Fraud Examination in Academia

Higher Education Should Help Stave off Fraud and Abuse

 


Accounting, business, and criminal justice students in colleges and universities are graduating unprepared for the “real world,” because few are receiving any fraud examination training. Consequently, when they stumble upon fraud in the workplace, they do not know what to do.

Occupational fraud and abuse costs organizations billions of dollars annually; higher-education business and criminal justice schools have a responsibility to help stave off this horrendous dilemma. Fraud examination and forensic accounting classes have to become part of the academic curriculum.

Why Teach Fraud Examination? 

An accepted business principle is that successful organizations must satisfy the needs of customers. In academia, the customers include the organizations providing employment to those graduating from colleges and universities. Successful academic institutions must satisfy the needs of the organizations hiring their graduates.

Accordingly, there are four compelling reasons why fraud examination is a “customer need” and should be taught to accounting, business, and criminal justice graduates. First, the substantial yet unnecessary costs associated with occupational fraud and abuse make it more difficult for businesses to compete in an increasingly competitive world. Second, the failure to detect fraud during financial statement audits costs accounting professionals billions of dollars in litigation expenses and this damages their credibility as professional consultants. Third, the demand for fraud examiners and forensic accountants has been increasing dramatically over the last decade. Fourth, the limited supply of people with the knowledge and skills needed to fight the battle effectively against fraud has created a huge void in the market. The following sections discuss each of these reasons in more detail.

The Cost of Fraud 

The complexity of today’s business transactions and computerized information systems creates abundant opportunities for employees to defraud their employers. Recent fraud surveys suggest that more and more employees take advantage of these increasing opportunities for committing fraud. In 1998, KPMG, LLP – one of the “Big Five” accounting firms – conducted a fraud survey of 5,000 leading U.S. companies and organizations. The results of the survey revealed that the median loss per fraud incident was $116,000. Moreover, 59 percent of the respondents believed that fraud will become more of a problem in the future (Sherman, 1999).

According to a survey of 2,608 Certified Fraud Examiners conducted by the Association, occupational fraud and abuse costs organizations in the United States more than $400 billion per year or an estimated 6 percent of total revenues (Wells, 1997, 35). The hidden nature of fraud makes it difficult, if not impossible, to determine how much fraud actually is costing organizations today. However, both the frequency and magnitude of fraud losses have convinced most organizations that to remain competitive they must intensify their efforts to detect and prevent fraud.


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