Editorial

Financial Audit or Indian Journal of Corporate Governance

11(2)–24
Forensic Audit? © 2018 Institute of
Public Enterprise
Government Sector SAGE Publications
sagepub.in/home.nav
Panorama DOI: 10.1177/0974686218806724
http://journals.sagepub.com/home/ijc

Rajat Deb1

Abstract
The study has been motivated to assay the selective stakeholders’ perceptions
on whether the government financial audit has been converted into forensic
audit. Adopting a cross-sectional study design with survey strategy through a
self-administered interview schedule with a 50-item inventory, data has been
collected from randomly chosen 120 sample respondents having equal repre-
sentations from two groups—current and retired government employees and
businessmen of Tripura. The significant statistical results have concluded that
corruption and accounting slacks have important impacts on the government
audits, and the latter if used in an appropriate manner are likely to detect frauds
and catalyse in bringing accounting reforms.

Keywords
Government audit, forensic audit, survey, fraud, India

Introduction
Auditing has prevailed in government sectors since the Roman or Greek civilisa-
tions before 500 bc for scrutinising public accounts (Lee, 1971). The internal audit,
part of the internal control system, has ensured compliance of government spend-
ing and revenue collections with financial regulations and guidelines (Adeniji,
2011; Unegbu & Obi, 2012) and has assessed the accounting system effectiveness
(Ahmad, Othman, & Jusoff, 2009; Liu & Lin, 2012; Tracey, 1994; Vos, 1997), hav-
ing a significant association with financial accountability (Babatunde, 2013) with
avenues for improvement (Stoner, 1994), but its scope has been gradually reducing
as internal auditors have focused on preventing leakage of government funds
(Fernald, 1943). Applying analytical procedures especially through divergent
1
Assistant Professor, Department of Commerce, Tripura University, Suryamaninagar, Tripura, India.
Corresponding author:
Rajat Deb, Assistant Professor, Department of Commerce, Tripura University, Suryamaninagar-
799022, West Tripura, Tripura, India.
E-mail: debrajat3@gmail.com
2 Indian Journal of Corporate Governance 11(2)

thinking—a process of gathering evidence using mental generation i. e. through

clues (refer Cropley, 2006; Santanen, Briggs, & DeVreede, 2004)—the lower-level
trained auditors have been used for detecting frauds and misstatements on a regular
basis (refer Bedard & Biggs, 1991; Trompeter & Wright, 2010), applying profes-
sional scepticism (Brewster, 2011; Hurtt, 2010). Higher levels of professional
scepticism (critical mindset for assessing audit evidence), along with audit experi-
ence (e.g., Jeffrey & Weatherholt, 1996; Smith & Hall, 2008; Suddaby, Gendron,
& Lam, 2009), has enhanced the probability of questionable transactions’ reporting
(Taylor & Curtis, 2010) and sensibility in fraud detection (refer Hammersley,
Johnstone, & Kadous, 2011; Trotman & Wright, 2012; Wilks & Zimbelman, 2004),
resulting in significant improvement in audit quality.
Government audits have provided a link between the executives and parliament
or assembly as the case may be on the financial matters (Chubb, 1952,
p. 172; Premchand, 1963, p. 301) following regulation, authorisation, efficiency and
propriety (Basu, 1981, pp. 28.7–28.8; Duřeli, 1917, pp. 182–183; Wattal, 1962, p.
235), except secret expenditures, where the audit just has to be banked up on the
certificates from the concerned departments (Lall, 1981) and even sometimes has
remained a mute spectator for some wastes and frauds (Joseph, 1994). The gravity
and ill effects of corruption and frauds in the government sector have been reported
in depth (e.g., Graaf, Maravic, & Wagenaar, 2010; Gupta, Davoodi, & Alonso-
Terme, 2002; Platt, 2015, p. 86; Seligson, 2002; Tanzi & Davoodi, 1997; Vogl,
2012, p. 274; Wei, 2000). Social trust—a probability of being protected from others
cheating (Guiso, Sapienza, & Zingales, 2008)—has been entrusted with the govern-
ment auditors not only from macro-perspectives such as checking the tax collec-
tions (Francois & Zabojnik, 2005; Guiso, Sapienza, & Zingales, 2004) but even
from a micro-perspective like extension of bank loans (Chen, Liu, & Wang, 2016;
Wu, Firth, & Rui, 2014). Auditors’ roles have been questioned for lack of fraud
detections (Johnson, 2010) even though they have faced difficulties in executing the
same (Hammersley et al., 2011) in the forms of pressure from seniors for preparing
unqualified (refer Firth, Mo, & Wong, 2012; Francis & Krishnan, 1999; P. Hughes,
H.Y. Pabowo, Interviewer, Los Angeles, CA, 3 December 2012) and even favoura-
ble reports (Silviu & Timea, 2015). Although they are used to unearth financial
misdeeds like the investigators (e.g., Gottschalk, 2010; Law, 2011; Omar &
AbuBakar, 2012), most of the employees have remained mum rather than being a
whistle-blower (refer Bashir, Khattak, Hanif, & Chohan, 2011), resulting in poor tax
collections (Khan, 2012). Scholars are concerned about the excessive pressure on
internal auditors from top bureaucrats for detecting frauds (refer A. Siantury, D.
Salaki, P. Pangaribuan, D. N. Kusumawati, S. Aripin, H.Y. Prabowo, Interviewer, 16
October 2012; N. Wahito, H.Y. Prabowo, Interviewer, Jakarta, 20 January 2013),
disturbing their sceptic mentality—an essential element for such fraud investiga-
tions (e.g., R. Durkin, H.Y. Prabowo, Interviewer, Los Angeles, CA, 29 November
2012; Singleton & Singleton, 2010; J. Ziegler, H.Y. Prabowo, Interviewer, Los
Angeles, CA, 3 December 2012); notwithstanding, they have enjoyed their tasks (S.
Young, H.Y. Prabowo, Interviewer, Los Angeles, CA, 29 November 2012).
Literature has validated multidimensional studies on government audits such
as scope for improvements in operational efficiencies of the employees (Cohen &
Sayag, 2010) and schools in China (Saito & Mcintosh, 2010), detection of
Deb 3

irregularities and frauds (in China [e.g., Gong, 2010; Zhao, 2005], in the USA
[Ferraz & Finan, 2011], in Brazil [Ferraz & Finan, 2011] and in Nigeria [Onoja,
Ajanya, & Audu, 2013]), effectiveness of Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA) schemes (Lakha, 2011) and fund
management techniques in India (Deb, 2015). Studies focusing on reforms in
government accounting and the auditing system have also been attempted, for
example, fund management practices (Deb, 2015; Yilmaz, Beris, & Serrano-
Berthet, 2010), accounting reforms (refer Deb, 2014; Warren, 2014) and fraud
preventive and controlling techniques (McLellan, 2011), along with the
mechanisms for safeguarding national assets (refer Enofe, Mgbame, Osa-Erhabor,
& Ehiorobo, 2013; Udeh & Nwadialor, 2016). Usually financial audit in
government sector is an annual exercise whereas red flag (fraud) detections
carried out by forensic accounting experts incurring costs (Basu, 2014; Colon,
2015) based on symptoms, if any, indicated by the auditors in as much an auditor
is not an investigator (Association of Certified Fraud Examiners, 2009), and has
been compared like a watch dog rather than a blood hound (Lopes, 1986). Forensic
accounting techniques have been used extensively for detection and prevention of
frauds in corporate sectors (refer Popoola, Che-Ahmad, & Samsudin, 2014;
Raghavan, 2014; Rezaee, Lo, Ha, & Suen, 2016; Singh, 2012). They probably
need to be applied in the government sector as well, and auditors should start
auditing with a suspicious mind assuming that someone might have committed a
mistake (Lord Justice Denning, 1958). The present study has motivated us to
answer the research question as to whether the internal audits of government
sectors in Tripura have turned out to be a forensic audit exercise or not least the
perceptions which have emerged in the recent past after the exposure of a series
of scams by the state’s Internal Audit Directorate. Such apprehensions have been
documented based on the continuous exposure of frauds in different rural
development (RD) blocks of the state such as Bishalgarh, Satchand, Dasda,
Rupaicherri; other infamous scams are, for example, scheme implementations in
the National Rural Health Mission and in Rashtriya Madhyamik Siksha Abhiyan,
purchase of ginger, drug scam and others (Tripurainfo.com Archives). Interestingly,
the Division Bench of the Hon’ble High Court of Tripura in November 2016 has
ordered for conducting special audits of the MGNREGA scheme in all 58 RD
blocks of the state by chartered accountant firms (Tripurainfo.com Archives).
Studies addressing the roles of government internal auditors like the forensic
auditors have been searched extensively, but probably the body of knowledge has
likely been scant at least in the Indian context. The present study has detected this
deficiency in the literature and has attempted to contribute back with new insights
about government internal auditors’ perceived changing roles.
The present study has attempted to assay the perceptions of the selective
stakeholders about the expected changing roles of government internal auditors.

Prior Studies and Hypotheses

In this section prior studies have been reviewed to frame the research hypotheses
based on which a conceptual model as exhibited in Figure 1 has been formed.
4 Indian Journal of Corporate Governance 11(2)

Corruption Inducements
Corruption has been defined as a crime committed within an organisation, more
prominently in government departments (Raadschelders, 1998, p. 140) for
attaining personal gains by the officials (Aguilera & Vadera, 2008). Literature has
indicated its motivators in government offices, for instance, poor compensation
structure (Husain, 2011; Lindner, 2013), employees’ greed and financial strains
(refer Acuña-Alfaro, 2012; Dobovšek & Slak, 2015; Gong, 2010; Zhou & Tao,
2009), nepotism (Acuña-Alfaro, 2012), scope for unethical promotions (Acuña-
Alfaro & Tran, 2015, p. 424), payment of bribes for accessing better healthcare in
government hospitals (Vian, Brinkerhoff, Feeley, Salomon, & Vien, 2012) and for
higher grades in examinations (McCornac, 2012). Scholarship has indicated
corruption have been taken place in multiple ways e. g., for issuing trade license
(Bardhan, 1997; Quah, 2009, pp. 820–821), for getting jobs payment of bribes
(Ponniah & Sokheng, 2015) usually have been taken place as limited instances of
punishments (Nalu, 2015) even after misusing positional powers (Dorminey,
Fleming, Kranacher, & Riley, 2012), and such corruptions could have been curbed
by government audits (refer Johnson, Taxell, & Zaum, 2012; Myo, 2014; Spector,
2005). Rationale for setting the hypothesis has been substantiated by scholars
from the prominent infamous corruption instances in Indian government
departments ranging from payment of bribes for driving licences (Bertrand,
Djankov, Hanna, & Mullainathan, 2007), to payment of kickbacks for government
contracts (Bussell, 2010; Davis, 2004), to payment for favourable postings (Wade,
1982) and even furnishing misstatements in the implementation of governments
projects (Véron, Williams, Corbridge, & Srivastava, 2006). Moreover, a recent
Indian study has validated the significant increase in the instance of re-corruption—a
situation when whistle-blowers restrain themselves which likely have accelerated
the corruptions (Vaidya, 2017).

Accounting Slacks
Advocates of cash basis of accounting over accrual basis of accounting have
pointed out few shortcomings of the latter (e.g., Christiaens, 2000; Christiaens &
Van Peteghem, 2007; Ellwood, 2001; Guthrie, 1998; Lewis, 1995), but others
have highlighted the limitations of the former such as confined scope for detecting
corruptions (Carlin, 2005; Chan, 2003; Downs, 1957; Vinnari & Näsi, 2008),
over-centralised and directed systems (Sunder, 1997; Thomas, 2001), non-
exhibition of true financial positions (Deb, 2014) and little connection with culture
and traditions (Hoque & Hopper, 1994). On the other hand, few scholars have
suggested a combination for good financial management, tantamount to good
governance (e.g., Christiaens & Vanhee, 2002; Monsen, 2002).
So, based on these, the following has been hypothesized.
H1: Corruptions and accounting slacks have significant impacts on
government audits.
Deb 5

Fraud Detections
Fraud has been perceived as a perpetrator’s crime to deceive others (Wells, 2008,
p. 8) probably with an intention of not being detected (Association of Certified
Fraud Examiners, 2012, p. 57; Dorminey et al., 2012) with rationalisation for their
misdeeds (Dorminey et al., 2012; Murphy & Dacin, 2011). Furthermore, frauds
have been committed by the perpetrators in different forms such as pilferage of
petty cash, stocks and cash (Gill & Goldstraw-White, 2010) mostly by employees,
even by top officials, rather than by outsiders (e.g., Krambia-Kapardis & Zopiatis,
2010; Peltier-Rivest & Lanoue, 2012), creating concerns for management (Brink
& Witt, 1982). Literature has documented perpetrating government officials, for
example, by taking bribes (tax officials in Indonesia [Kimura, 2012] and transport
officials in India [Bertrand et al., 2007]) and by taking kickbacks (in India [Davis,
2004], in Indonesia [Prabowo, 2012], in Pakistan [Bashir et al., 2011; Jalal, 1991,
pp. 80–90] and in Singapore [Neo, 2014]), but such detentions usually have taken
place by whistle-blowers rather than by statutory auditors (Kroll, 2014;
PricewaterhouseCoopers, 2014). Interestingly, the perceived role of internal
auditors in fraud detections have been acknowledged by scholars (e.g., Abbott,
Parker, & Peter, 2012; Burnaby, Howe, & Muehlmann, 2009; Frimpong, 2013;
Lacativo, 1995; Sawyer, 1988), and the presence of skilled auditors has also been
acknowledged for improving the audit quality (e.g., Cohen & Sayag, 2010), since
police personnel due to workloads have restrained themselves from these tasks
(e.g., Smith, Button, Johnston, & Frimpong 2011; Sommer & Brown, 2013).

Accounting Reforms
Studies have motivated us to choose better accounting techniques from institu-
tional perspectives (e.g., Adhikari & Mellemvik, 2010; Timoshenko & Adhikari,
2010). The switchover from cash basis to accrual basis of the accounting system
with its pros and cons has been studied in depth (e.g., Arnaboldi & Lapsley, 2009;
Christiaens, Reyniers, & Rolle, 2010; Ellwood & Newberry, 2007; Hyndman &
Connolly, 2011; Lapsley, Mussari, & Paulsson, 2009). Lauder's contingency
model of the government accounting for innovation (1992) has three variables
viz. stimuli, socio-political factors and administrative factors Indian Journal of
Corporate Governance - IJC Meeting on 15 October 2018 a roadmap for the future
(Adams, Muir, & Hoque, 2014). Further, government audits have guided in bring-
ing accounting reforms (Antipova & Bourmistrov, 2013; Jones, Lande, Luder, &
Portal, 2013) with the extensive application of Fiedler’s (1967) contingency
theory, that is, to clearly define and allocate tasks and duties (Abushaiba &
Zainuddin, 2012; Mu’azu & Siti, 2013), but such reforms have produced unpleas-
ant outcomes in the UK and Australia (Andon, Baxter, & Chua, 2007; Norhayati
& Siti-Nabiha, 2009), with no desired benefits (Christensen, 2007), even spend-
ing taxpayer money (Fowler, 2009).
Accordingly, a relevant hypothesis has been set.
H2: Government audits have significant impacts on fraud detections and
guiding accounting reforms.
6 Indian Journal of Corporate Governance 11(2)

Predictors Outcomes

Corruption Outcome/Predictor Fraud

inducements detections
H1 Government H2
audit
Accounting Accounting
slacks reforms

Figure 1. Conceptual Model of Government Audit Study

Source: The author.

From Figure 1, it has been hypothesised that two predictors are likely to affect the
outcome, that is, the government audit, and the latter being the predictor probably
influence the other two outcomes. Moreover, the study has conceptualized a
research paradigm where the ontology has been referred as the perceived changing
role of government internal auditors (existence of reality), followed by an
epistemology (carried out a survey to accumulate knowledge), having an axiology
to assay the paradigm shift from the financial audit to forensic audit (research
objective), has adopted a methodology (an approach to execute the study) with an
appropriate method (data collection and the analysing technique).

Methodology
Research methodology is the overall approach for executing the study, incorpo-
rated in the following subsections.

Research Design
Aligned with literature to unearth the overall snapshot of the research problem
(Babbie, 1989, p. 89) it has adopted a cross-sectional study design applying
survey strategies to access its inherent advantages such as ease in quantification
and capability to estimate the likely behaviour of the studied population (e.g.,
Creswell, 2008; Fisher, 2007; McDaniel, 2010). Moreover, the choice of the field
survey has been justified by a good number of auditing literatures (e.g., Bobek,
Daugherty, & Radtke, 2012; Fu, Tan, & Zhang, 2011; Hayes & Baker, 2014).
Methods
The data collection and analysis technique has been referred as method (see
Saunders, Lewis & Thornhill, 2014) having the following sub-sections.
Structuring Interview Schedule
The items of the schedule have been developed in the following manner. At first,
the digital library of a central university has been extensively searched with
Deb 7

pertinent keywords, and around 226 papers with full texts published by the
selective international publishers have been downloaded. Second, the papers
thereafter were thoroughly reviewed based on which research hypotheses and a
45-item inventory for the interview schedule have been designed. In the third
stage, protocol interviews have been carried out separately with three subject
experts to assess the language, order and relevance of the draft items as literature
has advocated (e.g., Diamantopoulos, Reynolds, & Schlegelmilch, 1994), and
hence items with mean scores 2 and above have been retained for pilot study, after
dropping five items. Fourth, aligned with the advices of the scholars (e.g.,
Zikmund & Babin, 2012), a pretest with 30 randomly chosen sample respondents
has been performed to assay the reliability (a good measure) of the items, and
based on Cronbach’s alpha scores exceeding 0.5 (Nunnally, 1978) the number of
items have been reduced to 36. Finally, the survey was attempted during
September–November, 2017. In-person interviews have been arranged to assess
the perceptions having flexibility and to unearth the specific responses of the
participants, whenever required, which have been applied in public sector
accounting studies (e.g., Berg, 1998; Mack & Ryan, 2006; Ritchie & Lewis,
2003); this has been adopted in the current study as well.
Sampling Technique
The study population consisted of in-service and retired government employees
and businessmen of Tripura, a northeastern Indian state. The study population has
been divided into twin stratums—current and retired government employees and
businessmen being the taxpayers, having direct bearing in governance of the state
government. Since the exact number and contact details of all of them were
inaccessible, it has not been designed in the sampling frame and rather we have
selected 120 samples randomly with equal representations by each stratum and
substratum. The sample size has fallen within the threshold limit of 30–500 as
recommended by the social scientists (e.g., Isreal, 2013; Hill, 1998; Roscoe, 1975).
Data Collection Design
The self-administered interview schedule has been used for data collection which
has been segregated into three sections—section I has 10 items focusing on
gathering respondents’ basic information and section II has 36 items framed in a
5-point Likert scale for accessing its associated multiple advantages (Hair, Black,
Anderson, & Tatham, 2010) addressing the core research topic, whereas section
III has incorporated therein 4 items covering overall perceptions structured in the
nominal scale. Moreover, following the literature a cover letter containing
instructions to fill in the schedule has been attached at the top of the schedule
(e.g., Dillman, 1978) to counter the non-comprehension problems that arose while
the enumerator translated the items into local language whenever required (e.g.,
Peytchev, Conrad, Couper, & Tourangeau, 2010); attempts have also been taken
to maintain data collection ethicality (Oberhofer & Dieplinger, 2014).
8 Indian Journal of Corporate Governance 11(2)

Table 1. Study Variables

Predictors Outcomes Extraneous

Corruption inducements
Government audit
Accounting slacks
Peer-group influences
Fraud detections
Government audit
Accounting reforms
Source: The author.

Parameters
The study variables as summarized in Table 1, have been classified in three types,
viz., the predictors—corruption inducements and accounting slacks—are likely to
have significant impacts on the outcome, that is, the government audit, and the
latter, in turn, being a predictor probably has to influence two more outcomes—
fraud detections and accounting reforms. Further, the respondents have been
chosen judiciously, and interviews have been conducted separately to control the
influence of an extraneous variable, that is, the peer-group influences as it might
lead to biased responses as scholars have validated (e.g., O’Shaughnessy, 2014).

Statistical Tests
The study has summarised the rationale for applying the inferential statistics for
testing null hypotheses as cited in Tables 2 and 3, respectively.

Results

Sample Statistics
The descriptive statistics of the items have been computed using mode (for the
nominal scale), mean and standard deviations (SDs) (for the interval scale).
The study has reported that majority of the respondents are men (78.2%), in the
age group of above 45 years (54.17%), married (88.32%), graduates (55.83%),
general (45.3%) and Hindu by religion (89.17%).

Regression Analysis
In order to examine the extent to which corruption inducements and accounting
slacks are likely to have an impact on government audits, multiple regressions
analysis has been applied.
Table 2. Choice of Statistical Tests

Variables
Predictors Outcomes Null
Tests Name Measurement No. Name Measurement No. Objectives hypotheses
Multiple Corruption Ordinal 2 Government Interval 1 To estimate H01
regression inducements (categorical) audit (continuous) the value of an
and accounting outcome based on
slacks the values of two
predictors.
One-way Government Nominal 1 Fraud detections Interval 2 To determine H02
MANOVA audit (2 types of and accounting (continuous) whether there are
categorical) reforms any differences
between
independent
groups on
more than one
continuous
outcomes.
Source: The author.
10 Indian Journal of Corporate Governance 11(2)

Table 3. Assumptions Hold for Selected Statistical Tests

Tests Type Rationale

Multiple regression Parametric The outcome has been measured on a
continuous level, having two predictors
each has been measured on a continuous
level. Further, the model has a linear
relation, the sampling distribution has been
normally distributed
One-way MANOVA Parametric The rationale behind the choice of the test
has been summarized as the outcomes
have been measured in an interval level,
the predictor has two categorical types,
independent groups, independence of
observations; sample size n > 30, with
no outliers, linearly related, sampling
distribution is multivariate and has been
normally distributed.
Source: The author.

Table 4. Model Summary

Change Statistics
Adju Standard Significance
sted Error of R2 F F
Model R R2 R2 Estimate Change Change df1 df2 Change
1 0.538 0.532 0.516 62.53 0.417 125.48 1 118 0.000
2 0.912 0.903 0.923 51.86 0.343 107.13 2 117 0.000
Source: The author.

From Table 4, in model 1, only corruption inducements have been applied as

predictors, and in model 2 both the predictors have been used. The column R has
represented the values of the multiple correlation coefficients between the
predictors and the outcome. When the first predator has been used, it has resembled
the simple correlation coefficient (.538). The next column R2 has shown the
proportion of variability in the outcome. For model 1 its value has stood at .532,
and for model 2 this value has increased to 90.3 per cent. So, accounting slacks
have contributed only 37.1 per cent. The adjusted R2 has provided an idea of how
well the model has generalised, and its value was computed to be very close to R2.
In the change statistics, the significance of R2 has been tested using the F-ratio for
each of the blocks. Model 1 has caused R2 changes from 0 to .417, and this
change has raised the F-ratio to 125.48 and significant p < .001 (k = 1,
n = 120). The addition of a new predictor has caused R2 to increase by 0.374. Using
R2change, kchange = 2 − 1 = 1; the F change has been calculated as 107.13 ( p < .001).
Table 5 has reported the analysis of variance (ANOVA) results, how it is bet-
ter in predicting the outcome. The F-ratio has represented the ratio of the
Deb 11

improvement which for model 1 has been calculated as 91.28, (p < .001) and for
model 2 as 101.75, highly significant ( p < .001). Accordingly, the findings have
provided evidence to likely reject H01.

Multivariate Analysis of Variance (MANOVA)

MANOVA test has been applied for assessing the impact of government audits on
fraud detections and introducing accounting reforms. Respondents’ occupations
have been assumed as predictors, while the other two as outcomes.
The means and standard deviations (SDs) for two outcomes have been
presented in Table 6. The outcome has been segregated amongst the two predictors.
Box’s test of the assumption of equality of covariance matrices has been
conducted as reported in Table 7. The result of the test of H02 has indicated that
variance-covariance matrices have found equal for both levels of occupation that
is the assumption of homogeneity has computed as non-significant (p = .193;
p < .05).

Table 5. ANOVA Results

Sum of Mean Square

Model Squares (SS) df (SS/df) F Sig.
Regression 401,578.32 1 401,578.32 91.28
Model 1  Residual 887,453.11 118 7,520.78 0.000*
Total 119
1,289,031.43
Regression 801,238.12 2 400,619.06 101.75
Model 2  Residual 1,012,485.39 117 8,653.72 0.000*
Total 119
1,813,723.51
Source: The author.
Notes: Predictor: (Constant) corruption inducements; predictor: (Constant) corruption inducements
and accounting slacks; government audits.

Table 6. Descriptive Statistics

Occupations Mean SD N
Fraud Detections Government employees 4.29 1.495 60
Businessmen 4.12 1.741 60
Total 4.33 1.108 120
Accounting Reforms Government employees 4.03 1.029 60
Businessmen 3.95 1.122 60
Total 4.17 1.238 120
Source: The author.
12 Indian Journal of Corporate Governance 11(2)

Table 7. Box’s Test of Equality of Covariance Matrices

Box’s M 10.259
F 1.107
df1 5.298
df2 22,301.125
Sig. .193
Source: The author.

Table 8. Multivariate Test

Hypothesis Error
Effect Value F df df Sig.
Intercept Pillai’s trace 0.793 688.373 2.000 22.000 .000
Wilks’ lambda 0.203 688.373 2.000 22.000 .000
Hotelling’s 58.157 688.373 2.000 22.000 .000
trace 58. 157 688.373 2.000 22.000 .000
Roy’s largest root
Occupations Pillai’s trace 0.375 2.541 4.000 53.000 0.022
Wilks’ lambda 0.660 2.408 4.000 49.000 0.031
Hotelling’s trace 0.422 2.408 4.000 43.000 0.039
Roy’s largest root 0.319 4.284 2.000 24.000 0.019
Source: The author.

The main MANOVA results have been presented in Table 8 where the test
statistics have quoted for the intercept of the model and the respondents’ occupa-
tions, and the latter has been considered for testing null hypotheses. The four
values have been transformed into F-ratio with 2 degrees of freedom (df).
The significant values of all those tests have been computed lower than .05 (p <
.05), an evidence likely to reject H02. Pillai’s trace has indicated robustness of the
test as sample sizes have been taken as equal (government employees and busi-
nessmen), indicating a significant difference. Eventually, it has indicated the addi-
tional power of Roy’s root as test assumptions likely have been hold.
To test H01, the study has applied multiple regressions (please refer Tables 4
and 5, respectively), while for H02, one-way MANOVA (please refer Tables 6–8,
respectively) have been used; the significant results have supported to reject both
null hypotheses, and it is likely to accept the research hypotheses and has con-
cluded that corruption inducements and accounting slacks have influence in gov-
ernment audits, and the latter if applied appropriately may significantly detect
and prevent accounting frauds and help in bringing accounting reforms.

Discussion and Conclusion

The current study has motivated to assay the selective stakeholders’ perceptions
on the expected paradigm shift about the role of state government auditors—from
Deb 13

financial audits to forensic audits—based on a series of infamous scams and

financial shenanigans exposed from audit reports in the last couple of years.
The choice of the twin set of stakeholders has been justified as these groups pay
income taxes and have direct bearing with good governance. The survey of related
literature has produced two research hypotheses and a conceptual model for
executing the study. Adopting a cross-sectional study design with survey strategy
data from 120 selective stakeholders has been gathered using the self-administered
interview schedule. The reliability (a good measure) and validity (a right measure)
of the tool have been assessed through protocol interviews and a pilot study
followed by Cronbach’s alpha scores and the sample adequacy test, respectively.
The inferential statistics have provided evidence to likely reject null hypotheses,
and the study has concluded that corruption inducements and accounting slacks
are likely to have significant impacts on government audits, and the latter would
probably have a significant influence on fraud detections and on introducing
accounting reforms.
The majority of the respondents have unanimously expressed their concerns
about the changing role of the government financial audit which, likely been
turned out as forensic audit in its scope and modus operandi. Such apprehensions
have been justified by them by pointing out the accounting slacks and poor fund
management practices as exposed by government audit reports. Taking cognizance
of such reports, they have labelled serious allegations against the ruling party’s
loyal corrupt bureaucrats, excessive unionism, ill nexus of bureaucrats with
political bigwigs, lahe lahe (go slow) attitudes towards digitalisation, poor work
culture, DDOs’ (drawing and Disbursing Officers) lack of fund management
literacy, vindictive attitudes against whistle-blowers, lower rates of convictions
and little supervisions by directors and secretaries—all of these have contributed
in such a debacle in the government sectors. Furthermore, by and large the
respondents have been presuming government audit, an annual routine exercise
likely been loosing its identity and rather been assumed as forensic audit,
notwithstanding, strictly speaking the latter is usually carried out to unearth any
specific financial crime. In spite of the enumerator’s differentiation of these two
types of audits, a majority of the respondents have expressed reservations on the
exposure of a series of scams exposed by internal audit reports, which according
to them are tantamount to forensic audits in its scope and modus operandi.
The study has duly acknowledged the limitations before drawing on eventual
conclusions. First, it has attempted to assess the sample respondents’ perceptions on
the expected changing roles of state government auditors; hence, other specific
aspects of government audits have been excluded from its scope. Second, the
literature review has been confined to publications in English, especially in academic
e-journals and government audit reports; hence, literature on other vernacular
languages has not been consulted, resulting in only two research hypotheses,
focusing on corruptions, frauds and accounting gimmicks. Third, the audit reports
in the current study have been exclusively confined with those produced by the
audit directorate, Finance Department of Government of Tripura, rather than those
of the office of the auditor general (AG), Tripura. Fourth, it has used a self-
administered interview schedule in lieu of adopting or adapting any questionnaires
14 Indian Journal of Corporate Governance 11(2)

from other studies. Moreover, due to parsimony and a limited time scale it has
conducted the survey in a predefined study area with a relatively smaller sample
size. Fifth, instead of the 4-point Likert scale it has applied a 5-point Likert scale
with the third option as ‘neutral’, and scholars have validated insignificant
differences between these two scales (e.g., Losby & Wetmore, 2012). Sixth, in spite
of taking preventive measures the possibility of peer-group influences cannot be
entirely avoided. Seventh, it has run IBM SPSS-22, instead of its latest versions,
and other statistical software, for example, R, Strata and EViews for data analysis.
Eighth, social-desirability bias (Crowne & Marlowe, 1960)—a tendency of the
participants to respond as expected by the enumerator—might not be fully rolled
out in the context of the current study. Ninth, even though both men and women
participants have shared their perceptions, it has not attempted any comparative
analysis of those perceptions. Finally, the applied inferential statistical tests have
their inherent limitations which could have an impact on the study findings as
indicated by scholars (e.g., Bethlehem, 2008).
The study has several implications for stakeholders. At first, it has attempted
to measure the selective stakeholders’ perceptions whether the auditors of the
Directorate of Audit have been conducting financial audits or forensic audits.
Their perceptions have been justified from the findings as corruption and
accounting slacks have largely been unearthed by those auditors as exhibited from
audit reports. Second, it has pinpointed corruption in different government
departments, in the implementation of centrally sponsored schemes and how few
unscrupulous officials have been siphoning government funds as exposed from
audit reports. Third, the traditional cash-based accounting system, lack of
digitalisation and inexperienced bureaucrats with little knowledge on financial
acumen, along with political nexus, have been identified as the prime reasons for
scams and financial shenanigans. Fourth, it has validated the significant role of
audits in bringing accounting reforms especially switching over to accrual basis,
in tune with the literature (e.g., Antipova & Bourmistrov, 2013). Moreover, the
need for rigorous trainings of accounting staff has been emphasised. Fifth, the
report may be used by the policymakers for chalking out auditors’ forensic training
programmes using analytical procedures and e-exposure for detecting innovative
frauds and corruption in government offices, as reported by literature as well
(Osburn & Mumford 2006; Scott, Leritz, & Mumford, 2004). Sixth, auditors may
take a serious note of the findings for revitalising their multiple skills especially
fraud detection skills, applying sceptic minds as perceived by the majority of the
stakeholders. Finally, banking upon the report the tax-paying common men
should be more cautious while accessing different government services and
should raise their concerns against any red flag or corruption they smell.
Future research endeavours would be multimodal in their nature encompass-
ing accounting, economic, social and political aspects. First, accounting in a
wider sense has incorporated tree aspects: constructive aspects (accounting the-
ory), practical aspects (accountancy) and controlling aspects (audits). So, studies
may be attempted to address the government auditors’ changing perceived roles
by inductive studies to generate emerging theories and deductive studies for test-
ing the relevance of established accountancy and auditing issues. Further, ration-
Deb 15

ale and scope of forensic audits in government sectors may also be evaluated.
Second, the literature has documented that auditors’ remunerations and independ-
ence have significant influence on reporting quality (e.g., P. Hughes, H.Y. Pabowo,
Interviewer, Los Angeles, CA, 3 December 2012; Silviu & Timea, 2015), and
those excluded variables may be replicated in government audits as a good
number of government auditors in Tripura have been working on fixed pay and
have kept mum on exposing corruptions due to transfer phobia. Third, the quan-
tum of revenue losses as divulged from published audit reports needs to be thor-
oughly reviewed for sketching preventive mechanisms, as well as for fixing
responsibilities and detecting professional negligence as literature has validated
(e.g., Gong, 2010; Hu, 2005). Fourth, perception studies may be carried out to
assess the preparedness of auditors and auditees with forensic audit procedures
simultaneously with financial audits. Fifth, it has been evident that corruption has
been positively correlated with lean supervision, governance and political ill
nexus and associated weak legal provisions (Gong, 2010; Zhou & Tao, 2009), and
such misdeeds can be curbed by audits, especially by forensic audits. Hence stud-
ies may be attempted to assess corruption-level changes. Sixth, studies may be
undertaken to assess whether lavish public spending and public fund management
policies have been improved or not after applying forensic audit and analytical
procedures, akin to literature (e.g., Blume & Voigt, 2011; Schelker & Eichenberger,
2010). Finally, professional skepticism- a person's propensity to put off the con-
clusion until the alternative action supported by documentary evidence (see Hurtt,
2010) may be applied in the perception studies on government audit.

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship
and/or publication of this article.

Funding
The author received no financial support for the research, authorship and/or publication of
this article.

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