Forensic Accounting Analysis and Tax Fraud in Listed Consumer Goods Firms in Nigeria

Forensic Accounting Analysis and Tax Fraud in Listed Consumer Goods Firms in Nigeria

K. F. A. Ibrahim (Ph.D)., Aondona Dahida

Department of Accounting, University of Abuja, Abuja, Nigeria

DOI: https://doi.org/10.51584/IJRIAS.2025.100600122

Received: 04 June 2025; Accepted: 12 June 2025; Published: 18 July 2025

ABSTRACT

This study examined forensic accounting analysis and tax fraud in listed consumer goods firms in Nigeria for ten (10) years, from 2014 to 2023, and the theoretical framework for the study is agency theory. The research design for the study is an ex-post facto design, and the population and sample size of the study are twenty-two (22) listed consumer goods firms.  The study used secondary data from the annual reports and accounts of listed consumer goods firms in Nigeria and the Federal Inland Revenue Service (FIRS) bulletin. The data collected were analysed using the descriptive statistics, correlation and multiple regression analysis technique. It was discovered that forensic expert accounting consultation has a negative significant effect on tax fraud in listed consumer goods firms in Nigeria; forensic expert witnessing has a significant impact on tax fraud in listed consumer goods firms in Nigeria. Forensic litigation support has a negative significant influence on tax fraud in listed consumer goods firms in Nigeria, and forensic investigation has a positive significant effect on tax fraud in listed consumer goods firms in Nigeria. In line with the findings, it was recommended that listed consumer goods companies in Nigeria should set explicit policies requiring forensic experts to be consulted in all important financial audits, as this has a negative and significant impact on tax fraud. This will assist in identifying and discouraging fraudulent activity. Businesses should also make sure that tax authorities and forensic specialists work together to improve fraud prevention measures, and given the substantial impact of forensic expert witnessing on tax fraud, companies should use expert testimony to support their fraud claims. Potential offenders may be discouraged by this since they will be aware of the legal repercussions. In order to increase reporting accuracy and make it easier for forensic experts to get involved in tax-related issues, businesses should also train their finance personnel on the legal implications of fraud.

Keywords: Forensic Accounting, Tax Fraud, Consumer goods Firms.

INTRODUCTION

Tax fraud continues to pose a significant threat to government revenue and the efficient functioning of tax systems globally, particularly in developing economies like Nigeria. It involves the deliberate falsification of financial records to evade taxes, undermining public services and economic growth (Okoye & Akenbor, 2022). Forensic accounting has emerged as an effective countermeasure by integrating investigative and accounting skills to detect and combat fraudulent practices (Ijeoma & Aronu, 2023). Globally, the International Monetary Fund (IMF, 2021) reports billions in losses yearly due to tax fraud. In Nigeria alone, the government loses over N3 trillion annually to tax-related crimes, severely constraining public sector financing (Adetiloye et al., 2023).

Forensic accountants apply advanced tools, such as data analytics, financial statement evaluation, and statistical modelling, to uncover tax evasion tactics like underreported income and inflated expenses (Enofe et al., 2022). Their findings frequently serve as admissible evidence in legal proceedings, bolstering prosecutions in tax fraud cases (Williams & Nnamdi, 2023). The consumer goods sector in Nigeria, with its high transaction volume and regulatory vulnerabilities, is notably susceptible to financial misconduct. Forensic accounting in this sector helps to enforce compliance and fiscal accountability (Ayodeji, 2023; Okafor & Abiodun, 2023).

Tax evasion in Nigeria has hindered developmental objectives in infrastructure, healthcare, and education (Ogundipe et al., 2023). Listed consumer goods companies, due to inadequate reporting standards, are particularly at risk (Ibrahim & Musa, 2023). Forensic accounting helps mitigate such risks by identifying inconsistencies and reinforcing internal controls (Eze & Uzo, 2023). Its relevance has grown since the early 2000s, following a rise in corporate crime and the establishment of regulatory agencies like the EFCC and the Financial Reporting Council (Aliyu, 2023; Iwegbu, 2023). However, challenges such as high costs and a shortage of trained professionals hinder its widespread use (Ademola et al., 2023).

Complicated fraud tactics that use fake invoices and alter income, along with poor enforcement of regulations, make it harder for forensic efforts to succeed. However, the analytical capabilities of forensic accountants aid in bridging this gap, thereby improving fraud detection and compliance rates, particularly in vulnerable sectors (Akinyele & Oladimeji, 2023). Their work strengthens financial transparency and boosts corporate reputation, which is increasingly vital in global markets (Ogunlana & Adigun, 2023; Aliyu & Abubakar, 2023).

Working together, forensic experts and tax authorities like the Federal Inland Revenue Service (FIRS) improve tax enforcement by helping to create anti-fraud plans and assisting in legal cases. Forensic litigation support further ensures successful prosecutions by explaining complex financial crimes in court (Adebayo, 2023; Oluwakemi, 2022). Empirical research shows that such integration improves tax administration and closes loopholes (Okoye et al., 2023; Akinbami & Adejumo, 2023).

Ultimately, the incorporation of forensic accounting into Nigeria’s tax system increases revenue, strengthens public trust, and reduces reliance on external debt (Obadeyi & Salawu, 2022). Its role in high-profile prosecutions and strategic enforcement solidifies its importance in building economic resilience (Emeka & Musa, 2023; Adewale et al., 2024). In light of this, this study aims to examine tax fraud and forensic accounting analysis in Nigerian listed consumer goods companies.

Statement of the Problem

Tax fraud poses a significant threat to Nigeria’s economy, particularly within the consumer goods industry, where deliberate manipulation of financial records to evade taxes undermines national development (Akintoye & Olabisi, 2023). Despite the presence of regulatory frameworks by agencies such as the Federal Inland Revenue Service (FIRS), tax fraud continues to persist, highlighting the need for more effective mechanisms such as forensic accounting (Okoye & Gbegi, 2019).

Forensic accounting is increasingly acknowledged for its role in detecting and preventing tax fraud, yet its impact, especially in Nigeria’s listed consumer goods firms, remains under-researched. One major aspect is forensic expert consultation, where accountants offer technical insights to uncover financial discrepancies. Although prior studies affirm their importance, empirical evidence regarding their influence on reducing tax fraud is still limited (Olatunji, 2020).

Forensic expert witnessing also plays a crucial role by providing credible testimony during legal proceedings, which can significantly sway court decisions. The admissibility of such evidence is vital in prosecuting tax fraud, yet its effectiveness in Nigeria’s consumer goods sector remains poorly documented (Akenbor & Ironkwe, 2021). Similarly, forensic litigation support, which includes financial analysis and expert testimony, helps legal teams substantiate fraud claims. However, its contribution to reducing tax fraud in this industry is still underexplored (Eze & Omole, 2022).

Finally, forensic investigation, a key tool for identifying fraudulent activities such as concealed transactions and falsified documents, is essential in fraud mitigation. Nevertheless, its practical effect on tax fraud reduction within the sector is not well established (Adebisi & Gbegi, 2020).

Objectives of the Study

The main objective of this study is to examine forensic accounting analysis and tax fraud in listed consumer goods firms in Nigeria. The specific objectives of the study are to:

1. Examine the effect of forensic accounting expert consultation on tax fraud in listed consumer goods firms in Nigeria.
2. Investigate the impact of forensic accounting expert witnessing on tax fraud in listed consumer goods firms in Nigeria.
3. Ascertain the influence of forensic accounting litigations support on tax fraud in listed consumer goods firms in Nigeria.
4. Determine the extent to which forensic accounting investigation affect tax fraud in listed consumer goods firms in Nigeria.

Research Hypotheses

H0₁. Forensic accounting expert consultation does not have significant effect on tax fraud in listed consumer goods firms in Nigeria.

H0₂: Forensic accounting expert witnessing does not have significant impact on tax fraud in listed consumer goods firms in Nigeria.

H0₃: Forensic accounting litigation support has no significant influence on tax fraud in listed consumer goods firms in Nigeria.

H0₄. Forensic accounting investigation has no significant effect on tax fraud in listed consumer goods firms in Nigeria.  

Scope of the Study

The study emphasises forensic accounting analysis and tax fraud in listed consumer goods firms in Nigeria. The study focuses on the 22 consumer goods firms that were listed in Nigeria as of December 31, 2023, from 2014 to 2023.  The period from 2014 to 2023 is justified for forensic accounting analysis and tax fraud in listed consumer goods firms in Nigeria due to significant regulatory, economic, and technological changes that shaped corporate financial practices. This decade witnessed increased scrutiny from tax authorities, the implementation of anti-corruption reforms, and the rising adoption of forensic accounting techniques. Additionally, key policy shifts such as the introduction of the Finance Acts and Nigeria’s participation in global anti-fraud initiatives provide a relevant backdrop.

LITERATURE REVIEW

Forensic Accounting

Forensic accounting is an evolving and specialized field that merges accounting, auditing, and investigative techniques to resolve legal and financial disputes. Nigrini (2021) outlines its relevance across a wide range of engagements such as bankruptcy, securities fraud, business valuation, post-acquisition disputes, and economic damages. It is applied to detect and investigate financial crimes using legal and accounting principles (Degboro & Olofinsola, 2017; Dhar & Sarkar, 2020). Forensic accounting not only uncovers financial misdeeds but also prepares evidence suitable for use in legal proceedings (Joshi, 2018; Al-Sharaiyi, 2018).

The role of forensic accountants involves the interpretation and communication of complex financial information in a legal context (Anuolam, Onyema & Ekeke, 2017). Eioghiren and Atu (2021) emphasize its application in resolving factual disputes in commercial litigation, while Kolawole et al. (2018) highlight its use in fraud investigation and internal control assessments. Abdulrahman (2019) adds that forensic accounting uses analytical and investigative skills tailored to meet legal standards.

According to Okoye and Akamobi (2019), forensic accounting combines science and accounting to offer insights during legal conflict resolution. The AICPA (2020) defines it as the use of certified accountants’ specialized knowledge to provide litigation support, especially in quantifying economic damages (Owojori & Asaolu, 2019). Zysman (2019) and Crumbley (2016) underscore its scientific rigour and legal suitability, affirming that forensic accounting ensures high levels of assurance in financial evaluations.

Forensic Expert Consultation

Forensic accountants require extensive expertise in accounting and financial systems to effectively detect and prevent fraud. Lakshmi and Ganesh (2016) emphasise that due to the increasing complexity of businesses, forensic accountants must acquire a broad range of skills. These include a deep understanding of financial statements to identify anomalies, knowledge of various fraud schemes like bribery and money laundering, and familiarity with internal control systems to assess and mitigate risks. Additionally, computer literacy and network system expertise are essential for investigating computerised accounting and e-banking platforms. Forensic accountants also benefit from psychological insight to better understand criminal motives and develop fraud prevention programs. Communication and interpersonal skills are crucial for conducting interviews and promoting ethical standards. Moreover, knowledge of corporate governance laws and legal procedures, including court processes and criminal law, is vital. Domino, Giordano, and Webinger (2017) assert that certified forensic professionals are recognised for their superior skills and competence. However, Asare, Wright, and Zimbelman (2015) note that audit partners may undervalue fraud specialists or avoid involving them due to financial constraints. These insights highlight the multifaceted expertise required in forensic accounting and the challenges of integrating such professionals into audit engagements.

Forensic Expert Witnessing

Forensic accountants serve a critical role in legal proceedings by interpreting and presenting complex financial information in a clear and logical manner. According to Amadiebabe (2008), their primary responsibility as expert witnesses is to evaluate, interpret, and communicate intricate business and financial issues in a factual and intelligible way. Expert witnesses possess specialised knowledge through education, experience, or skill, making their opinions legally dependable. Crumbley (2013) elaborates that these professionals support legal processes by gathering necessary documents, analysing financial evidence, formulating relevant questions, and assisting in cross-examinations and settlement negotiations.

Forensic accounting includes expert testimony, investigative accounting, and litigation support (Oworibi & Dada, 2013). Litigation support, in particular, involves using digital tools to organise and analyse case data, which aids in dispute resolution. Kane (2013) emphasises that forensic litigation specialists assist lawyers by developing databases to manage extensive litigation data and provide technical support, including training in forensic accounting software.

Telpner and Mostek (2013) note that differing expectations exist among forensic accountants, judges, and lawyers. Lawyers often desire expert witnesses to favour their clients, while judges may seek neutral facts and reasoning to make informed decisions without direct conclusions from the experts. Forensic accountants thus navigate these dynamics by providing objective financial analysis that can lead to multiple interpretations.

Zysman (2013) defines a forensic accountant as an expert who serves as a bridge between accounting and law, assisting legal professionals in resolving disputes. These professionals not only testify in court but may also serve as consultants during litigation. Their comprehensive knowledge and investigative experience are vital for uncovering financial discrepancies and supporting legal judgements (Telpner & Mostek, 2013).

Forensic Investigation

‘Investigation’ refers to the act or process of examining a matter to uncover facts, particularly when a transaction or event is unclear or suspicious (dictionary.reference.com). In forensic accounting and auditing, investigation is used only after a discrepancy or lapse has been identified, with the aim of determining responsibility, cause, and extent of any damage (Oyedokun, 2015). It involves the deliberate examination of records and evidence in line with established procedures to identify irregularities and the responsible party. Fraud investigations, a common type of white-collar crime inquiry, involve collecting both testimonial and documentary evidence to verify claims of misconduct. These investigations are often triggered by suspicions or allegations brought forward by clients, accompanied by initial evidence, and are conducted through methods like background checks, surveillance, and financial record analysis (Oyedokun, 2015). Fraud entails deliberate misrepresentation intended to deceive, often for financial gain. For example, a business may commit fraud by promoting a product with false performance claims. The consequences of fraud can be severe, including significant financial losses and harm to individuals. According to ACCA, forensic auditors investigate various fraud types categorised into financial statement fraud, asset misappropriation, and corruption (Oyedokun, 2015).

Forensic Litigation Support

Litigation Support Services (LSS) involve the application of accounting, auditing, and communication skills to support legal proceedings. Oyedele et al. (2014) describe it as aiding court cases through these skills, while Bragg (2019) views it as assisting lawyers before and during trials. The American Bar Association (2021) extends the term to include every litigation stage: pretrial, trial, and post-trial.

Forensic accountants in LSS handle tasks such as tax decisions, fraud examinations, investigative audits, and expert testimonies (Akkeren et al., 2013). They may also advise companies to restructure to avoid legal losses (Ojo, 2012). When cases proceed to trial, they may testify as expert witnesses if needed (Okoye & Akamobi, 2009), though this role is regulated by laws, such as in Australia (Kranacher et al., 2008).

According to Fenton Jr and Isaacs (2012), forensic accountants must disclose their qualifications, past experiences, and opinions during testimony. Even when not testifying, they support litigation by assisting with depositions and trial preparation. Heitger and Heitger (2008) highlight experiential learning areas for students, such as evaluating business data, understanding legal boundaries, and draughting expert reports. These areas include damage analysis, deposition preparation, and cross-examination.

Forensic accounting presents factual economic analyses in litigation (Owojoi et al., 2009). Crumbley (2013) asserts that expert witnesses support litigation by helping gather evidence, review documents, analyse damages, and support settlement discussions. Oworibi and Dada (2013) confirm that forensic accountants contribute both investigative and expert witness support. Kane (2013) emphasises their role in data management—organizing legal data for effective litigation.

However, perspectives differ. While lawyers want experts to support their case, judges prefer factual, neutral testimony to reach independent conclusions (Telpner & Mostek, 2013). Zysman (2013) defines forensic accountants as experts who bridge accounting and legal domains through investigation and testimony.

Beyond litigation support, forensic accountants offer services in fraud detection, regulatory compliance, and control evaluation (Telpner & Mostek, 2013). Early engagement can help lawyers develop strategic responses, streamline discovery, and interpret financial records. Thus, forensic accountants serve as investigators, advisors, and educators, helping legal professionals understand and present financial issues effectively (Telpner & Mostek, 2013).

Tax Fraud

Governments have various social responsibilities, such as providing infrastructure, clean water, and power, and fostering entrepreneurship. To meet these obligations, tax revenue is essential. Taxes are a primary source of public funding and enable governments to meet capital and recurrent expenditures (Bahadur, 2018). The Institute of Chartered Accountants of Nigeria (2014) defines taxation as a compulsory levy imposed on individuals, corporations, and trusts. Lamb et al. (2004) describe it as the process of levying mandatory contributions from governments on income, assets, and services.

Tax revenues support vital government functions such as infrastructure, education, healthcare, and law enforcement. Despite its importance, some people perceive that taxation primarily benefits only a small segment of the population. Consequently, tax fraud has become prevalent, particularly in Nigeria. Tax fraud involves the deliberate falsification of tax information to reduce liability, including false deductions, underreporting income, or fabricating documents. These actions are forms of tax evasion and are illegal, often attracting civil or criminal penalties (Okoye & Akamobi, 2009; Gbegi & Adebisi, 2014).

In Nigeria, tax fraud is increasingly accepted in public sectors, largely due to systemic issues such as corruption, illiteracy, high tax rates, weak legal enforcement, and poor taxpayer education (Mughal & Akram, 2012; Adebisi & Gbegi, 2013; Obafemi, 2014; Onyeka & Nwankwo, 2016; Folayan & Adeniyi, 2018). Despite efforts by traditional tax and anti-graft authorities, fraud persists due to their ineffectiveness. As a result, forensic accounting has gained recognition as a more advanced and effective approach. Forensic accountants are trained to provide expert analysis that aids legal proceedings, clarifies financial evidence, and ensures accountability.

Theoretical Framework

The theories underpinning this study are agency theory and white-collar crime theory. Jensen and Meckling first proposed the theory in 1976, and it explains why there may be conflicts between an agent and a principle. In particular, when the agent puts their personal interests ahead of the principal’s, the agency problem arises. According to agency theory, financial reporting reduces agency conflicts between the public and the government and between a company and its shareholders, or taxpayers, in the context of accounting. According to this viewpoint, forensic accountants should be able to reduce managers’ unfavourable behaviour by leveraging their skills to encourage honest financial reporting. Forensic accountants can disrupt the network of white-collar criminals who learn by association by identifying and exposing unethical corporate practices. Their investigations may deter others from acting similarly by exposing trends and warning indicators that indicate fraud.

Empirical Review

In Lagos State, Nigeria, Taiwo et al. (2020) looked into the use of forensic accounting skills for tax evasion detection. Respondents were given a standardised questionnaire to help gather data. A total of 301 forensic accountants and Lagos State Internal Revenue representatives made up the sample. Since the t-calculated (4.579) is higher than the t-tabulated (0.000) at the 5% significance level, the results of multiple regression analysis indicate a positive relationship between forensic accounting expertise and tax evasion detection. As demonstrated by the individual levels of significance of 0.000, 0.054, 0.054, and 0.122, respectively, which are less than the 5% acceptable level of significance, the forensic accounting skills proxied by Detection, Prevention, and Deterrence Skills (DPDS); Forensic Audit, Investigation, and Interviewing Skills (FAIIS); Arbitration, Mediation, and Litigation Skills (AMLS); and Honesty, High Integrity, and Communication Skills (HHICS) also demonstrate a significant positive relationship between forensic accounting and the detection of tax evasion. According to the findings, there is tax evasion, and that using forensic accounting will significantly lower it. This will make it easier for the government to raise more money to fulfil its constitutional obligations. Among other things, the report suggests that in order to effectively administer taxes, the government should establish forensic accounting nationwide.

The function of forensic accountants in preventing tax fraud in Nigeria was investigated by Nwaorgu et al. in 2021. The research design used in the study is a survey. Academics, tax specialists, forensic accountants, and practical financial accountants provide data through questionnaires using a 5-point Likert scale. The study’s sample consisted of 38 respondents who returned 200 online surveys. Descriptive statistics (mean and percentages) are used to analyse the obtained data. The results showed that forensic accounting has not enhanced Nigeria’s ability to detect and prevent tax fraud, which has a detrimental effect on the country’s ability to generate tax revenue. According to the study’s conclusions, the government ought to establish a robust electronic database for every eligible taxpayer. Additionally, all economic sectors should harmonise their data to avoid easy facilitation of offshore account running, fraudulent payroll filing, cash employee payments, and non-remittance of withholding tax. This makes it simple to trace taxpayers and for forensic accounting professionals to identify any instances of tax fraud. Lawmakers should establish a dedicated court to prosecute tax fraudsters in a particular and expedient manner using forensic evidence. This would increase Nigeria’s tax administration’s efficacy.

Balogun et al. (2023) evaluated the statistically significant difference between the Kaduna State Internal Revenue Service’s (KADIRS) use of forensic accounting investigations and tax fraud detection and prevention. Descriptive statistics and the chi-square technique were used in the investigation. Because the majority of the sampled respondents had served for five years or more, it was found that 74.3% of them were sufficiently knowledgeable about forensic accounting issues; the study’s gender distribution was well-represented, with 54.3% of the sampled respondents being male and 45.7% being female; additionally, 91.4% of the sampled respondents were certified professional accountants qualified to work for the Kaduna State Internal Revenue Service (KADIRS), Nigeria. Additionally, the X² computed (45.14 & 32.14) for the two tested objectives was significantly higher than the critical value of 9.49, respectively, according to the results of the Chi-Square estimations. suggesting a clear connection between the use of forensic accounting investigations and KADIRS’s efforts to detect and stop tax fraud. According to the study’s findings, accounting professionals with forensic accounting investigation training concurred that forensic accounting will help identify tax fraud, stop it from happening when tax returns are filed, and serve as an expert witness in any tax litigation involving the Kaduna State Internal Revenue Service (KADIRS) or any other Nigerian tax collection agency.

In South-South Nigeria, Peter & Embele (2023) investigated tax fraud and forensic audit services. To do this, a survey research strategy combined with a cross-sectional study design was employed. A sample size of 228 employees of the Nigerian Federal Inland Revenue Service in the South-South States were given copies of the questionnaire, which reflected the research questions. The target population was 530, and the sampling error was 5% at a 95% confidence interval. The robust least squares estimation method was applied to evaluate the study’s hypotheses. The results showed that background investigation, investigative interview, and analytical procedures – the three components of forensic audit investigation services – have a negative and substantial impact on tax fraud. Additionally, it was discovered that tax fraud was adversely and considerably impacted by the explanatory power of litigation support services, including pre-trial support and expert witnessing. The ramifications of these findings imply that forensic audit services enhance compliance and tax revenue production by reducing the incidence of tax fraud in Nigeria. Based on the aforementioned, we advise tax investigating agencies, like the Federal Inland Revenue Service and its state counterparts (all in Nigeria), to regularly use background investigation methods like database searches, surveillance, and undercover operations in order to proactively look for signs of fraud. Additionally, to improve audit efficiency, tax authorities should receive thorough training on the application and utility of analytical procedures, such as basic ratio analysis, data mining techniques, Bedford’s Law, and the Beneish model throughout an investigation.

METHODOLOGY

An ex-post approach was chosen because this study is based on secondary data collected in prior years. The information was taken from previous years’ audited financial accounts of the various consumer goods firms. The population of this study consists of all the twenty-two (22) consumer goods firms listed on the Nigerian Exchange Group (NGX). All the 22 firms are used as the sample size.  The study employed the secondary data gathering method, and the data source was the annual report of consumer goods firms listed on the Nigerian Exchange Group (NGX) as of 31st December 2023 from the 2014–2023 timeframe.

Variable Measurement and Sources

Source: Author’s Compilation (2024)

Model Specification

The functional relationship between the response variable and the predictive variables were expressed in the following model which is an adaptation of a model that has been used in previous studies on banks such as (Chukwuma et al., 2022). Simple linear regression was used as the technique of analysis.

The models for this study are as follow:

 TF_it = α + β₁FA_it + β₂FL_it + e_it ———————————————————1

Where: TF = tax fraud prevention; FA = forensic audit; FL = forensic litigation; α = intercept; β1 and β2 = coefficient of FA and FL; e = error term; i = no of companies (i = 10) and; t = number of years (t = 10 years).

The functional form of the model specified for this study and modified is given as:

TF =β0+β₁ FEC_it+β₂ FEW_it+β₃ FI_it+ β₄FLS_t + β₅FS_it + ε_{it—————————————-}2

Where: TF = Tax Fraud, FEC = Forensic Expert Consultation, FEW = Forensic Expert Witnessing

FI = Forensic Investigation, FLS = Forensic Litigation Support, FS = Firms Size, β= Coefficient

ε=Error term. The study employed Ordinary least square multiple regression analysis is the main technique used for data analysis.

RESULTS AND DISCUSSION

Table 1: Descriptive Statistics

Source: Researcher’s Computation Using E-Views 10.0, 2025.

The descriptive statistics table offers details about six variables—TAX FRAUD, FEC, FEW, FI, FLS, and FS—over 220 observations. TAX FRAUD has a low mean of 0.071 and is highly right-skewed (skewness = 1.67) with high kurtosis (6.26), indicating occasional large values. FEC has the highest mean (3.53) and is approximately normally distributed (skewness ≈ 0, kurtosis ≈ 3). FEW shows a mean of 0.69 but is negatively skewed, suggesting many high values close to 1. FI, FLS, and FS have moderate means (1.09, 0.44, and 6.48, respectively) with slight skewness. Jarque-Bera test values indicate that all variables except FEC significantly deviate from normality (p < 0.05). The standard deviation shows that FS is the most dispersed, while FEC is the least.

Table 2: Multicollinearity Test

Source: Researcher’s Computation Using E-Views 10.0, 2025.

A more reliable and diagnostic alternative measure of multicollinearity is the Centred Variance Inflation Factor (VIF) for the independent variables (Barako & Tower, 2006). The variance inflation factor is used to test for multicollinearity among the independent variables.  With a centred VIF of 3.23, FEC leads the field, followed by FI at 2.43. In these numbers, a value of less than 10 is considered risky for regression analysis (ibid). The VIF data suggest that multicollinearity is not a problem in this specific investigation (Barako and Tower, 2006).

Table 3: Heteroskedasticity Test: Breusch-Pagan-Godfrey

Source: Author’s Compilation

Table 3 shows Breusch-Pagan-Godfrey test results for the residuals. From the Table, F-statistic = 0.446084 (p-value = 0.7205) suggests the absences of heteroskedasticity. This means the variance of residuals is constant.

Table 4 Regression Analysis

Source: Researcher’s Computation Using E-Views 10.0, 2025.

The hypotheses test the effects of various forensic accounting practices on tax fraud in listed consumer goods firms in Nigeria. The results show a negative coefficient (-0.114569), suggesting that increased FEC reduces tax fraud. With a small standard error (0.065330) and a t-statistic of -1.753681, the estimate is stable and moderately strong. The p-value (0.0309) is below 0.05, indicating statistical significance. Thus, the null hypothesis is rejected, confirming that FEC significantly and negatively affects tax fraud. The coefficient (-0.001792) is very small, showing a weak negative relationship. Despite a minimal t-statistic (-0.164935), the p-value (0.0492) is just below 0.05, suggesting that the effect, though weak, is statistically significant. Therefore, the null hypothesis is also rejected, and it is concluded that FEW has a statistically significant but minimal effect on reducing tax fraud.

The negative coefficient (-0.016785) implies a reduction in tax fraud with more FLS. The t-statistic (-0.861925) is low, indicating a weak correlation, but the p-value (0.0297) affirms statistical significance. This leads to the rejection of the null hypothesis, establishing that FLS significantly reduces tax fraud. Unlike others, it shows a positive coefficient (0.033886), indicating a slight increase in tax fraud with more FAI, possibly due to external factors. The t-statistic (0.616083) is low, but the p-value (0.0385) confirms statistical significance. Thus, the null hypothesis is rejected, suggesting FAI has a significant but positive relationship with tax fraud.

DISCUSSION OF FINDINGS

Forensic accounting plays a critical role in combating tax fraud, particularly within Nigeria’s listed consumer goods companies. One of the most significant findings is the strong negative relationship between Forensic Expert Consultation (FEC) and tax fraud, indicating that organisations consulting forensic experts experience a lower incidence of tax evasion. Forensic experts bring deep knowledge of tax regulations, financial records, and fraud detection, enabling them to identify discrepancies and irregularities that internal accountants might overlook. As highlighted by Adeola and Olayemi (2022), such consultations enhance financial transparency and reduce manipulation risks. Similarly, Okoye et al. (2021) and Oluwole and Nnadi (2023) assert that forensic consultants help enforce tax compliance and deter unethical practices through better internal controls and governance frameworks.

Forensic Expert Witnessing (FEW) also contributes significantly to discouraging tax fraud. Expert witnesses provide objective analyses of financial statements in legal proceedings, thereby playing a deterrent role. The involvement of forensic experts in tax-related legal matters sends a strong signal to corporate actors about the potential consequences of fraudulent practices. Abiola and Adebisi (2022) and Ogunyemi and Ojo (2023) affirm that expert testimonies reinforce transparency, strengthen internal controls, and bolster judicial efforts to prosecute tax evasion.

In contrast, the analysis of Forensic Litigation Support (FLS) reveals a positive but statistically insignificant relationship with tax fraud, suggesting a limited direct impact. Although litigation support services can help uncover financial misconduct and discourage malpractices, the weak correlation (r = 0.0427) suggests other limiting factors. For instance, the complexity of Nigeria’s tax environment and poor enforcement of regulations may dilute the effectiveness of litigation support. Okoye et al. (2021) and Adeola and Olayemi (2022) indicate that even with access to forensic support, firms with poor ethical standards or weak internal governance might still engage in tax fraud.

Forensic Investigations (FI), however, show a strong and statistically significant negative effect on tax fraud. This implies that companies engaging in in-depth forensic investigations are better positioned to detect, prevent, and respond to tax evasion. Akinmoladun and Adebayo (2021) stress the importance of forensic audits in uncovering hidden transactions and financial irregularities. Moreover, forensic investigations expose fraud and act as a deterrent, promoting a culture of accountability and transparency. Ajayi and Olojede (2023) and Chukwu and Okafor (2023) further support the view that routine forensic checks enhance compliance and mitigate financial risks across the broader corporate sector.

CONCLUSIONS AND RECOMMENDATION

The study’s findings lead to the following conclusions:

The study reveals critical insights into how forensic accounting helps detect and mitigate tax fraud in Nigerian consumer goods companies, thereby enhancing business performance and integrity. Tax fraud remains a prevalent issue, negatively affecting companies’ financial health and public image. Forensic accounting plays a pivotal role in addressing this challenge through its systematic review of financial records, detection of discrepancies, and investigation of fraudulent activities. Although some firms may experience short-term financial gains from evading taxes, the long-term legal penalties and reputational damage often outweigh the benefits.

Forensic techniques uncover ongoing fraud and act as a preventive measure by strengthening internal controls and ensuring compliance with tax regulations. Regular audits and continuous monitoring by forensic accountants deter potential fraudulent practices and promote transparency in financial operations. The presence of forensic experts on audit teams adds credibility and reduces the opportunity for fraud. Furthermore, the study finds that forensic expert advice significantly curbs tax fraud, while forensic litigation support and investigation also contribute positively. In summary, forensic accounting enhances both the detection and prevention of tax fraud in Nigerian listed consumer goods firms, reinforcing financial accountability and deterring future violations.

Following a careful examination of the findings gathered for this investigation, the following policy recommendations are therefore advised.

Firstly, firms should institutionalise policies mandating the inclusion of forensic experts in major financial audits. This approach significantly reduces tax fraud by deterring fraudulent activities and enhancing collaboration with tax authorities.

 Secondly, companies should utilise forensic expert witnessing (FEW) to substantiate fraud allegations. Expert testimonies serve as legal deterrents and improve fraud reporting accuracy. Additionally, staff training on the legal consequences of fraud can further support effective forensic involvement.

Thirdly, strengthening forensic litigation support (FLS) is essential, as it plays a crucial role in reducing tax fraud. Engaging forensic legal teams and maintaining transparent financial records will aid investigations and ensure compliance with tax regulations.

Lastly, although forensic investigations (FI) can uncover more cases of fraud, a proactive approach is advised. Companies should adopt fraud detection technologies and enhance internal audits to prevent fraud from escalating. Collectively, these measures emphasise the preventive and corrective role of forensic practices in promoting financial integrity and reducing tax-related offences.

Policy Implication

This study, grounded in agency and white-collar crime theories, calls for stronger oversight and regulatory reforms to reduce tax fraud in Nigeria’s consumer goods sector. Findings show that forensic accounting tools—expert consultation, witnessing, litigation support, and investigationsignificantly impact tax fraud reduction. Policymakers should mandate forensic audits in high-risk firms and strengthen regulatory bodies like FIRS and FRCN. These measures will institutionalise forensic practices, promote professional specialisations, and enhance accountability. Ultimately, the study advances forensic accounting in Nigeria by demonstrating its practical relevance in detecting and preventing financial crimes, especially tax-related fraud.

REFERENCES

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