Forensic Accounting, Internal Control Systems, and their Effect on Tax Compliance of Deposit Money Banks in Nigeria

In the Nigerian banking sector, persistent financial violations, control deficiencies, and tax disputes have highlighted the compliance framework insufficiencies of deposit money banks. There has been some interest by scholars in forensic accounting and internal controls. However, the majority of prior studies have examined these concepts independently and, to the best of my knowledge, have not examined the nexus of these concepts to tax compliance for Nigerian deposit money banks. This study fills this gap by assessing the nexus of forensic accounting and internal control to tax compliance for deposit money banks in Nigeria. The study adopted a quantitative descriptive design. The study population consisted of 900 employees of the accounting, internal audit, compliance, and risk management units of seven deposit money banks. The sample size was derived from the Yamane (1967) formula. The sample size was 277, and the study achieved a response rate of 93.9% (n=260). A structured questionnaire comprising of 26 close-ended items measured on a 5-point Likert scale was the research instrument. The questionnaire measured three constructs: forensic accounting practices, internal control systems, and tax compliance. Forensic accounting, internal control, and tax compliance had the following Cronbach’s alpha 0.872, 0.885, and 0.843, respectively. The research adopted a correlational research design and analyzed the data using descriptive statistics, Pearson product moment correlation, and simple and multiple regression, which were performed at a significance level of 0.05. With forensic accounting practices (β = 0.572, t = 11.205, p < 0.05, R² = 0.327) and internal control systems (β = 0.528, t = 9.978, p < 0.05, R² = 0.278) both exerting positive and significant effect on tax compliance, and with both mechanisms explaining 40.5 percent of the variability in tax compliance (F(2, 257) = 87.636, p < 0.05), forensic accounting practices (β = 0.411) having more influence than internal control systems (β = 0.323), the study found that both forensic accounting practices and internal control systems act as complementary, not substitute, factors of tax compliance. The study further suggested that deposit money banks set up forensic accounting units sufficiently equipped with resources and embed forensic data analytics in the normal monitoring of transactions, and adopt a compliance model that integrates the outcome of investigations to strengthen the preventive control/restraints.