size of the random sample was proportional to stratum

size. Stratified random sampling ensures that a representative cross section of the strata in the

population is obtained and one can study each stratum separately. It is economical and allows

for higher representatives leading to more accurate results. Departments worked and

managerial levels were used in formulating stratus. Those stratus contributed proportionally to

the sample size basing on their contributions to the target population. Stratification will always

achieve greater precision provided that the strata have been chosen so that members of the same

stratum are as similar as possible in respect of the characteristic of interest. The results from

each stratum may be of intrinsic interest and can be analyzed separately and it ensures better

coverage of the population than simple random sampling. Dividing the population into distinct

strata enabled the researcher to draw inferences about specific subgroups that is likely to be

lost in a more generalized random sample. Stratified sampling helped to avoid the likelihood

of selecting respondents from the same department.

3.5 Data collection sources

Fraenkel et al; (2014) noted that there are two sources of data in research which are secondary

and primary sources.

3.5.1 Secondary sources of data

Secondary data is information gathered for purposes other than the completion of a research

project. Secondary data is also used to gain initial insight into the research problem. Secondary

data is classified in terms of its source – either internal or external. Internal, or in-house data,

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is secondary information acquired within the organization where research is being carried out.

External secondary data is obtained from outside sources (Wilson, 2016).

According to Kotler (2013) secondary data exists in many forms and the onus is usually on the

researcher to assemble and select the most appropriate pieces of information. Secondary data

incorporated for this study include internal audit reports, external audit reports, auditor

general’s annual reports on parastatals, management reports, minutes for board meetings, stock

count reports and the financial statements of ZESA Holdings.

Using secondary data allows multiple research projects to be conducted using the same data

set. This can help the researchers build on each other’s findings and can help verify the findings

of a particular researcher. Since it is an inexpensive way of collecting and processing data

secondary data can also provide venues for discussions. Usually the discussion go about the

loopholes or strengths tapped or untapped in the previous studies. Further to that volumes of

information are available which gives the researcher a wider and more appropriate choice and

this saves time as it is easy to access in a relatively shorter period of time.

3.5.2 Primary sources of data

Best, (2012) postulated that primary sources of data consists of the collection of original data

sources from field work. It is often undertaken after the researcher has gained some insight into

the issue by reviewing secondary research or by analyzing previously collected primary data.

It can be accomplished through various methods, including questionnaires and telephone

interviews in market research, or experiments and direct observations in the physical sciences,

amongst others (Wilson, 2013). The main advantage primary data sources is that it addresses

specific research issues as the researcher controls the search design to fit their needs. There is

great control; not only does primary research enable the researcher to focus on specific

subjects; it also enables the researcher to have a higher control over how the information is

collected. Taking this into account, the researcher can decide on such requirements as size of

project, time frame and goal (Wilson, 2013).

3.6 Research Instruments

A research instrument is what is used to collect data in a qualitative field of study according to

Tadu (2014). Several methods were used for collecting data in the field. In this project,

information were elicited from respondents through questionnaires and face to face interviews.

30

3.6.1 Questionnaires

A questionnaire is an instrument of research consisting of a series of questions and other

prompts for the purpose of gathering information from respondents (Malhotra, 2012). A

questionnaire was used to gather written responses from the targeted population which are then

reviewed, tabulated and analyzed. However, the researcher is aware that, with a questionnaire

some respondents may not submit the forms or may return them too late and /or some

questionnaires may be wrongly completed; particularly if they feel the research will not benefit

them. In addition a questionnaire relies more on the respondents’ literacy levels; depending on

their literacy levels and their command of the language used; respondents may interpret and

answer some questions from varied angles. Questionnaires guarantee confidentiality; hence,

respondents act without any fear or embarrassment. Another advantage is that the interviewee,

whose personal appearance, mood or conduct may influence the results of an interview, is not

present when the questionnaire is being completed (Burns, 2015). Furthermore, a questionnaire

is a quick and efficient way to obtain information from a large number of consumers. However,

designing a questionnaire is complex and time-consuming, and the quality of the data that are

collected is determined by the quality of the questionnaire.

Questionnaires are restricted to two basic types of question that is closed ended and open ended

questions; however the researcher used closed ended questions: Closed-ended (or “closed

question”) is a question for which a researcher provides a suitable list of responses (for example

Yes / No, agree or disagree). This produces mainly quantitative data (Fraenkel et al; 2014).

Closed-ended questions are more easily analyzed. Every answer can be given a number or

value so that a statistical interpretation can be assessed. Closed-ended questions are also better

suited for computer analysis. They can be more specific, thus more likely to communicate

similar meanings.

3.6.1.1 Questionnaire Pre-testing or Pilot testing

Pilot testing is done to identify and eliminate weaknesses and/or ambiguities in the research

instrument according to Green and Brown (2016). It is an essential way of testing for validity,

reliability and practicability of the instrument. Kumar (2015) says the purpose of a pilot

exercise is to get rid of problems out of the instrument so that subjects in the main study will

experience no difficulties in completing it. A draft questionnaire was prepared and distributed

to different departments at random. After this pilot study, some questions were rephrased to

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ensure that they communicate and gather the intended data, and correctly decoded by the

respondents.

3.6.1.2 Designing the Questionnaire

A semi structured questionnaire was designed by the researcher in such a way that there are

several questions designed on the basis of scaling namely Likert Scales. According to Leedy

(2014) Likert scale can be termed Rating scale and it was developed by Rensis Likert in 1930.

He stated that a rating scale is more useful when behaviour, attitude, or other phenomenon of

interest needs to be evaluated on a continuum of say, “inadequate to excellent”, “never to

always”, or “strongly disapprove to strongly approve” or “strongly agree to strongly disagree”.

The use of Likert scales is usually based on four point or five point responses (Davies 2012).

The bases of measurement that was used in Likert scale are as follows:

Strongly disagree Disagree Uncertain Agree Strongly agree

1 2 3 4 5

The Likert scale was used for questionnaires. The reason why the Likert scale was chosen is

because it is easily understood by the respondents. The responses are easily quantifiable and

subjective to computation of some mathematical analysis; these responses can be easily coded

and analyzed in SPSS and Excel. Likert scale does not force the respondent to stand on a

particular topic but allows them to respond in degree of disagreement (Davies, 2012). It is

because of the above reasons that the researcher uses Likert scale.

3.6.2 Interviews

Interviews were conducted with supervisors from different departments at Zesa Holdings

Bindura. Cohen (2013) defined an interview as a direct method of obtaining information in a

face to face situation. Interviews provide in- depth information about the particular research

issue or system. Since the information cannot be quantified (not amenable to statistical

analysis) the interview is often described as a qualitative research method. Qualitative research

methods for example the experiment, gather a small amount of information from many subjects

while interviews gather a broad range of information from a few subjects. There are two types

of interview, structured and unstructured which the researcher opted to use. For this study the

researcher used structured interviews because of its several advantages over unstructured

interviews.

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3.6.2.1 Structured Interviews

Structured interviews consisted of a list of specified structured questions. The interviewer did

not deviate from the list or inject an extra remark into the interview process (Weirs, 2017). The

interviews were done to selected respondents since it was impossible to interview the whole

sample. The researcher used structured interviews because they are useful for untangling

complex topics within the research area and the interviewer can go on to probe deeper into a

response given by an interviewee. In addition to that interviews provide the researcher with

instant feedback from the questions paused. In some cases the researcher could simplify or

clarify statements in the interview to the interviewee which in turn can produce a high response

rate.

3.6.2.2 Interview administration

With the agreement of the respondents, the researcher set up the interview dates, venue and

time. The researcher gave the interviewees the interview guide in advance a day before the

confirmed and agreed date to allow for familiarization with the agenda of the personal

interview by the respondents. All visits to the respondents’ premises were strictly by

appointment. During the personal interviews, the researcher provided both the subject matter

and direction. Using this data collection technique, the researcher was able to adapt the

questions as necessary and clarify doubts.

3.7 Data collection procedures

Hussen, (2017) defined data collection procedure as steps taken in administering instruments

and collection of data from subjects under study. Appointments were made with research

subjects through telephone, and via social media (whatsapp groups) and email. Distribution

and administering of instruments (questionnaire) was done by hand. Retrieval of instruments

was done in an orderly and justified manner. Hussen (2017) argued that retrieval of instruments

has to be a well thought out strategy meant to enhance timely collection of comprehensive data.

In retrieving questionnaires the researcher did follow ups and persuasion.

3.8 Data presentation

The data was presented in forms of tables and figures such as bar and pie charts. Percentages

were used to analyze the data. The tables made it easier for the researcher to make inferences.

This helped the researcher in coming up with views on the subject under discussion.

Percentages helped the researcher to make sure that, the data was compact and easy to

33

understand and comment upon. The other advantage of using tables and figures such as bar

graphs was that, it made it easier to understand the trends (Woolcott et al; 2012).

3.9 Data analysis

Analysis of data is a process of inspecting, cleaning, transforming, and modelling data with the

goal of highlighting useful information, suggesting conclusions, and supporting decision

making (Khothari, 2012). Data analysis has multiple facets and approaches, encompassing

diverse techniques under a variety of names, in different business, science, and social science

domains (Woolcott et al; 2012). The researcher compiled findings thoroughly. She put together

similar answers from the two separate questionnaires. Data from interviews were compared

with data from questionnaires. The study used Statistical Package for Social scientists (SPSS)

for analysing data. The SPSS package enabled the application of mean, mode, standard

deviation, cumulative percentages and presentation bar graphs and pie charts.

3.10 Reliability and validity

Reliability is defined by Saunders et al; (2014) as the replicability of the research under similar

conditions elsewhere. Bell (2010) states that reliability measures to what degree an instrument

or line of action would give the same results at different occasions if duplicated under similar

circumstances. According to Joppe (2012), reliability is the extent to which results are

consistent over time and an accurate representation of the total population under study is

referred to as reliability and if the results of a study can be reproduced under a similar

methodology, then the research instrument is considered to be reliable. According to Bell

(2010), validity is concerned with ensuring that questions measure or describe what they intend

to find. Even though a question has a high reliability it does not necessarily have a high validity,

however if the questionnaires has low reliability then it will also lack validity (Bell, 2010).

Considering trustworthiness of a study Anderson (2018) states that it is important to gain a high

validity. Trustworthiness can further be described in two forms; relevance and validity

(Anderson 2018). Where relevance covers how relevant the theoretical framework and

empirical finding are concerning the purpose and problem of the paper. Validity is to evaluate

the level of relation, between theoretical framework and empirical work, which also represents

the aspect of representation and trustworthiness of the thesis (Brymen and Bell, 2014). In this

research, the author ensured that questionnaire is clear and understandable so the questionnaire

is sent for pre-test. Moreover, to avoid misunderstanding, all questions contained no technical

terms because those kinds of errors can reduce the sources of information to check the

information in order to confirm findings.

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3.11 Ethical considerations

According to Hussey et al; (2015) suggested that ethics of research include debriefing, informed

consent, confidentiality, protection of privacy, protection against harm and protection of

identity. The researcher was guided by the above mentioned principles so as to get valuable

information in an ethical way. Respondents were not coerced into participating in the research

as there was an informed consent meaning that prospective research participants were fully

informed about the procedures involved in the research. Furthermore participants were assured

that information obtained will not be made available to anyone who is not directly involved in

the study. Participants were also assured that they will remain anonymous throughout the study

even to the researcher.

3.12 Chapter summary

This chapter looked at various approaches to research. The chapter explored research

philosophies were positivists and interpretivist. Later the chapter discussed about population

and sampling methods. The study considered the stratified random sampling where participants

were put in strata with each department worked contributing proportionally to the sample.

Sources of data to be used were explored, were the study made use primary data and secondary

data. Research instruments and data collection procedures were explored. The later subsections

looked at reliability, validity, ethical considerations, data presentation and data analysis

procedure. The next chapter explores data presentation and analysis.

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CHAPTER IV

DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.0 Introduction

This chapter focuses on the presentation, analysis, and interpretation of the data collected

through the questionnaires and interviews. The presentation and analysis is done according to

the design and structure of the research instrument. The discussion of findings was done in

conjunction with the major research objectives as well as the research sub-objectives, which

were outlined in the first chapter. The data was first prepared and edited where necessary before

it was presented in forms of tables, charts and graphs for analysis. The chapter ended

highlighting the outcome as perceived by the respondents.

4.1 Data Presentation and Analysis

As indicated earlier in the previous chapter, the questionnaires were administered personally by

the researcher. The researcher now focuses on data presentation, analysis and discussion of the

data gathered during the research process. This provided a sound meaning to the findings so as

to provide answers to the research questions that would permit drawing conclusions and action

taking. Both qualitative and quantitative means were employed by means of tables, pie charts,

graphs and comments. First, the researcher presents frequency distributions on the response rate

and respondents’ demographic profile, which were followed by a presentation of results on the

impact of forensic audit on risk reduction at ZESA Holdings. The analysis of data was done

using the SPSS version 20.

4.2 Response rate

The response rate, usually known as the completion or return rate, is the ratio of number of

people who answered the questions divided by the number of people in the sample Leedy

(2014). It is usually expressed as a percentage. Most questionnaires sent out were successfully

filled in and returned. The summary of responses from questionnaires is given in table 4.1

below.

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Table4.1 Response rate

Gender Total

Male Female

Response

Returned Count 24 20 44

% within column 96.0% 80.0% 88.0%

Not returned Count 1 5 6

% within column 4.0% 20.0% 12.0%

Total Count 25 25 50

% within column 100.0% 100.0% 100.0%

Source: Primary data

Table 4.1 above shows the response rate of the study. The results show that 50 questionnaires

were issued to participants drawn from employees, 44 were satisfactory completed representing

88% response rate overlay. The acceptable response rate varies with the circumstances,

according to Leedy (2009) a questionnaire response rate of 50% is considered adequate

whereas a response rate of above 60% is satisfactory. Wagennar and Babbie (2014) share the

same view with Leedy and confirm that a response rate of fifty percent is considered adequate

while that of sixty percent is good. As a result, the 44 returned questionnaires were considered

valid for data analysis.

4.3 Demographic information

4.3.1 Gender distribution

The respondents were asked to respond to questions on their gender profiles and the results are

presented below. Here the researcher’s aim was to determine distribution of the gender of her

respondents so as to make sure that the results are not gender bias. The results are shown in the

pie chart below.

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Figure 4.1: Gender distribution

Source: Primary data

As shown from the pie chart above the majority of respondents were males 54.5% and females

make up the remaining part 45.5%. This indicates that males were more willing to provide

information than their female counterparts. This means that the researcher managed to collect

more data from males than from females. However since the gender distribution imbalance is

not significant this does not affect quality of results.

4.3.2 Educational qualifications

This section aims to evaluate respondents’ educational qualifications as this can influence

quality of results. It is one’s educational qualification which enables him or her to understand

what has been asked and to answer questions properly. Below is a figure showing distribution

of respondents’ educational qualifications

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Figure 4.2 Educational qualification

Source: Primary data

From the results presented above it can be noted that a large proportion of respondents are

holders of first degrees 38.6% followed by holders of a master’s degree 25.0%. Those with

national diploma constituted 11.4%, higher national diploma holders 15.9% while those with

doctorates constituted 9.1%. These results indicated that the researcher was able to gather data

from educated people who understand better the topic under study.

4.3.3 Working experience

This section was designed to establish respondents working experience with ZESA Holdings

as the researcher believes that respondent’s working experience has an influence on the quality

of research results. Below is a table showing research findings.

39

Table 4.2 Working experience

Frequency Percent Valid Percent Cumulative Percent

Valid

less than 2

years 4 9.1 9.1 9.1

3 to 4 years 11 25.0 25.0 34.1

5 to 8 years 17 38.6 38.6 72.7

above 8 years 12 27.3 27.3 100.0

Total 44 100.0 100.0

Source: Primary data

The results in the table above shows that 9.1% of the sample have less than 2 years of working

experience with ZESA, 25.0% have working experience of 3 to 4 years, 5 to 8 years constituted

38.6% while above 8 years 27.3%. This shows information was collected from experienced

respondents since majority of them have more than two years working experience. This

supported Balkaran, (2013)’s view who cited that, any worker who has more than two years

operation experience with the same organization can provide reliable information about that

organization.

4.3.4 Department worked

The thrust of this section was to determine departments worked by the respondents. It is the

researcher’s belief that one’s understanding of forensic audit depends on the department he or

she works. Study results are presented in the table below.

Table 4.3 Department worked

Frequency Percent Valid Percent Cumulative Percent

Valid

Management 7 15.9 15.9 15.9

Auditing 10 22.7 22.7 38.6

Finance 7 15.9 15.9 54.5

Accounts 11 25.0 25.0 79.5

Information and

technology 9 20.5 20.5 100.0

Total 44 100.0 100.0

Source: Primary data

Respondents working in the management department constituted 15.9% of the total sample,

auditing 22.7%, finance 15.9%, accounts 25.0% and information technology 20.5%. From the

40

above results it can be concluded that all departments that take part in the auditing process were

represented therefore the research was able to get reliable information.

4.4 Reasons for having a forensic audit

The thrust of this section was to investigate reasons why forensic audit is needed in

organisations, Below is a table showing study findings of the reasons for having a forensic

audit;

Table 4.4 Reasons for having a forensic audit

Reason Responses Total

SD D UN A SA

To provide enough evidence

for litigation purposes

Count 1 10 5 21 7 44

% 2.3% 22.7% 11.4% 47.7% 15.9% 100.0%

To attract more stakeholders

into the business

Count 6 6 0 25 7 44

% 13.6% 13.6% 0.0% 56.8% 15.9% 100.0%

To improve stakeholder trust

and confidence in corporate

financial statement

Count 6 7 4 8 19 44

% 13.6% 15.9% 9.1% 18.2% 43.2% 100.0%

To detect errors and deter

fraud

Count 5 3 2 12 22 44

% 11.4% 6.8% 4.5% 27.3% 50.0% 100.0%

Source: Primary data

4.4.1 To provide evidence for litigation purposes

Respondents agreed that organisations conduct forensic audit in order to provide evidence for

litigation purposes, this was captured in 47.7% and 15.9% of the respondents who agreed and

strongly agreed respectively while 2.3% strongly disagreed and 22.7% disagreed and only

11.4% being not sure. According to Institute of Forensic Accountants of Nigeria (IFA, 2014)

Forensic audit is the activity that consists of data gathering, verifying, processing, analyzing

and reporting in order to obtain material facts and/or evidence in the area of legal or financial

disputes and or financial irregularities including fraud and giving preventive advice.

4.4.2 To attract more stakeholders into the business

Study results above indicated that respondents agreed that forensic audit results can be used to

attract more stakeholders into the business this has been deduced from 56.8% and 15.9% of the

respondents who agreed and strongly agreed respectictively while 13.6% and 13.6% strongly

disagreed and disagreed respectively. According to Mohamed and Salad (2013), applying

forensic auditing services reports of fraud are minimised and this attract more stakeholders into

41

the organisation since no one stakeholder want to be associated with companies who have bad

reputation.

4.4.3 To improve stakeholder trust and confidence in corporate financial statement

43.2% and 18.2% of the respondents strongly agreed and agreed respectively, 13.6% and

15.9% strongly disagreed and disagreed respectively while 9.1% were uncertain. This

demonstrates that forensic audit is be used to improve stakeholder trust and confidence in the

corporate financial statements. These study results were in support to the findings by

Rosmawati (2014) who asserted that financial statements audited by forensic auditors give a

better picture of the fair view of the organisation and this improve confidence and trust in the

company.

4.4.4 To detect errors and deter fraud

Respondents were asked whether forensic audit is used to detect errors and deter fraud. Their

responses indicated that 50.0% and 27.3% strongly agreed and agreed respectively while 11.4%

and 6.8% strongly disagreed and disagreed respectively and only 4.5% indicated that they were

not sure this demonstrates majority of respondents agreed that forensic audit is used to detect

errors and deter fraud. Forensic auditing plays an important role in detecting, reducing and

eliminating risks (Mohumud and Salad, 2013). Dalal and Bhakti (2017), described forensic

auditing as the utilization of specialized investigative skills in carrying out an enquiry

conducted in such a manner that the outcome will have application to the court of law. They

further stated that the primary aim of forensic auditing is fraud detection, unlike the traditional

auditing that focuses on review of internal control system, error identification and prevention.

4.5 Awareness of the use forensic audit

This section of the study was designed to examine the extent to which respondents are aware

of forensic audit. The researcher asked respondents three questions.

4.5.1 Forensic auditing is more advanced than financial auditing

Respondents were asked the extent to which they agreed or disagreed with the view that forensic

auditing is more advanced than financial auditing and their responses were analysed and

presented in the figure below:

42

Figure 4.3: Forensic auditing is more advanced than financial auditing

Source: Primary data

Study results above indicate that 29.5% and 20.5% of the respondents strongly agreed and

agreed respectively, 22.7% and 15.9% strongly disagreed and disagreed respectively while

11.4% indicate that they are not certain as to whether forensic auditing is more advanced than

financial auditing. These results demonstrate that majority of respondents agreed that forensic

auditing is more advanced. In support of these findings Aduwo, (2016) explained that forensic

auditing can go a long way to influence financial scandals in corporate organization.

4.5.2 In forensic auditing investigative activities are undertaken

Respondents were asked whether investigative activities are undertaken in forensic auditing

and their responses were presented in the table below:

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Table 4:5: In forensic auditing investigative activities are undertaken

Frequency Percent Valid Percent Cumulative Percent

Valid

Strongly

disagree 2 4.5 4.5 4.5

Disagree 3 6.8 6.8 11.4

Uncertain 8 18.2 18.2 29.5

Agree 17 38.6 38.6 68.2

Strongly agree 14 31.8 31.8 100.0

Total 44 100.0 100.0

Source: Primary data

Results above show that 38.6% and 31.8% of the respondents agreed and strongly agreed

respectively while 4.5% and 6.8% strongly disagreed and disagreed respectively and 18.2% of

the respondents were uncertain that in forensic auditing investigative activities are undertaken.

This shows that respondents were in agreement that investigative activities are carried out in

forensic auditing. Adegbie and Fakiel (2017) posited that forensic auditing is the practice of

utilizing accounting, auditing and investigative skill to assist in legal matter.

4.5.3 Application of forensic auditing is still limited in many government entities in

Zimbabwe

The aim of this section was to investigate respondents’ responses on the view that application

of forensic auditing is still limited in Zimbabwe’s government entities. Respondents’ results

were presented in the figure below:

44

Figure 4.4: application of forensic audit is still limited in many government entities in

Zimbabwe

Source: Primary data

There was a general consensus from respondents that application of forensic auditing is still

limited in many government entities in Zimbabwe this was deduced from 50% of the

respondents who strongly agreed, 18.2% who agreed while 9.1%, 6.8% and 15.9% strongly

disagreed, disagreed and were uncertain respectively. Okoye and Akenbor (2013) commenting

on the application of forensic auditing in developing economies and Zimbabwe is not an exception,

notes that forensic accounting is faced with so many bottlenecks.

4.6 Forensic audit in detecting and preventing risk

4.6.1 Forensic audit can identify misappropriated assets

The aim of this section of the study was to establish whether forensic audit can identify

misappropriated assets, views from respondents were analysed in the table below.

45

Table 4.6 Forensic audit can identify misappropriated assets

Frequency Percent Valid Percent Cumulative Percent

Valid

Disagree 7 15.9 15.9 15.9

Uncertain 2 4.5 4.5 20.5

Agree 15 34.1 34.1 54.5

strongly agree 20 45.5 45.5 100.0

Total 44 100.0 100.0

Source: Primary data

There was a general consensus from the respondents that forensic audit can identify

misappropriated assets since majority of them strongly agreed (45.5%) and agreed (34.1%).

With only 15.9% disagreed and 4.5% uncertain it can be concluded that forensic audit help in

reducing misappropriation of assets. Crumbley, et al, (2012) assert that because of its nature

forensic audit reduces risks of misappropriation of assets by management.

4.6.2 Forensic audit can verify unauthorised transfer of money

This section of the study was designed to investigate whether forensic audit can verify

unauthorised transfer of money and the study findings were presented in the table below;

Table 4.7: Forensic auditing can verify unauthorized transfer of money

Frequency Percent Valid Percent Cumulative Percent

Valid

Strongly

disagree 6 13.6 13.6 13.6

Disagree 11 25.0 25.0 38.6

Uncertain 4 9.1 9.1 47.7

Agree 12 27.3 27.3 75.0

Strongly agree 11 25.0 25.0 100.0

Total 44 100.0 100.0

Source: Primary data

25.0% and 27.3% of the respondents indicate that they strongly agreed and agreed respectively,

13.6% and 25.0% strongly disagreed and disagreed respectively while a paltry of 9.1% were

uncertain that forensic auditing can verify unauthorised transfer of money. This shows that

forensic auditing can verify unauthorised transfer of money. Forensic auditors analyze financial

transaction involving unauthorized transfers of money between companies (Owojori and Asolu

2019). Cole (2015) opines that forensic auditors are required to have special skills in inspecting

documents for authenticity, alteration, forgery or counterfeiting.

46

4.6.3 Forensic auditing can identify reversible insider transaction

The researcher asked respondents the extent to which they agree or disagreed to the view that

forensic auditing can identify reversible insider transactions and respondents’ responses were

analysed and presented in figure below;

Figure 4.5: Forensic auditing can identify reversible insider transactions

Source: Primary data

From the above figure it can be noted that majority of respondents agreed that forensic auditing

can identify reversible insider transactions, this has been captured in 34.1% and 22.7% of the

respondents who agreed and strongly agreed while 11.4% and 9.1% strongly disagreed and

disagreed respectively. However 22.7% indicated that they are not sure.

4.6.4 Forensic auditing can enhance disclosure of forward looting information

Respondents were asked whether forensic auditing can enhance disclosure of forward looting

information and their responses were analysed and presented in the below.

47

Table 4.8: Forensic auditing can enhance disclosure for forward looting information

Frequency Percent Valid Percent Cumulative Percent

Valid

Strongly disagree 2 4.5 4.5 4.5

Disagree 6 13.6 13.6 18.2

Uncertain 6 13.6 13.6 31.8

Agree 18 40.9 40.9 72.7

Strongly agree 12 27.3 27.3 100.0

Total 44 100.0 100.0

Source: Primary data

Study results above indicated that there was a general agreement between participants that

forensic auditing can enhance disclosure of forward looting information this was supported by

40.9% and 27.3% of the respondents who agreed and strongly agreed respectively with 13.6%

indicating that they were uncertain while 13.6% and 4.5% strongly disagreed and disagreed

respectively.

4.7 Ability of forensic auditing to reduce risks

4.7.1 Forensic auditing is solely enough as a tool to prevent suspicious or fraudulent

transactions

This section of the study aims to investigate whether forensic audit on its own can be enough

tool to prevent fraud. Respondents’ views were presented in the table below.

Table 4.9 Forensic auditing is solely enough as a tool to prevent suspicious or fraudulent

transactions

Frequency Percent Valid Percent Cumulative Percent

Valid

Strongly

disagree 11 25.0 25.0 25.0

Disagree 20 45.5 45.5 70.5

Agree 8 18.2 18.2 88.6

Strongly agree 5 11.4 11.4 100.0

Total 44 100.0 100.0

Source: Primary data

The above results indicated that there was a disagreement between respondents that forensic

audit on its own can prevent fraud. This was captured in 25.0% and 45.5% of the respondents

who strongly disagreed and disagreed respectively. With only 11.4% and 18.2% of the

48

respondents strongly agreeing and agreeing respectively it can be concluded that there is need

for some other measures to work with forensic audit in order to reduce fraud risk.

4.7.2 Forensic auditing is effective in assessing, monitoring and evaluation of internal

control systems

Respondents were asked whether forensic audit is effective in assessing, monitoring and

evaluating internal control systems and their views have been presented in the table below;

Table 4.10: Forensic auditing is effective in assessing, monitoring and evaluation of

internal control systems

Frequency Percent Valid Percent Cumulative Percent

Valid

Disagree 7 15.9 15.9 15.9

Uncertain 13 29.5 29.5 45.5

Agree 15 34.1 34.1 79.5

Strongly agree 9 20.5 20.5 100.0

Total 44 100.0 100.0

Source: Primary data

20.5% and 34.1% of the respondents strongly agreed and agreed while 29.5% were uncertain

and 15.9% disagreed with the above. It can be concluded that forensic audit is effective in

assessing, monitoring and evaluation of internal control systems. Thus forensic audit can be

adapted as internal audit strategy to prevent fraudulent activities. According to Onuorah and

Ebimobowei (2015) forensic accounting services offer banks with the necessary tools to deter

fraudulent activities. Similarly, Islam, Rahman, and Hossan (2017) agreed that forensic

accounting is a critical tool in the fight against corruption, detection and prevention of fraud.

4.7.3 Forensic investigations deals directly with fraud investigation and this reduces

financial reporting expectations gap

The table below presents research findings concerning the above question;

Table 4.11: Forensic investigations deals directly with fraud investigation and this

reduces financial reporting “expectations gap”

Frequency Percent Valid

Percent

Cumulative Percent

Valid

Strongly disagree 7 15.9 15.9 15.9

Disagree 4 9.1 9.1 25.0

Agree 20 45.5 45.5 70.5

Strongly agree 13 29.5 29.5 100.0

Total 44 100.0 100.0

49

Source: Primary data

45.5% agreed and 29.5% strongly agreed while 15.9% strongly disagreed and 9.1% disagreed

that forensic investigations deal directly with fraud investigation and this reduces financial

reporting expectations gap.

4.7.4 Forensic auditing can help avert corporate failures

Respondents were asked whether forensic audit can help to avert corporate failures and their

responses were analysed and presented in a pie chart below:

Figure 4.6: Forensic auditors can help averting corporate failures

Source: Primary data

36.6% and 25.0% of the respondents strongly agreed and agreed respectively, 13.6% and 9.1%

strongly disagreed and disagreed respectively while 13.6% indicated that they were not sure

whether forensic auditing can help in averting corporate failure. This demonstrates that forensic

auditors can help in averting corporate failure. These findings agreed with the Centre for

Forensic Studies (2010) report which showed that forensic accounting could be used to reverse

the leakages that cause corporate failures.

50

4.7.5 Forensic auditing is an effective tool to reduce management theft

This section of the study was designed to investigate whether forensic auditing is an effective

tool to reduce management theft, the respondents’ views were analysed and presented in the as

shown in the figure below:

Figure 4.7: Forensic auditing is an effective tool to reduce management theft

Source: Primary data

The above results indicate that there was a general consensus between respondents that forensic

auditing is an effective tool to reduce management theft, this was captured in 43.2% and 25.0%

of the respondents who strongly agree and agreed respectively while 9.1%, 15.9% and 6.8%

strongly disagreed, disagreed and were uncertain respectively. To this end it can be concluded

that forensic auditing can reduce management theft. According to the findings by Mahbub

Karim (2017) in Bangladesh the emergence of forensic accounting as well as the applicability

of this technique in detecting frauds committed in corporate sectors is an efficient and effective

tool against corporate fraud hence management theft can be reduced.

51

4.8 Interviews

4.8.0 Data analysis of the interview

On top of the questionnaires, the researcher managed to do interviews with some of the ZESA

workers and it was to a greater extent successful. The researcher managed to conduct interviews

with 6 heads of department who did not take part in answering the questionnaire.

4.8.1 Causes of fraud in organisations

On causes of fraud interviewees were of the view that greedy, need for status in society, poor

internal control systems, pressure from top management, pressure for a better life, opportunity

and personal debts were the cause of fraud. These findings support views by Albrecht, et al

(2014) who argues fraud often occurs as a response to economic pressures, and most pressures

involve a financial need such as greed, living beyond one’s means, large expenses or personal

debt, poor credit, personal financial losses, and an inability to meet a financial.

4.8.2 Reasons for carrying out forensic audit

Discussions with interviewees indicated that most organisations especially ZESA Holdings

carry out forensic audit because financial audit fails to reveal some of the fraudulent activities

done by various stakeholders within organisations. Other reasons mentioned in discussions

include providing a better evidence of some concealed information. The interviewees cited that

it is essential to have the forensic auditor role in managing, preventing and curbing the fraud

in public sector especially in areas such as taxation, procurement, payroll and recruitment and

claims in public sector. The respondents also agree that fraud such as embezzlement breach of

trust, cheating, theft of assets or supplies, bribery and abuse of power does happen in public

sector.

4.8.3 Challenges of forensic auditing application

Interviewees cited that application of forensic auditing services in public sector has been

hindered by lack of technical capabilities, conflicting regulatory codes and standards, lack of

harmonization and unification of all the existing sectoral corporate governance codes

applicable in Zimbabwe. Respondents also pointed out that statutory regulation are not always

up to date with the latest advancements in technology. In addition interviewees were of the

view that another challenge facing application of forensic audit is that it as an expensive service

that only big organizations can afford. These findings were in agreement with views by

Crumbly (2014) who noted that the challenges confronting the application of forensic

52

accounting is such that it lack the admissibility, of evidence in compliance with the laws of

evidence which is crucial to successful prosecutions of criminal and civil claims.

4.8.4 The importance of carrying out forensic audit

The objective of this question was to determine if management and staff see if it is really

important to carry out forensic audit. On this question, all the participants that is 100% were of

the opinion that forensic audit is very important to carry out. Most of the members mentioned

that before ZESA engaged in doing Forensic audits, they saw it as not important and as a worst

of money not knowing that it was really going to save a lot for the company and for the

pensioners. Respondents mentioned that it helps to control management theft, it provides better

information for litigation purposes and also helps in revealing insider transaction.

4.8.5 What do you think are the benefits accrued to organisations that employ forensic

auditing

The researcher wanted to find out if there are any benefits enjoyed by organisations utilising

forensic auditing services. Most of the members mentioned that the way forensic audit

is revealing a lot of crimes, has helped the employees to work together in a great way, enhance

team spirit and they are now so motivated doing their work and enjoy the benefit of protecting

their treasured employment. Interviewees also added that, this will benefit the society by

realizing good service delivery.

4.9 Summary

The chapter focused on the analysis and presentation of the data that was collected in the

previous chapter. The findings and analysis were oriented towards evaluating the

effectiveness of forensic audit to risk reduction and the information was presented in form

of text, graphs, charts and tables. The next chapter, that is chapter five will summarise the

research findings and also outline recommendation suggested by the researcher.

53

CHAPTER V

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This chapter marks the end of the research, it covers the summary of the whole study, followed

by conclusions and recommendations. The study evaluates the effectiveness of forensic audit

to risk reduction at ZESA Holdings. This chapter also provides the findings which are based

on the results of this research.

5.1 Summary of major findings

The study found out that to a larger extent forensic audit is very effective in reducing

risk as it can uncover diverted fraudulent practices, identify misappropriated asset and

reversible insider transactions, it can verify unauthorised transfer of money, and can

enhance disclosure of forward looting information; this significantly influence fraud

detection and control. The study further revealed that forensic auditing is an effective

tool for assessing, monitoring and evaluating internal control systems and also

uncovers diverted fraudulent practices

The study also aimed to determine the reasons for having forensic audit in organisations

and the findings indicated that organisations use forensic audit to provide enough

evidence for litigation purposes as the evidence provided by financial audit is normally

not sufficient. In addition it was also revealed that evidence provided by forensic

auditing about the state of affairs of the organisation is very useful in attracting more

stakeholders as it improves trust and confidence in corporate financial statements.

Study results revealed that application of forensic audit is still limited in Zimbabwe

especially in parastatals because the law is not in support with the procedures of

forensic auditing. It was further revealed that the level of awareness that forensic

auditing can reduce risk is very low.

In addition to the above it was also found out that forensic auditing on its own is deals

directly with fraud investigation and this reduces financial reporting expectations gap

therefore it is solely enough as a tool to prevent suspicious or fraudulent transactions.

By so doing corporate failures and management theft are averted.

5.2 Conclusion

The major purpose of the study was to evaluate the effectiveness of forensic audit to risk

reduction. From the findings above the researcher concluded that forensic audit is an effective

54

tool in risk reduction. Organisations carry on forensic audits for various reasons such as

preventing management theft, provide a more detailed evidence for courts, identify

misappropriated asset and reversible insider transactions. Forensic auditing carries out

investigative activities and this enables it to effectively dig down the problem and then come

up with best solutions. In addition it was also concluded that because of its investigative

approach forensic audit have managed to reduce risk, it proves to be an effective tool to risk

reduction however the awareness of it is very low hence its application of is still limited.

5.3 Recommendations

The researcher makes the following recommendations basing on the conclusions.

There is need of providing a comprehensive framework that involves the use of forensic

audit methodology in areas like audit planning and execution.

The several professional accountancy bodies in Zimbabwe should ensure that forensic

accountants are trained with modern skills of forensic accounting procedures, the financial

reporting council should ensure harmonization and unification of the conflicting regulatory

codes that will guarantee best standards and regulations are established for best practice

and service delivery.

The government to put in place the statutory instrument that governs the forensic audit

which is separate from that of general auditors.

Management should develop fraud awareness and appropriate fraud risk-management

program supported by senior management and an appropriate oversight process from

the Board of directors or Audit committee as the potential of management override

increases.

The laws of our country to be revised and incorporate the procedures of forensic audit.

There is need for an establishment of an independent forensic audit team in all

government owned entities. Government must assist in the formation of this committee.

This will help in setting forensic auditing standards, monitoring compliance with

accounting standards, reviewing auditors’ practice and reviewing reporting practices

and enforcing sanctions for violations. The government should ensure capacity and

effectiveness of this regulatory regime to provide a real sense of security to

stakeholders.

There should be firms of forensic audit and standards that govern the forensic auditors

different from those of general auditors so that they work separately with other auditors

only focusing on investigating while other auditors focus on their duties.

55

Introduce forensic audit as a degree program in tertiary schools here in Zimbabwe.

5.4 Suggestions for further research

This research focused much on effectiveness of forensic audit in fraud risk reduction and was

limited to public entities. It does not cover private entities as well as the factors affecting

application of forensic audit services therefore the researcher proposes that further studies

should be carried on factors affecting application of forensic audit in all sectors of Zimbabwe.

5.5 Summary

This chapter focuses on the summary of the whole study, the findings which were based on the

data in chapter four, conclusion and recommendations. The findings were oriented on the

evaluation of the effectiveness of forensic audit to risk reduction. This marks the end of the

research.

56

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60

QUESTIONNAIRE

Instructions

1. Do not write your name on this questionnaire

2. May you please attempt all the questions

3. Please place a tick ( √) in the box of your preferred answer and or a narrative answer in

the space provided below each question

SECTION A: DEMOGRAPHICS AND GENERAL INFORMATION

1. Gender

Male Female

2. Age

Below 30 years [ ], 31 to 40 years [ ], 41 to 50 years [ ], above 50 years [ ]

3. Working experience?

Less than 2 years [ ], 3 to 4 years [ ], 5 to 8 years [ ], above 8 years [ ]

4. Educational qualifications

National Diploma Higher national Diploma First degree

Masters Doctorate

5. Department worked

Management Auditing Finance Information Technology

SECTION B: General Opinion Section

Please choose the most suitable answer to indicate the extent to which you agree or disagree with

each of the statements given below. Please tick the number that represents your opinion

1-Strongly Disagree, 2- Disagree, 3- Neutral, 4-Agree, 5- Strongly agree

6. Reasons for having a forensic audit

Reason SD D UN A SA

To provide enough evidence for litigation purposes

To attract more stakeholders into business

To improve stakeholder trust and confidence in

corporate financial statement

To detect and deter fraud

61

7. Awareness of the use forensic audit

SD D UN A SA

Forensic auditing is more advanced than financial auditing

Forensic audit go beyond numbers

Forensic auditing carries out investigative activities

Application of forensic audit is still limited in many

government entities in Zimbabwe

8. Forensic audit in detecting and preventing risk

SD D UN A SA

Forensic auditing can identify misappropriated assets

Forensic auditing can verify unauthorized transfer of money

Forensic auditing can identify reversible insider

transaction

Forensic auditing can enhance disclosure for forward

looting information

9. Ability of forensic auditing to reduce risks

SD D UN A SA

Forensic auditing is solely enough as a tool to prevent

suspicious or fraudulent transactions

Forensic auditing is effective in assessing, monitoring and

evaluation of internal control systems

Forensic investigations deals directly with fraud

investigation and this reduces financial reporting

“expectations gap

Forensic auditors can help avert corporate failures

Forensic auditing is an effective tool to reduce

management theft

THE END

THANK YOU

62

INTERVIEW GUIDE

1. What are the causes of fraud in organisations?

2. What are the reasons of carrying out of forensic audits in most organisations?

3. What do you think are the benefits accrued to organisations that employ forensic auditors?

4. What are the challenges encountered by parastals in applying forensic auditing services?

5. Is forensic audit an effective tool for risk reduction?