Forensic Accounting Techniques and Fraud Detection in Nigeria: Evidence from Altman Z-Score Model Application in Oil and Gas Industry
Author : K.F.A IBRAHIM, ADEMU Sylvester Onyekachi and Oluyemi Ayodele OLONITE
Abstract :
This study investigated the nexus between forensic accounting techniques and fraud detection in Nigeria, using Altman Z-Score Model application in oil and gas industry as empirical evidence. The study period was between 2016 and 2020. The population of the study comprises of 11 listed oil and gas companies from which eight (8) were selected as sample size. The study employed ex post facto research design, making use of the annual reports and accounts of the oil and gas companies as the secondary source of data collection. Data obtained were subjected to both descriptive and inferential statistical analyses. One-Sample t-test was employed to confirm the Altman’s Z-score result for Hypothesis 1 which revealed that the results of the original Z-score are not the same with the modified Z’’-score. The results of the original Z-score revealed that all the sampled companies are in safe zone (equal or greater than 2.99). Since the modified, Z′′-score can be used for almost all the manufacturing and varieties of corporations in which: when Z′′ <1.1, it signals a dangerous zone with high risk of bankruptcy, when 1.1 < Z′′< 2.6 it denotes warning zone of bankruptcy risk; when Z′′ > 2.6 it indicates that the company is in a safe zone, not at risk of bankruptcy; whereas the results of Z’’ score (1968) suggest that all the sampled companies are in safe zones except Japaul Gold Plc which was in distress/bankrupt zone (0.2444), the modified Z” score revealed that on average values, Ardova (Forte oil) Plc and Japaul Gold fell within warning or gray zone (2.144 and 1.1878). More so, the multiple linear regression results show that red flag (REDF) has significant negative impact on fraud detection, while forensic investigative skill (FISK) reveals significant positive effect on fraud detection, FATE shows insignificant negative relationship since the listed oil and gas firms did not show any evidence of FATE. On overall, the sampled firms are predicted not fraudulent/bankrupt. The oil and gas companies are therefore counseled to uphold good financial management principles and policies. Investors are encouraged to invest in these sampled oil and gas companies in Nigeria that are predicted safe from fraud, bankruptcy and insolvency.
Keywords :
Altman Z-score, modified altman Z” score, forensic accounting, fraud detention, financial ratios, bankruptcy; oil and gas industry
