Effect of Forensic Accounting Expertise on Tax Fraud Detection in Nigeria Federal Inland Revenue Service.

Abstract

Tax fraud remains a significant challenge in Nigeria, with the Federal Inland Revenue Service (FIRS) losing an estimated $20 billion annually due to tax evasion. The study investigated the effect of forensic accounting expertise (specifically forensic investigative skills, legal knowledge, auditing techniques, and financial ratio analysis) on tax fraud detection in Nigeria’s FIRS. Anchored on the positivist philosophy and using a quantitative research design, the study targeted a population of 179 FIRS professionals out of which 168 responded. A stratified random sampling technique was adopted, and data were collected via structured questionnaires. Reliability of the instrument was confirmed using Cronbach’s Alpha (α = 0.85), and data were analysed using descriptive statistics, correlation, and multiple regression with SPSS 17.0. The findings revealed that forensic investigative skills (β = 1.010, p < 0.05) and legal knowledge (β = 1.533, p < 0.05) had positive and significant effects on tax fraud detection. However, auditing techniques (β = -0.757, p < 0.05) and financial ratio analysis (β = -1.099, p < 0.05) showed significant but negative effects. The study concluded that while investigative and legal competencies enhance tax fraud detection, the current application of auditing and ratio analysis may be ineffective or misaligned. It recommends targeted training in forensic investigation and legal procedures, as well as a review and modernization of auditing and ratio analysis techniques to improve the efficacy of fraud detection in Nigeria’s tax system.