ABUBAKAR TATARI ALI POLYTECHNIC (ATAP), BAUCHI

SCHOOL OF MANAGEMENT STUDIES

DEPARTMENT OF ACCOUNTANCY AND TAXATION
COURSE: ACC 417 (Forensic Accounting)
CLASS: Higher National Diploma in Accountancy (HNDII)
SESSION/SEMESTER: 2023/2024 Session — Third Semester
LECTURER: Hannatu Yohanna Gimba, ACA.

A) Goal
This course is packaged to expose students to the basic knowledge of Forensic Accounting, and
it will be conducted largely on an intensive discussion given to contemporary issues in forensic
accounting. The course is designed primarily to expose students to forensic accounting at an
advanced level by deepening the knowledge of students in forensic thereby widening their views
on the subject matter.

B) GENERAL OBJECTIVES:
On completion of this course, the student should be able to:
1. Explain the basic concept of Forensic Accounting
2. Explain Fraud Examination and investigation
3. Explain the importance of the roles of forensic accounting in fraud detection, investigation,
and fraud risk assessment in an organization
4. Understand the need for forensic accounting theories in resolving the problem of financial
crimes and cyber-crime in Nigeria
5. Explain the concept of Creative Accounting
6. Explain the concept of Digital Forensics
7. Understand the need for Forensics and Fraud Investigation Report Writing.

C) RECOMMENDED TEXTBOOKS
1) AFAR Journal of Forensic Accounting & Fraud Investigation
2) Mainoma, M.A. & Oyedokun, G.E. (2020). Guidance on Due-Diligent War in Nigeria: A
Forensic Accounting Approach to Fight against Corruption. Lagos. Nigeria. Association of
Forensic Accounting Researcher (AFAR). ISBN: 9789789787326
3) Oyedokun, G. E. (2020). Fundamentals of forensic accounting & fraud Investigation. 2 nd
Edition, Lagos, Nigeria. Association Forensic Accounting Researchers (AFAR). ISBN: 978-978-
56462-6- 9
4) Oyedokun, G. E. (2018). Fundamentals of forensic accounting & fraud Investigation. Lagos,
Nigeria. Aaron & Hur Publishing. ISBN: 978-978-56462-6-9
5) Oyedokun, G. E. (2018). Ethical justification for creative accounting: Fraud & forensic
Accountants’ perspectives. Lagos, Nigeria. Aaron & Hur Publishing. ISBN: 978-978-56462- 9-2
6) Oyedokun, G. E. (2017). Compendium of writings in forensic accounting & fraud
examination. Lagos, Nigeria. ASCO Publishers. ISBN: 978-978-55513-7-2
7) Oyedokun, G. E. (2019). Lecture Note on Audit Assurance & Professional Ethic.
D) GRADING FORMULA
Continuous Assessment 40%
Semester Examination 60%
Aggregate 100%

The continuous assessment marks are to be absorbed through class work, scheduled test and
assignment(s).

1. EXPLAIN THE BASIC CONCEPT OF FORENSIC ACCOUNTING

Introduction
Forensic accounting plays a vital role in preventing, detecting and minimizing accounting frauds
and eliminating their existence in an organisation. The role of forensic accountants in combating
frauds and other related financial crimes both in the private and the public sectors cannot be
overemphasized. Hence, forensic accountants must possess the requisite accounting, auditing,
and investigative skills in order to provide evidence suitable for use in the court when fraud
exists within an organization. However, the procedures for a thorough forensic audit demands a
high level of understanding in the provision of auditing, investigation techniques, accounting
rules, wide economic references and other legal obligations. Forensic accountants draw
conclusions which calculate values and identify irregular or suspicious transactions by critically
analyzing the financial data. Thus, they provide an accounting analysis to the court of law for
any dispute resolution and the economic investigative explanations of the fraud that has been
committed.

Therefore, forensic accounting can be described as a specialized field of accountancy which

investigates fraud and analyze financial information to be used in legal proceedings. Forensic
accounting uses accounting, auditing, and investigative skills to conduct investigations into theft
and fraud. It encompasses both Litigation Support and Investigative Accounting.

According to the Journal of Forensic Accounting, “Forensic accounting is sufficiently thorough

and complete so that an accountant, in his/ her considered independent professional judgment,
can deliver a finding as to accounts, inventories, or the presentation thereof that is of such quality
that it would be sustainable in some adversarial legal proceeding, or within some judicial or
administrative review.” Forensic accounting falls within the context of our environmental needs.

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That is, to give forensic assistance in accounting issues. This is very vital in the environment that
is flooded with fast moving businesses and polluted with politicians who have powers to corrupt
well-meaning businessmen. This normally happens in detriment of well-planned public projects
that are roughly implemented.

KPMG (1999) defines forensic accounting as assistance in disputes which are likely to involve
litigation, arbitration, expert determination, mediation or an enquiry by an appropriate regulatory
authority, and investigation of suspected frauds, irregularity or misconduct which could
potentially lead to civil, criminal or disciplinary proceedings; while focusing primarily on
accounting issues. In the same vein, Chilvers (2000) defines forensic accounting as the use of
investigative techniques, integrated with accounting and business skills, to develop information
and opinions for evidence in court and for use by expert witnesses.

Forensic accounting is recognized as a form of professional expertise and endowed with specific
attributes; the recognition comes from possessing a formal certification in forensic accounting
which provides symbolic value (Williams, 2002). Forensic accounting as posited by Crumbley,
Heitger and Smith (2005) is the specialty area of the accountancy profession which describes
engagements that result from actual or anticipated disputes or litigation. “Forensic” means
“suitable for use in a court of law,” and it is to that standard and potential outcome that forensic
accountants generally should work. In the same view, Howard and Sheetz (2006) defines
forensic accounting as the process of interpreting, summarizing and presenting complex financial
issues clearly, succinctly and factually often in a court of law as an expert.

Due to the common nature of the various definitions reside in the areas of litigation services,
accounting investigation and preparing court-ready evidence all of which are of great
importance, forensic accounting may be one of the most effective and efficient ways to reduce
and prevent fraudulent activities as it is concerned with the evidentiary nature of accounting data,
and as a practical field concerned with:
i. Accounting fraud and forensic auditing;
ii. Compliance,
iii. Due diligence and risk assessment;
iv. Detection of financial misrepresentation and financial statement fraud.

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Notwithstanding all about definition of forensic accounting, Oyedokun (2018) gives a
compressive definition of forensic accounting as “a scientific accounting method of uncovering,
analyzing, resolving and presenting fraud and white-collar crime matters in a manner that
produces admissible evidence which is capable of proving or disproving facts in issue suitable in
the court of law”. Similarly, in his study, Oyedokun (2018) contributed to the existing
knowledge in terms of forensics concepts, where new definitions were brought forward as a
result of the findings herein. These are tax accounting, forensic taxation, forensic tax audit,
forensic tax investigation, and forensic tax justice among others.
ASSIGNMENT
Briefly explain the following as they relate to forensic accounting:
a) Forensic Tax Accounting
b) Forensic Taxation
c) Forensic Tax Audit
d) Forensic Tax Investigation
e) Forensic Tax Justice.

The role of a Forensic Accountant as follows:

1. Investigating financial accounts for illegal activity such as white-collar crime.
2. Interprets findings of an investigation to determine if there's a problem.
3. Examines financial data regarding alleged criminal activity such as fraud, money laundering,
illegal transactions, and embezzlement.
4. Examine financial records which may include bank accounts, records, or financial
transactions.
5. Use knowledge of the law and accounting to determine whether there is fraudulent activity.
6. Working with law enforcement, private investigators or lawyers while conducting
investigations.
7. Testifies in court about the investigation.
8. Assist the courts, solicitors, and clients to understand the complex financial and accounting
issues and presenting that information in a manner that all users can understand.

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Forensic Accountants helps at a number of different levels in the litigation process including:
i. Assisting in initial discovery
ii. Applying commercial knowledge and expertise
iii. Providing expert evidence both written and oral
iv. Criminal Investigations
v. Shareholders' and Partnership Disputes
vi. Personal Injury Claims/Motor Vehicle Accidents
vii. Business Interruption/Other Types of Insurance Claims
viii. Business/Employee Fraud Investigations
ix. Matrimonial Disputes
x. Business Economic Losses
xi. Mediation and Arbitration

Competencies Required by a Forensic Accountant

A set of competencies required by a forensic accountant have been identified. These skills
include
i. Good analytical skills
ii. Creative thinking skill
iii. Strong knowledge of the legal environment
iv. Unstructured problem-solving competence
v. Investigative flexibility
vi. Analytical proficiency including oral communication ability, written communication ability,
vii. Practical business experience.
In conclusion, a forensic accountant is expected to have competence in a broad spectrum of
disciplines including accounting, law, auditing, criminology, and information technology and
communication skills.

2. EXPLAIN FRAUD EXAMINATION AND INVESTIGATION

The increasing incidence of fraud, fraudulent activities, and corrupt practices in Nigeria and
around the world has necessitated the relevance of forensic accounting. Forensic accounting
arises because the audit system in an organization had failed to detect certain errors. Hence it
covers all activities involved in fraud investigation, forensic accounting investigation and

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forensic audit. Forensic accountants are employed to look into the possible suspicion of
fraudulent activities or hired by a company who may just want to prevent fraudulent activities
from occurring.

Definition of Fraud
According to the Institute of Turkish History (1998), fraud means a deceptive trick, scam, game
artifice, cabal which is committed to cheating, mislead someone and contributing something
useless to something in order to gain an advantage. According to Arzova (2003), fraud is meant
to create a misjudgment or maintain an existing misjudgment to induce somebody to make a
contract. However, one should not mix fraud with fault, which means “wrong, mistake, error
committed involuntarily and unconsciously”. Fault stems from the deficiencies originated from a
person or an environment. Therefore, intention is the most important element which
distinguishes fraud from fault. Fraud can be referred to as intentional act of using an unfair or
dishonest act to illegally deprive another person or entity of money, assets, or legal rights which
includes misappropriation, and misrepresentation or non-disclosure of a material fact.

Elements of Fraud
There are basically 4 elements that prove the commission of fraud. They are:
 A misrepresentation or non-disclosure of a material fact: Non-disclosure or
misrepresentation of material fact is the major element and necessary condition that
proves the commission of a fraud (Fraud Examiner’s Manual, 2020).
 Knowledge of falsehood: There must be knowledge of misleading and non-disclosure of
the fact.
 Intention to deceive: There must be an intentional act to conceal or misrepresent facts.
 Actual loss or injury suffered: There must be loss or injury suffered by the victim as a
result of relying on the deception or misrepresentation of the fraudster.
Different Types of Fraudsters
Fraudsters usually fall into one of three categories:
1. Pre-planned fraudsters, who start out from the beginning intending to commit fraud. These can
be short-term players, like many who use stolen credit cards or false social security numbers; or
can be longer term, like bankruptcy fraudsters and those who execute complex money laundering
schemes.

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2. Intermediate fraudsters, who start off honest but turn to fraud when times get hard or when life
events, such as irritation at being passed over for promotion or the need to pay for care for a
family member, change the normal mode.
3. Slippery-slope fraudsters, who simply carry-on trading even when, objectively, they are not in
a position to pay their debts. This can apply to ordinary traders or to major business-people.

It should be noted that, fraud can also be categorized into three groups, namely;
i. Internal: Internal fraud relates to those committed by members of staff and directors of the
organizations
ii. External fraud: external fraud is committed by persons not connected with the organization
and;
iii. Mixed fraud: this involves outsiders colluding with the staff and directors of the organization.

Fraud Examination
Fraud examination is the methodology of resolving allegations from inception to disposition
including obtaining evidence, interviewing suspects, writing reports and assisting in detection
and deterrence of fraud (ACFE, 2022). Fraud examination draws its common body of knowledge
from four areas: accounting and auditing, fraud investigation, legal elements of fraud and
criminology. It is hereby recommended that all would be forensic accountants/investigators,
fraud/forensic auditors, statutory auditors, and investigative accountants should be well equipped
with forensic accounting techniques in obtaining admissible evidence suitable for litigation
purposes. All fraud investigations are forensic accounting investigation but not all forensic
accounting investigations are a fraud investigation. This is where forensic accountant and fraud
examiners come in. Certified Fraud Examiners are currently in great demand, with the public
need for honesty, fairness and transparency in reporting increasing exponentially.

Fraud Investigation
Fraud investigation deals with the investigation of fraudulent activities. The outcome of fraud
investigation may or may not be used for legal purposes. Fraud investigation is often associated
with the investigation of criminal matters. All fraud investigations are forensic accounting
investigation but not all forensic accounting investigations are a fraud investigation. Forensic
accounting is the umbrella that covers fraud investigation, forensic accounting investigation and
forensic audit.
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Fraud Alerts
Fraud alerts have been described as specific events or red flags, which may be indicative of
fraud. A list of possible fraud alerts is provided below. This should not be considered an
exhaustive list, as alerts will appear in many different guises according to circumstances.
i. Anonymous emails/letters/telephone calls.
ii. Emails sent at unusual times, with unnecessary attachments, or to unusual destinations.
iii. Discrepancy between earnings and lifestyle.
iv. Unusual, irrational, or inconsistent behaviour.
v. Alteration of documents and records.
vi. Extensive use of correction fluid and unusual erasures.
vii. Photocopies of documents in place of originals.
viii. Rubber Stamp signatures instead of originals.
ix. Signature or handwriting discrepancies.
x. Missing approvals or authorization signatures.
xi. Transactions initiated without the appropriate authority.

Anti-Fraud Team
The anti-fraud team according to Ekeigwe (2010) comprises of those that are responsible for
controlling and preventing fraud and as well prosecuting fraudsters as they include:
i. Fraud Examiner: Also known as fraud investigator is a person who conducts civil and criminal
investigations to identify a scam. He tracks all the events and examines all the evidence in
situations where fraud may have been committed.
ii. Auditors: They are those charged with the responsibility of examining and reporting on the
financial statements so as to detect any misappropriations or fraudulent practices.
iii. Security: Usually a detective, they investigate what could be described as a traditional fraud
offences, such as banking fraud, insiders billing fraud, etc. They are usually armed in case of any
emergency.
iv. Human Resource Personnel: They are those charged with the responsibility of implementing
strategies and policies that are capable of curbing fraudulent acts.

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v. Management Representative: This is a representative of the organization in which the
investigation is been carried out. He has a first-hand information concerning the issue
investigated on.
vi. Legal Counsel: They are those who give legal advice.
vii. Information System Personnel: They are those involved in processing data concerning the
investigation.
viii. Accountants: Accountants here examine the accounts and records of an organization un
behalf of a client for a special purpose in terms of business.

Approaches to Forensic Accounting Assignment

Each forensic accounting assignment is unique and has a peculiar approach. In general, many
forensic accounting assignments will include the steps that must be carried out by forensic
accountant and are detailed below:
1. Meet with the Client: It is very important to meet with the client in order to have a clear
understanding of the important facts, players and issues at hand.
2. Perform Conflict Check: A conflict check should be carried out as soon as the relevant
parties are established.
3. Perform Initial Investigation: Preliminary investigations should be carried out prior to the
development of a detailed plan of action. This will allow subsequent plans to be based upon a
more complete understanding of the issue.
4. Develop an Action Plan: This plan will take into account the knowledge gained by meeting
with the client in carrying out the initial investigation and will set out the objectives to be
achieved and the methodology to be utilized to accomplish them.
5. Obtain the Relevant Evidence: Depending on the nature of the case this may involve
locating documents, economic information and asset, a person or the company, another expert or
proof of the occurrence of an event.
6. Perform the Analysis: The actual analysis performed will be dependent upon the nature of
the assignments and may involve:
i. Calculating economic damages
ii. Summarizing a large number of transactions
iii. Performing a tracing of assets

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iv. Performing a present value calculation by utilizing appropriate discount rates
v. Performing a regression or sensitivity analysis
vi. Utilizing a computerized application such as a spreadsheet, database or computer model
vii. Utilizing charts and graphics to explain the analysis.
7. Prepare the Report: Often a report will be prepared which may include sections on the
nature of the assignment, scope of the investigation, approach utilized, and limitations of scope
and findings and/or opinions. The report will include schedules and graphics necessary to
properly support and explain the findings.

3. EXPLAIN THE IMPORTANCE OF THE ROLES OF FORENSIC ACCOUNTING IN

FRAUD DETECTION, INVESTIGATION, AND FRAUD RISK ASSESSMENT IN AN
ORGANIZATION
The thoughtful and efficient use of forensic accounting investigators often offers the right
balance between conducting routine audits and investigating for possible fraud. A predicate must
exist before an investigation is undertaken. A predicate is the totality of circumstances that
would lead a reasonable, professionally trained, and prudent individual to believe a fraud has
occurred, is occurring, and/or will occur. Predication is the basis for undertaking a fraud
investigation.

According to Hopwood, Leiner and Young (2012), the fraud investigation process involves
systematically gathering and reviewing evidence for the purpose of documenting the presence or
absence of fraud. Fraud investigations normally commence as a result of some indication that
fraud may have occurred. Forensic Investigation and Forensic Audit are better forensic strategies
in resolving the allegations of fraudulent activities as signs of financial crime can be initially
detected in a variety of ways; by accident, by whistle-blowing, by auditors, by data mining, by
controls and testing, or by the organization's top management requesting an inspection on the
basis of mere suspicion. In virtually all cases, the fraud investigator must assume that the matter
under investigation will eventually conclude in civil or criminal courts. As a result, fraud
investigations must be conducted systematically and with the utmost care from the very
beginning.

A forensic accounting investigation is a practice of lawfully establishing evidence and facts that
are to be presented in a court of law (Oyedokun, 2015b). The term is used for nearly all
investigations, ranging from cases of financial fraud to murder. When most people think about
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forensics, they think about crime scene investigation, in which physical evidence is gathered.
There are other forms of forensic investigation, however, such as computer forensics and sub-
fields that focus on dentistry or insects and crime scenes (Taylor, 2017).

Concept of Investigations
Investigation is the act or process of investigating or the condition of being investigated.
Investigation can also be defined as searching inquiry for ascertaining facts; detailed or careful
examination. Investigation is a vital part of forensic accounting and auditing process but only
applied when the event or transaction is beclouded. It is carried out when lapses have been
established to ascertain who is responsible, the reason for the action including the extent of
damage if any. It could be referred to as a detailed verification and clarification of doubt about a
transaction or event.

Forensic Investigation
Forensic investigation is much more thorough and focused, principally to fully recognize a
specific issue or family of issues and often used in resolving disputes, including litigation
support. Forensic accounting as simplified by Oyedokun (2014) means effective evidence
gathered by auditors which are appropriate for use in a court of law and frequently used by
government agencies. Whereas forensics is principally conducted with an assumption that there
may be something that has gone wrong, and sufficient papers should be built up to establish the
same. The primary purpose is evidence collection to establish a possible misappropriation,
misstatement or a fraud. Forensic accounting is designed for use in a court of law, so forensic
accountants develop evidence that cannot be shredded by opposing lawyers. Forensic accounting
investigators thus often have the task of conveying to all constituencies that the results of the
investigation will be more reliable if all participants and interested parties work together and
contribute their specific expertise or insight with truth-seeking objectivity.

Phases in Engagement Approach to Forensic Accounting

Renick (2007) in the article “A Phased Engagement Approach to Forensic Accounting” opined
that there are several approaches to a forensic investigation. The study recommended a phased
engagement approach in managing the investigation efficiently as its controls the engagement
with decision points throughout the process (Renick, 2007). The phases are listed below:

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Phase 1: Exploration and Evaluation
Before any work can begin, the client and the forensic accountant must define the problem, the
issues involved, and the scope of the engagement. Then a projection of the timeframe, cost, and
expected deliverables for each phase can be determined. Phase 1 concludes with a report of
preliminary findings, written or oral. The report should indicate what additional information and
documents are needed, a recommendation on how to proceed, and the identification of any
potential risks. These might include risks to the business from public disclosure or government
scrutiny, and to clients for their actions or inactions, as well as litigation risk. Forensic
accountants must bear in mind that all written communications may be subject to discovery.

Phase 2: Expansion of Scope (Tracking and Tracing)

This Phase commences with specific document analysis. This analysis is more in-depth than in
phase 1 as it will probably include a review of many more transactions, books, records, and
documents requested from the opposing side. Phase 2 may also include the verification of certain
findings from third parties.
Preparing the analysis: In preparing an analysis, it is important for a forensic accountant to
trace transactions from beginning to end as well as from end to beginning including reviewing
supporting documentation. One example would be a purchase. The beginning-to-end tracing may
start with the request by the factory foreman for certain materials. The tracing would include
requisition and inventory logs, the purchase journal, the accounts payable subsidiary ledger, the
cash disbursements journal, and the general ledger. The documents related to that request might
include the materials requisition, the purchase order, the warehouse receipts journal, the voucher
payable, and other documents (Oyedokun, 2015c).

Phase 2 is concluded with the delivery of a report to the client. As compared to the report issued
in phase 1, the phase 2 report is almost always in writing and more formal. The report in phase 2
should include detailed findings, any additional potential risks that the forensic accountant
believes are present, any additional information that might still be needed, and a
recommendation as to whether the forensic accountant believes there is sufficient evidence or
information for the process to continue.

It should be noted that, there are basic elements to consider for inclusion in a report of forensic
investigation. These include:

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i. Identity of your client.
ii. State in broad terms what you were asked to do.
iii. Describe your scope, including the period examined.
iv. Include mention of any restriction as to distribution and use of the report.
v. Identify the professional standards under which the work was conducted.

4. UNDERSTAND THE NEED FOR FORENSIC ACCOUNTING THEORIES IN

RESOLVING THE PROBLEM OF FINANCIAL CRIMES AND CYBER-CRIME IN
NIGERIA
Different theories as relating to forensic accounting have evolved over time as the field of
forensic accounting gains popularity. However, different scholars have developed different
theories relating to forensic accounting and fraud examination. An exposition to the various
theories relating to forensic accounting and fraud examination will be discussed in no particular
order.
1. Agency Theory
2. White Collar Crime Theory
3. Theory of Triangle of Fraud Action
4. Theory of Fraud Triangle
5. Theory of Fraud Diamond
6. Fraud Scale Theory
7. Deterrence Theory
8. Theory of Crime and Corruption
9. The Pentagon Fraud Theory
10. Anomie Theory

AGENCY THEORY
Jensen and Meckling (1976) defined an agency relationship as a “contract under which one or
more persons (the principal(s)) engage another person (the agent) to perform some service on
their behalf which involves delegating some decision-making authority to the agent. If both
parties to the relationship are utility maximizers, there is a good reason to believe that the agent
will not always act in the best interests of the principal”. Agency Theory explains how to best
organize relationships in which one party determines the work while another party does the

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work. In this relationship, the principal hires an agent to do the work or to perform a task which
he is unable or unwilling to do.

Agency theory is also explained as “a simple agency model suggests that, as a result of
information asymmetries and self- interest, principals lack reasons to trust their agents and will
seek to resolve these concerns by putting in place mechanisms to align the interests of agents
with principals and to reduce the scope for information asymmetries and opportunistic behaviour
(Institute of Chartered Accountants in England and Wales, 2005). The Institute of Chartered
Accountant in England and Wales (ICAEW) (2006) in Millichamp and Taylor (2008), stated that
“in principle, the agency model assumes that no agent is trustworthy and if they can make
themselves richer at the expense of their principals they will. The principal has no alternative but
to compensate the agents well for their endeavour so that they will not be tempted to go into
business for themselves by using the principal’s assets to do so”.

According to Millichamp and Taylor (2008), the agency is the name given to the practice by
which productive resources owned by one person or group are managed by another person or
group of person. Agency theory, on the other hand, is the recognition that the inclinations of
agents, in this case, the directors or manager of the business, is to act rather more in their own
interests than those of their employers, the shareholder.

WHITE COLLAR CRIME THEORY

White collar crime is a crime committed by a person of respectability and high social status in
the course of his occupation (Sutherland, 1949). Chandra and Showkat (2014) also tried applying
a criminal law definition to white-collar crime by saying; white-collar crimes are those
criminally illegal acts committed during the course of one’s job. Here are a few examples: An
accountant embezzles funds from his employer; two nurses steal drugs from their workplace and
sell them to addicts; a financial investor steals investors’ money; a prosecutor accepts a bribe to
drop criminal charges; two investors share inside information that allows them to redirect their
stock purchases while a disgruntled employee destroys the computer records of a firm upon her
resignation. These acts are instances where the criminal law has been violated during the course
of employment.

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Shanikat and Khan (2013) established that there is an increase in white collar crimes where
evidence is comparatively more obscure and difficult to detect. Furthermore, it is imperative to
equip auditors and investigators with forensic skills, due to the emerging threats in the recent
times. In general, this theory assesses white-collar crime as a natural product of conflicting
values within our economic and class structures and the white-collar criminal as an individual
who, through associations with colleagues who define their offences as "normal" if not justified,
learns to accept and participate in the anti-legal practices of his occupation.

THEORY OF TRIANGLE OF FRAUD ACTION

The study of Dada (2014); Albrecht, Hill and Albrecht (2006) and Kranacher et al. (2011)
described the action an individual must perform to perpetrate a fraud include, execution of the
fraud, embezzlement, cheque kiting or material fraudulent financial reporting, Concealment
which is the hiding of the fraud action by raising false journal, falsification of bank reconciliation
and destroying files and conversion which is the process of turning the gains from fraud into
something useable by the perpetrator for instance, money laundered, cars or houses are also
considered as fraud action.

Dada (2014) posited that, the triangle of fraud action can be documented, controlled and detected
by anti-fraud professionals. Where fraud triangle points investigators to why people might
commit fraud, the evidentiary trail might be weak or non-existent for instance, pressure and
rationalization are not directly observable. It should be noted that a lack of fraud evidence is not
a proof that fraud had not occurred. Hence, anti-fraud professionals need an evidence-based
approach to conduct an investigation. The triangle of a fraud action, therefore, helps in detecting
white collar crimes and obtaining prosecutorial evidence where it makes it difficult to argue that
the fraudulent acts were incidental.

DETERRENCE THEORY
The deterrence theory can be traced to the early works of classical philosophers such as Thomas
Hobbes (1588–1678), Cesare Beccaria (1738–1794), and Jeremy Bentham (1748–1832).
Deterrence theory is a theory of crime that presumes that human beings are rational enough to
consider the consequences of their actions and to be influenced by those consequences. Some
theorists believe that crime can be reduced through the use of deterrence. The goal of deterrence,

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crime prevention, is based on the assumption that criminals or potential criminals will think
carefully before committing a crime if the likelihood of getting caught and or the fear of swift
and severe punishment is present.

The theory of deterrence that has developed from the work of Hobbes, Beccaria and Bentham
relies on three individual components:
i. Severity,
ii. Certainty, and
iii. Celerity.

THEORY OF CRIME AND CORRUPTION

Sociologist Gross (1963) has asserted that all organizations are inherently criminogenic though
not necessarily criminal. Gross makes this assertion because of the reliance on “the bottom line.”
Without necessarily meaning to, organizations can invite fraud as a means of obtaining goals. It
is believed by Shanikat and Khan (2013) that the rise in the white-collar crimes, where evidence
are comparatively more obscure and difficult to detect, has necessitated equipping of auditors
and investigators with forensic skills, particularly over the recent years (Gottschalk, 2011;
DiGabriele, 2009; Carnes & Gierlasinski, 2001). Criminologist Oliver Williamson noted that
because of a department’s concern with reaching its goals, managers might tend to maximize
their department’s own interests to the detriment of the organisation (Fraud examiner manual,
2014).

As a strategy to control crime, deterrence is designed to detect law violations, determine who is
responsible, and penalize offenders in order to deter future violations. Deterrence systems try to
control the immediate behaviour of individuals, not the long-term behaviours targeted by
compliance systems. Deterrence theory assumes that humans are rational in their behaviour
patterns. Humans seek profit and pleasure while they try to avoid pain. Deterrence assumes that
an individual’s propensity towards law-breaking is in inverse proportion to the perceived
probability of negative consequences (Fraud examiner manual, 2014).

5. EXPLAIN THE CONCEPT OF CREATIVE ACCOUNTING

There are various definitions of creative accounting in the literature, but they all boil down to the
same idea. Bhasin (2016) describes creative accounting as an accounting practice that may (or
may not) adhere to accounting principles and standards, but deviates from what those principles

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and standards intend to achieve, in order to present the desired business image. In other words,
creative accounting is the process of transforming accounting information from what it actually
is to what the company wants it to be, using the benefits (or loopholes) in the existing rules or by
ignoring part of the rules.

Creative accounting can also be described as a series of actions initiated by the company’s
management that affect the reported business result, which, however, do not bring true economic
benefits to the company, but can instead result in great damages in the long term (Merchant, &
Rockness, 1994). Shah (1998) in turn, defined creative accounting as a process in which
managers utilise the so-called loopholes and ambiguities in accounting standards to demonstrate
financial success in a biased manner. Since creative accounting often does not violate legal rules,
the question is whether it is good or bad. This depends on the basic purpose for which it is used
and the manner in which it is applied.

Creative Accounting refers to the use of accounting knowledge to influence the reported figures,
while remaining within the jurisdiction of accounting rules and laws, so that instead of showing
the actual performance or position of the company, they reflect what the management wants to
tell the stakeholders, purposeful intervention in the external financial reporting process with the
intent of obtaining some exclusive gain.

Why Creative Accounting?

Management of organizations are been motivated towards creative accounting behaviour and
what motivates these steps are highlighted below according to Hameed and Ajide (2014):
a. The existence of tax levies based on income.
b. Confidence by shareholders and workers in management that is able to report stable earnings
and psychological expectations relating to increases or decreases in anticipated income.
c. In countries with highly conservative accounting systems, the income smoothing effect can be
particularly pronounced because of the high level of provisions that accumulate.
d. Another bias that sometimes arises is called 'big bath accounting’, where a company making a
bad loss seeks to maximize the reported loss in that particular year so that future years will
appear better.
e. Other motivations for creative accounting include those provided when significant capital
market transactions anticipated, and when there is a gap between the performances of the firm

17
and analysts' expectations. A variant on income smoothing is to manipulate profit to tie in
forecasts.

Consequences of Using Creative Accounting

The consequences of using creative accounting include:
i. Reduction of Company Value - Decisions taken to influence short-term profits through the
use of creative accounting may impair the health of “long-term" economical entity.
ii. Violation of Ethical Standards - Even if creative accounting practices do not violate IFRSs,
they are a controversial ethical practice. Creative accounting resembles a steep path with minor
accounting frauds, which become more aggressive until they create distortions in the financial
statements.
iii. Hiding Unit Operational Problems - Creative accounting can be practiced at lower
managerial levels so that operational problems can be kept hidden by senior managers.

Preventive Measures
i. The ability to choose different accounting methods can be reduced by reducing the number of
possible methods or specifying the cases when each method can be used. Another way of
preventing it is to seek consistency in the use of methods. If a company has used a certain
method when its financial condition was good, it should continue to use the same method even if
the advantage is not in her side.
ii. Regarding to the abusing judgment or prediction, there are three ways to prevent it. The first is
the adoption of rules that minimize cases of use of judgment or prediction by companies. The
second concerns the obligation to have a consistency or continuity of the method used in the
trial. So if the company has evaluated something in a certain way, there is no reason why it
should change this method if it does not use it anymore. Third, auditors need to intensify their
efforts in detecting inaccurate manipulative projections. Once auditors audit the company's
financial statements, they should carefully check whether the anticipation made by the managers
are normal or obvious signs of falsehood.
iii. Artificial transactions can be prevented by using the concept of "substance over form". So,
the companies should use more economic restraint in the accounting records of these transactions
than its legal form. It is necessary for the procedure to be economically conceived and to

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recognize its economic effect and not to be abused with the legal form which, despite being
legally regular, does not represent the economic reality of any action.
iv. Regular transactions are difficult to prevent and becomes a moral responsibility for the
company executives. However, the possibility to use it as a manipulation tool can be limited by
setting the constant assessment of fixed assets and long-term investments so that the loss or gain
from their valuation or impairment is recognized in the relevant period and not just in a period.
v. Since the market and the economy are increasingly evolving, chances that certain specific
business areas are not well covered by accounting rules. This problem can be reduced through
extended review of current standards and their completion with new standards for problem areas
such as accounting for stock exchange operations.

Concepts in Creative Accounting

 Earnings Management
Earnings management is a type of creative accounting where an attempt is made by management
so as to influence or manipulate reported earnings by using specific accounting methods or
changing the methods previously used. Earnings management techniques include deferring or
accelerating expense or revenue transactions or using other methods designed to influence short-
term earnings. Earnings management is the use of accounting techniques to produce financial
reports that present an overly positive view of a company's business activities and financial
position. Many accounting rules and principles require company management to make
judgments. Earnings management takes advantage of how accounting rules are applied and
create financial statements that inflate earnings, revenue or total assets.
 Window Dressing
This depicts a situation where an entity enters into a transaction during a particular financial year
and reverses such transaction immediately after the year-end. The main motive for doing this is
to artificially improve profitability and liquidity in the financial statements. Window dressing is a
strategy used by mutual fund and other portfolio managers near the year or quarter end to
improve the appearance of a fund’s performance before presenting it to clients or shareholders.
To window dress, the fund manager sells stocks with large losses and purchases high-flying
stocks near the end of the quarter. These securities are then reported as part of the fund's
holdings.

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  Aggressive Earnings Management
Aggressive earnings management is a manipulated means of misleading the stakeholders
especially about an entity's performance and profitability. Companies could carry out various
ugly means to achieve their aims. According to Sanusi (2010), some banks normally engage in
manipulation of their books by colluding with other banks to artificially enhance financial
positions and therefore stock prices, practices such as converting non-performing loans into
commercial papers and bank acceptances and setting up off-balance sheet special purpose
techniques so as to hide their losses. This shows the extent to which some banks could go on
creative accounting and aggressive earnings. Although, the Central Bank of Nigeria (CBN) had
put in place various stringent measures in order to put an end to this menace and other related
practices in the banking industry.

 Big Bath Accounting

This refers to recognizing all the bad news in one year so that later years can look stronger. If a
company expects disappointing results it might decide to make them even worse by writing
down assets and recognizing liabilities. In future years the assets could be used without any
corresponding cost and a decision made that the liabilities are no longer required. They would
then be reversed back through the statement of profit or loss.

Motives for Applying Creative Accounting

The main motives for applying creative accounting are:
i. Obtaining personal gain
ii. Competition
iii. Attracting investors
iv. Increasing or maintaining the level of capital
v. Buying time for not settling debts
vi. Beating analysts’ forecasts about future company performance.
In order to present their business in the best possible light, companies use various techniques to
manipulate financial information. Manipulations usually occur where accounting standards
require accounting estimates.

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The most widely used creative accounting techniques are:
i. Manipulation of off-balance sheet financing items
ii. Changes in accounting policies and depreciation methods
iii. Manipulation of other income and expense items
iv. Changes in the value of money
v. Overestimation of revenues by recording fictitious sales revenues
vi. Manipulation of receivables write-offs
vii. Manipulation of accruals.

Techniques for Preventing Creative Accounting

Efficient techniques for preventing creative accounting include:
i. Adaptation of accounting standards in terms of limited use of estimates and consistency in the
application of accounting methods
ii. Recognizing and insisting on the role of internal and external audit in identifying and
reporting unfair estimates, and preventing accounting manipulations
iii. Change of audit service providers from one accounting period to another
iv. Hiring independent auditors and members of the audit committee
v. Establishing effective corporate governance controls
vi. Company persistence in developing a whistleblower policy
vii. Continuously making employees aware of the code of ethics
viii. Placing emphasis on the development and application of forensic accounting
ix. Making investors aware of the practice of manipulating financial information
x. Consistent enforcement of penalties by national authorities.

6. EXPLAIN THE CONCEPT OF DIGITAL FORENSICS

Digital forensics is also known as computer forensics or cyber-crime forensics. Professionals
who manage or administer information systems and networks should understand computer
forensics. Forensics is the process of using scientific knowledge for collecting, analyzing, and
presenting evidence to the courts. The word forensics means “to bring to the court”. Forensics
deals primarily with the recovery and analysis of latent evidence.

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Computer Forensics
Computer forensics is a discipline that combines elements of law and computer science to collect
and analyze data from computer systems, networks, wireless communications, and storage
devices in a way that is admissible as evidence in a court of law. Computer forensics is the
practice of collecting, analyzing and reporting on digital data in a way that is legally admissible.
It can be used in the detection and prevention of crime and in any dispute where evidence is
stored digitally. Computer forensics follows a similar process to other forensic disciplines and
faces similar issues. Digital forensics is the process of uncovering and interpreting electronic
data. The goal of the process is to preserve any evidence in its most original form while
performing a structured investigation by collecting, identifying and validating the digital
information for the purpose of reconstructing past events.

Forensic investigators typically follow a standard set of procedures. After physically isolating the
device in question to make sure it cannot be accidentally contaminated, investigators make a
digital copy of the device's storage media. Once the original media has been copied, it is locked
in a safe or another secure facility to maintain its pristine condition. All investigation is done on
the digital copy.

Objectives of Computer Forensics

The main objectives of computer forensics can be summarized as follows:
a. To recover, analyze, and preserve the computer and related materials in a manner that can be
presented as evidence in a court of law.
b. To identify the evidence in a short amount of time, estimate the potential impact of the
malicious activity on the victim, and assess the intent and identity of the perpetrator.
The two basic types of data collected in computer forensics are as follows:
a. Persistent Data: Persistent data is the data that is stored on a local hard drive (or another
medium) and is preserved when the computer is turned off.
b. Volatile Data: Volatile data is any data that is stored in memory or exists in transit that will
be lost when the computer loses power or is turned off. Volatile data resides in registries, cache,
and random access memory (RAM). Since volatile data is ephemeral, it is essentially an
investigator knows reliable ways to capture it.

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More recently, commercial organizations have used computer forensics to their benefit in a
variety of cases such as:
a. Intellectual Property theft
b. Industrial espionage
c. Employment disputes
d. Fraud investigations
e. Forgeries
f. Bankruptcy investigations
g. Inappropriate email and internet use in the workplace
h. Regulatory compliance.

Stages of Digital Forensic Examination

Digital forensic examination process can be divided into six stages, presented in their usual
chronological order as follows:
1. Identification
2. Readiness
3. Evaluation
4. Collection
5. Preservation
6. Analysis
7. Presentation
8. Review
9. Reporting

7. UNDERSTAND THE NEED FOR FORENSICS AND FRAUD INVESTIGATION

REPORT WRITING
Introduction
Writing effective reports is a critical skill for Forensic Accountants. A thorough investigation or
keen analysis will often do little good if the forensic accountants/fraud examiners cannot convey
the information in a written format. Fraud examiners typically must be very flexible in their
writing technique, because reports should generally be tailored to the situation, as well as to the

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needs of the party requesting the report. Even so, many aspects of good writing such as accuracy,
relevancy, and clarity are universal to all reports (ACFE, 2019).

Report of Investigation
Documenting an investigation is as important as performing it. A poorly documented case file
can lead to a disappointing conclusion, can result in a dissatisfied client, and can even damage
the financial accounting investigator’s reputation and that of the investigator’s firm. The form of
the report whether oral or written is a matter to be discussed with the client and with counsel.
While it is not the responsibility of the forensic accounting investigator to advise on the legal
perils associated with various forms of reporting, there are certain issues of which forensic
accounting investigators should be aware as their clients debate the form of reporting that will
conclude the investigator’s investigation.

In the common circumstance, the conclusion cannot be decided at the inception of the
engagement, it is required to conduct the investigation in a manner that will facilitate a
comprehensive report, including the key documents and any exhibits necessary to illustrate the
findings. Many investigations begin small, but there is no way to know with certainty where they
will lead and what will be required at the conclusion. Although the client may not have requested
a report at the outset of the investigation, some event during the investigation may change the
client’s mind, the appropriate and effective response should be deciphered. For example, it may
be observed during an investigation that an officer of the company violated a law or regulation,
thereby requiring the company to consider self-reporting and possibly bringing a civil action
against the officer and other third parties. Alternatively, it may be subpoenaed for a forensic
investigator in an investigation that has captured the attention of regulatory agencies or law
enforcement.

Types of Report
The following types of reports are relevant and they include:
i. Written reports
ii. Informal reports
iii. Oral reports.
1. Written Reports: Reports documenting an investigation differ considerably from audit
opinions issued under Generally Accepted Auditing Standards (GAAS). The investigative report
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writer is not constrained by the required language of a governing standard, and investigative
reports differ from one another in organization and content depending on the client’s stated
needs. In contrast, audit reports adhere to the set formula prescribed by the Generally Accepted
Auditing Standards (GAAS). The uses of written reports also differ. The client could do any of
the following things with an investigative report, among others.
a. Distribute the report to a select group of individuals associated with the company in various
capacities.
b. Voluntarily give the report to a prosecutor as a referral for prosecution.
c. Enter the report as evidence in a civil fraud proceeding.
d. Give the report to outside counsel for use in preparing regulatory findings, entering
negotiations, or providing other legal services on behalf of the company.

A written report can be categorized into:

i. Report of investigation: This form of written report is given directly to the client, which may
be the company’s management, board, audit committee of the board, in-house counsel or outside
counsel. The report should stand on its own; that is, it should identify all the relevant evidence
that was used in concluding on the allegations under investigation. This is important because the
client may rely on the report for various purposes such as corporate filings, lawsuits,
employment actions, or alterations to procedures and controls.
ii. Affidavits: These are voluntary declarations of facts and are communicated in a written form
and sworn to by the witness (declarant) before an officer authorized by the court.
2. Informal Report: These consist of memos to file, summary outlines used in the delivery of an
oral report, interview notes, spreadsheets listing transactions along with explanatory annotations,
and other, less-formal written material prepared by the investigation team.
3. Oral Reports: Oral reports are usually given by the forensic accounting investigation
engagement leader to those overseeing an investigation, such as a company’s board, or to those
who represent the company’s interests, such as outside counsel.

Fraud Examination Report

A fraud examination report is a document written at the conclusion of a fraud examination.
Generally, an organization will have an allegation or a suspicion of fraud and will conduct a
fraud examination to determine whether fraud occurred, who may have been responsible, and the
amount of loss. It may vary in length and style across entities and types of investigations, but it
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generally offers the same message to a similar audience, no matter the entity. Depending upon
the structure of the organization, these reports may be written for management, the board of
directors or audit committee, and possibly the internal audit team. There is customarily an
executive summary at the beginning of the report, which includes the overarching themes of the
investigation, as well as a conclusion, if possible. It also usually includes a detailed explanation
of the activities performed in the investigation, evidence obtained, and justification for the
conclusion that the fraud examiner reached. These reports may be very formal documents or
simply internal memoranda.

A fraud examination report documents the results of a fraud examination and is generally created
by one or more critical members of the fraud examination team. Documenting results is a
particularly important function in fraud examinations. The fraud examination report conveys all
the evidence necessary to evaluate the case, and it can be used to corroborate previously known
facts. An accurate report will add credibility to the fraud examination and to the fraud examiner’s
work. Additionally, requiring a written report will force the fraud examiner to consider his
actions during an investigation by requiring that he documents his process. And a well-written
report will omit irrelevant information, thereby allowing pertinent facts to stand out. A first-rate
fraud examination report is based on a first-rate fraud examination (ACFE, 2017).

Tips for Writing Fraud Examination Reports

i. Know your reader. Readers of fraud examination reports include company insiders, attorneys,
defendants, witnesses, judges, juries, and the media.
ii. Understand your purpose. The primary purpose of a fraud examination report is to
communicate the results of a fraud examination and document the work performed.
iii. Use clear, simple language that is not subject to various interpretations. Where necessary,
explain the meaning of complex or technical terms. Avoid jargon, slang, and colloquialisms as
the fraud examination report might be read by people, including jury members, who are not
familiar with such language.
iv. Prepare the fraud examination report during the course of the examination and not long after
the fact in order to mitigate the risk of omitting or distorting important data. Transcribe
interviews as soon as possible after the questioning and, upon completing the examination,
prepare a final or interim report without delay. Timeliness preserves your memory of the

26
interviews, enhances the accuracy of witness testimony, and ensures that opposing counsel
cannot claim that the interview is unreliable because it was not recorded in a timely manner.
v. Prepare a separate memorandum for each potential witness in order to safeguard
confidentiality and avoid subjecting the entire fraud examination report to discover by opposing
counsel.
vi. List the memoranda in the order in which you conducted the interviews so the reader can
follow the examination process as it progresses from one witness to the next.
vii. Be mindful that information in the fraud examination report may be disclosed to adverse
third parties, including opposing legal counsel. Choose your wording carefully, as you may have
to defend every word.
viii. Deal with sensitive company considerations, such as internal control deficiencies, in
separate communications in order to maintain their confidentiality; fraud examination reports
will likely be reviewed by people outside the company, including the general public and the
opposition.
ix. Include only those matters that are relevant to the examination in the fraud examination often
yield information of which the relevance is not immediately such cases, opt for completeness.
x. Maintain impartiality by including all relevant information regardless of which side it favours
or what it proves or disproves.
xi. Reconfirm the facts and ensure that the fraud examination report is accurate. Errors in dates,
amounts, spelling, and even the most seemingly unimportant facts or details can leave the entire
report open to question and criticism. Fraud examination reports are used as a basis for litigation
and prosecution; defense attorneys can cite the smallest error as evidence that the entire
document is inaccurate.
xii. Use visual aids, including financial statement graphs, time flow diagrams, and matrices, to
help the reader understand the case, especially when there are multiple witnesses, events, or
other complex relationships involved.
xiii. Clarify the fraud examination report until conclusions are self-evident. Your job as a fraud
examiner is to find and present facts not to express opinions or draw conclusions regarding guilt
or innocence. The facts of your report should stand on their own, without embellishment or
commentary.

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Fraud Risk Assessment Report
A fraud risk assessment report is generally quite different from most other reports that a fraud
examiner might write. It is likely to include less narrative and more charts, graphs, and other
visual means to show the areas of highest risk (and thus, the greatest concern) to the
organization. These reports are usually not publicly issued to avoid displaying particularly weak
controls, audits, etc., to fraudsters that could take advantage of such information. Fraud risk
assessments are frequently not issued as reports at all, but rather are kept in the documentation
for developing audit plans (for auditors) and mitigating controls (for management). When fraud
risk assessment reports are issued, they are typically high-level discussions of the general risks to
the organization so as not to publicly divulge the detailed information.

Insurance Loss Report

If a loss is covered by insurance, a report may need to be prepared to the insurance company
detailing the nature and amount of the loss. For example, many companies have a fidelity bond
that insures an organization against losses due to any fraudulent or dishonest acts of its
employees. In order to seek reimbursement under the terms of the bond, the insured organization
may be required to submit a detailed report to the insurer outlining how the loss occurred, who
was responsible, and how the amount of loss was calculated. Additionally, the insurance
company may require the filing of a "proof of loss" form or report. The insurance company will
typically dictate what specific items may be required in the report. Generally, it is best to be as
precise as possible when calculating or estimating losses because once the claim is paid, the
insured may be prohibited from claiming any additional amounts due to that particular loss.

Expert Reports
Many fraud cases benefit from the assistance of an expert witness, who (unlike most witnesses)
may provide technical opinions while testifying. Typically, fraud examiners who serve as expert
witnesses in litigation are tasked with providing an expert report, which requires them to provide
particular information about their qualifications, their opinions, the bases of those opinions, and
various other pieces of information. The purpose of an expert report is to inform the parties, the
judge, and the jury (if applicable) about the expert’s opinion of the case, as well as his credibility
for commenting on such issues. The content of the expert report is highly dependent on the needs
of the situation. For example, the expert witness might provide an expert opinion on an
organization’s auditing practices. If the expert used a fraud examination report as part of the
28
basis of forming the opinion, the fraud examination report would likely need to be attached to the
expert report. However, each report in this scenario is a separate document with its own
structure. In some situations, the person who wrote the fraud examination report might also be
called as an expert witness, so it is important to keep in mind the different purposes of each
report.

Tips to Keep in Mind When Writing an Expert Report

The first two rules of being an effective expert are to:
1) Be honest and tell the truth, and
2) Stick to what you know. An expert should always be truthful. Otherwise, any exaggeration or
embellishment will likely come out during a deposition or cross-examination and impede on an
expert's credibility and persuasiveness.
An expert who states an opinion in an area beyond their expertise is easily challenged on cross-
examination. To accomplish this, an expert should do the following:
• Only provide opinions that are within your true area of expertise.
• Only use terms for which you know the definitions.
• Avoid using legal terms (unless you are a legal expert).
• Avoid expressing legal opinions (unless you are a legal expert).
• Do not state opinions on cost estimates unless you are qualified to do so.

Other major rules include:

 Beware of Wandering into Legal Territory
As noted above, an expert should avoid legal terms or opinions because generally, expert
witnesses are not lawyers. Therefore, an expert witness may not understand many aspects of
legal proceedings. An expert that uses legal terms in his report can expect to be closely
questioned on such terms. In so doing, the opposing counsel will attempt to show that the expert
was not sure what he was talking about when he used such terms, which can impede the expert's
credibility by calling into question the entire report and/or the expert's qualifications.
 Talk to Your Attorney Before You Put Anything in Writing
Before you put anything in writing, talk to your attorney first. It is important to discuss:
i contents of your written report with your retaining counsel before committing anything
ii Make sure you discuss the following content issues with your attorney-client:

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 • The purpose of the report.
• The topics/issues you should address.
• The topics/issues you should not address.
• Find out and understand the legally important topics/issues you should address.
• Express opinions or questions on any specific topics/issues your attorney raises.
Additionally, different attorneys have different preferences and styles. Therefore, you should
discuss the scope and length of the report with retaining counsel, including the level of detail
desired. It is also important to get the report's format from your retaining counsel, including
items like page numbering, and what type of font or paragraph structure to use.
 State Only the Facts
Do not guess or make assumptions in reports. If information is unknown, then that should clearly
be stated. A key purpose of the expert witness is to persuasively present his understanding of the
facts to the reader in the form of an opinion. Therefore, an expert report must provide factual
information because vague statements of fact will damage the expert's credibility, factual sources
should be citied, reminding the expert of information sources before test indicating that the
expert meticulously researched and composed the report.
 Write for a Lay Audience
Your report should be easy for practically anyone to understand. Remember that you are
retaining counsel, the opposing counsel, the judge, the jury, or anyone else reading your report
have little to no education in the area of your expertise. Therefore, you must use words in your
report so that lay individuals can understand what you are trying to convey.
 Be Brief
An expert is most effective when he uses brief language because the report must be prepared so
that a non-expert can understand it. Therefore, an expert should provide only essential
information and write in short, uncomplicated sentences and concise paragraphs. A reader finds
short sentences and paragraphs valuable because they are easy to read and understand.
Conversely, long-running sentences and paragraphs are generally more difficult to understand
and may discourage readers from even trying to comprehend the material.
 State Things Clearly and Directly
Experts should also state things clearly and directly. After all, it is the expert's role to state and
provide an opinion. A clearly and directly written opinion is not only easier to read, but it is also

30
more persuasive. For this reason, experts should avoid needlessly technical language, which is
distracting and has a tendency to diminish an expert's credibility.
 Use Precise Language
An expert report should avoid ambiguity or inexact language and use precise language where
possible. Using precise language will make the expert report more credible. Furthermore, the
expert should avoid generalizations and be specific. Since an expert writes a report to
communicate his findings and opinions, the expert must convey his findings and conclusions
clearly and confidently.
 Use Active Voice
In grammar, voice indicates the relation of the subject to the action of the verb. When the verb is
in the active voice, the subject acts; when it is in the passive voice, the subject is acted upon.
Always try to use the active voice. Sentences that use the passive voice are wordy, indirect, more
likely to be ambiguous, and tend to be more awkward. Sentences in the active voice are clearer
and more persuasive.
 Use Objective Language
The tone of an expert report must be objective. An expert is presumed to be an impartial,
disinterested witness that represents his profession. An expert must not become an advocate for
his "side." Doing so challenges the expert's credibility. The use of objective terms makes the
expert more credible and persuasive.
 Avoid Bias
Additionally, an expert must be thorough and avoid using language that could suggest bias and to
avoid statements that the other side could misrepresent in court. Therefore, an expert report
should avoid emphatic language and absolute words, such as always and never. Statements using
such terms provide abundant material for cross-examination, allowing the opposing counsel to
suggest that the expert is a "hired gun" who is merely offering statements to aid his "side." Such
terms also make defending the report much more difficult. Finally, subjective statements rarely
add any substance to the report while objective statements are more effective in conveying the
expert's message.
 Avoid Argumentative Language
An expert must avoid argumentative language. An expert is not an advocate. As stated above, the
tone of an expert report must be objective. Like subjective language, argumentative language

31
makes an expert appear biased, which will cause a loss in credibility. For example, if you
disagree with an opposing expert's opinion, do not directly criticize it. Instead, deal with the
opposing opinion in a reasoned method, making sure that your position is more persuasive.
 Do Not Comment on the Credibility of Witnesses
Beware of commenting on the credibility of witnesses. It is the jury's duty, not the experts, to
determine the truthfulness of each witness. Commenting about the veracity of others in a report
may make the expert appear biased, causing a loss of credibility.
 Avoid Broad Unsupported Statements of Opinions
Statements of an expert's opinions should be supported with reasons justifying the opinions.
When opinions are supported, they are more persuasive and the reader will likely give more
weight to the expert's report. Unsupported opinions make the expert less credible and make the
report more vulnerable to attacks.
 Do Not Speculate or Guess
Experts should not speculate or guess in their reports because doing so undermines a report’s
credibility. In addition, opposing counsel will use an expert's guesses or speculations a: trying to
show that the opinion is not reliable because it relies on speculations.
 Expert Witness Report Must Be Consistent and Accurate
An expert witness report must be consistent with previous reports, testimonies in other case,
and/or other publications. The opposing attorney may try to get a copy of everything ever
written, so it is best to be prepared to be relentlessly questioned on previous testimony and/or
publications. In fact, a counsel that can point out inconsistencies within a report or discrepancies
between an expert's other reports will create significant doubt about the expert's credibility. Thus,
an expert must meticulously check the report for accuracy.
 Be Professional
An expert must make the report look like it is worth what he is being paid for it. A well
composed report will likely indicate to the reader that the expert is a methodical person, which
will help boost the expert's credibility and will be more likely to persuade the reader. There are
numerous things an expert can do to make his report more professional.
The following list provides some examples:
i. Place the report in a report cover or binder.
ii. Use a 12-point font that is easy to read and looks professional.

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iii. Use 1½ lines of space between each line, which will make the report easier to read and will
provide space for the reader to make notes.
iv. Include a well-drafted cover page, which should include a title, case citation, the expert's
name, and the expert's address.
v. Provide an executive summary, especially when reports are long. An executive summary
should include a brief summary of the expert's conclusions with supporting rationale.
vi. Use topic headings to break up the report, making the report easier to read and navigate.
vii. Headings may also be very useful to the expert who is using his report while testifying.
viii. If the report is long, use tabbed dividers.
ix. Number the pages because the lack of page numbers often gives the report a sloppy and
unprofessional appearance.

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