The effect of forensic accounting on strengthening governance in Nigerian SMEs: A study of Lagos-based enterprises
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Background of the Study
Forensic accounting has increasingly become an important tool for enhancing governance in organizations, particularly in the context of small and medium-sized enterprises (SMEs). SMEs in Nigeria face significant challenges related to weak governance structures, which can lead to financial mismanagement, corruption, and fraud (Sulaimon & Olowookere, 2023). The lack of strong governance frameworks within Nigerian SMEs often results in a lack of accountability, inadequate financial controls, and inefficient use of resources, which can hinder the growth and success of these enterprises (Afolabi, 2024).
The application of forensic accounting in SMEs can help address these issues by improving transparency, ensuring accountability, and reducing the risk of fraud. Forensic accountants use specialized techniques such as financial audits, fraud detection methods, and investigative procedures to identify financial irregularities and provide solutions to strengthen governance (Okunola & Akinbile, 2024). By adopting these techniques, SMEs can build a more robust governance framework that promotes long-term growth and sustainability.
Lagos, being the economic hub of Nigeria, hosts a large number of SMEs that contribute significantly to the country's GDP. These enterprises, however, often struggle with governance issues that undermine their financial stability and growth. This study focuses on Lagos-based SMEs, exploring the role of forensic accounting in strengthening governance practices within these organizations. By examining how forensic accounting techniques have been applied, this research will provide insights into their effectiveness in improving governance in Nigerian SMEs.
Statement of the Problem
Governance in Nigerian SMEs is often characterized by weak financial controls, lack of accountability, and limited oversight, which increases the risk of financial mismanagement and fraud (Sulaimon & Olowookere, 2023). This has led to significant losses for many SMEs and has undermined their credibility with investors and other stakeholders. While forensic accounting has the potential to enhance governance by identifying fraud and improving financial transparency, its application in Nigerian SMEs remains limited and under-researched.
Many SMEs in Lagos struggle to implement forensic accounting measures due to resource constraints, lack of skilled personnel, and insufficient understanding of forensic techniques (Bamidele & Olayemi, 2025). This research will examine how forensic accounting techniques have been utilized by Lagos-based SMEs to strengthen their governance structures and improve their financial practices. The study will also explore the challenges faced by these SMEs in adopting forensic accounting practices.
Objectives of the Study
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To examine the impact of forensic accounting on strengthening governance in Lagos-based SMEs.
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To assess the effectiveness of forensic accounting techniques in improving financial transparency and accountability in Lagos-based SMEs.
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To identify the challenges faced by Lagos-based SMEs in implementing forensic accounting measures to enhance governance.
Research Questions
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How does forensic accounting contribute to strengthening governance in Lagos-based SMEs?
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How effective are forensic accounting techniques in improving financial transparency and accountability in Lagos-based SMEs?
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What challenges do Lagos-based SMEs face in implementing forensic accounting measures to enhance governance?
Research Hypotheses
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Forensic accounting significantly strengthens governance in Lagos-based SMEs.
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Forensic accounting techniques are effective in improving financial transparency and accountability in Lagos-based SMEs.
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Lagos-based SMEs face significant challenges in implementing forensic accounting measures to enhance governance.
Scope and Limitations of the Study
The study focuses on Lagos-based SMEs and their use of forensic accounting to strengthen governance. It will examine the application of forensic accounting techniques, their effectiveness, and the challenges encountered by these SMEs. The scope is limited to SMEs within Lagos, Nigeria, and does not consider SMEs in other regions. Limitations include challenges in accessing financial data from SMEs, reluctance to disclose instances of fraud, and time constraints that may limit the ability to study the long-term impacts of forensic accounting.
Definitions of Terms
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Forensic Accounting: A branch of accounting that involves the use of investigative techniques to detect and prevent fraud, financial mismanagement, and other financial irregularities.
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Governance: The system of rules, practices, and processes by which a company is directed and controlled, ensuring transparency, accountability, and ethical behavior.
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Small and Medium-sized Enterprises (SMEs): Businesses that maintain revenues, assets, or a number of employees below a certain threshold, contributing to economic development but often facing challenges in governance and financial management.
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Financial Transparency: The practice of openly disclosing accurate and comprehensive financial information to stakeholders to ensure trust and accountability.
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