An evaluation of forensic accounting practices in detecting payroll fraud in Nigerian local governments: A study of Abuja Municipal Area Council
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Background of the Study
Forensic accounting practices are increasingly recognized as an essential tool in identifying and investigating financial crimes in both the private and public sectors. In Nigerian local governments, payroll fraud has become a significant issue, with corrupt practices such as ghost workers, salary manipulation, and falsification of attendance records undermining the integrity of payroll systems (Akinyemi & Okafor, 2024). The Abuja Municipal Area Council (AMAC), as one of the major local governments in the Federal Capital Territory (FCT), has been plagued by payroll fraud, which has led to significant financial losses and resource misallocation. Payroll fraud affects the proper disbursement of salaries, leading to widespread inefficiencies in government spending.
Forensic accounting has the potential to uncover and mitigate payroll fraud by applying advanced auditing techniques to financial records, thereby ensuring that only legitimate employees are paid (Adewale, 2025). In this regard, forensic accountants are tasked with analyzing payroll data, identifying discrepancies, and recommending corrective actions to prevent fraud. While forensic accounting techniques have been successfully implemented in various sectors, their application in Nigerian local governments has not been widely studied. Consequently, the effectiveness of forensic accounting practices in detecting payroll fraud in AMAC remains an area of significant interest.
The need to evaluate the impact of forensic accounting in detecting payroll fraud within local governments like AMAC has become urgent due to the increasing prevalence of payroll fraud and its detrimental effect on public finance management. This study will explore the role of forensic accounting in detecting payroll fraud in AMAC, evaluating its effectiveness and the challenges that forensic accountants face in local government settings.
Statement of the Problem
Payroll fraud has been a major challenge in Nigerian local governments, especially in the Abuja Municipal Area Council (AMAC), where it has led to mismanagement of public funds and undermined trust in the government's financial systems (Akinyemi & Okafor, 2024). Fraudulent practices, such as the inclusion of ghost workers, overpayment of salaries, and manipulation of payroll records, have resulted in significant financial losses for the local government. Despite the establishment of anti-corruption frameworks and financial oversight bodies, the level of payroll fraud in AMAC remains high, suggesting that existing measures are insufficient.
The problem is compounded by inadequate forensic accounting practices within the local government systems. Forensic accounting techniques, such as data mining, forensic auditing, and fraud risk assessments, have not been effectively utilized to detect and prevent payroll fraud. As a result, the local government continues to experience financial losses due to fraudulent activities that could have been prevented or mitigated with proper forensic accounting investigations. This study seeks to evaluate the extent to which forensic accounting practices are applied in detecting payroll fraud in AMAC and to identify the barriers to effective implementation.
Objectives of the Study
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To evaluate the effectiveness of forensic accounting in detecting payroll fraud in AMAC.
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To identify the challenges faced by forensic accountants in detecting payroll fraud in AMAC.
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To assess the impact of forensic accounting practices on the reduction of payroll fraud in AMAC.
Research Questions
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How effective are forensic accounting practices in detecting payroll fraud in AMAC?
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What challenges do forensic accountants face in detecting payroll fraud in AMAC?
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How do forensic accounting practices contribute to reducing payroll fraud in AMAC?
Research Hypotheses
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Forensic accounting practices are effective in detecting payroll fraud in AMAC.
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There is a significant relationship between the challenges faced by forensic accountants and the detection of payroll fraud in AMAC.
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Forensic accounting practices lead to a significant reduction in payroll fraud in AMAC.
Scope and Limitations of the Study
The study will focus on the detection of payroll fraud through forensic accounting practices in the Abuja Municipal Area Council (AMAC). It will examine the application of forensic accounting techniques in payroll systems, including data analysis, employee verification, and financial auditing. The study will be based on interviews with forensic accountants, local government officials, and relevant stakeholders within AMAC.
However, the study is limited by access to detailed payroll records, as some information may be classified due to confidentiality concerns. Additionally, the findings may be limited to AMAC and may not be applicable to other local governments in Nigeria.
Definitions of Terms
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Forensic Accounting: The application of accounting principles, investigative skills, and auditing techniques to detect and prevent fraud (Adewale, 2025).
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Payroll Fraud: Any dishonest activity related to the manipulation of payroll systems, such as ghost workers, salary inflation, and falsified attendance records (Akinyemi & Okafor, 2024).
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Abuja Municipal Area Council (AMAC): The local government responsible for managing the Abuja area, including payroll management and public finance oversight.
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Ghost Workers: Non-existent employees who are fraudulently included in payroll records to divert public funds for personal gain.
