Anti-Fraud Education: Standardizing nationally, expanding globally

Fraud is a universal problem that threatens the very underpinnings of business and government across the globe. While many professionals in the United States scramble to keep up with accounting changes mandated by the Sarbanes-Oxley Act of 2002 and the Statement on Auditing Standards No. 99 "Consideration of Fraud in Financial Statements," our international counterparts face similar challenges. In fact, our European neighbors have their own version of Enron - they call it Parmalat.   

The International Accounting Standards Board (IASB) has been hard at work seeking to establish a convergence of international accounting standards to ensure the reliability of financial statements. This environment has significantly increased the European Union's preoccupation with financial transparency and fraud detection. If future accountants and business leaders are to fulfill the public's expectation of them to detect and deter fraud, institutions of higher education must prepare students accordingly. Throughout the U.S. and abroad changes are underway, but we must make progress continuously to keep up with the ever-changing fraud landscape.

U.S. colleges and universities are recognizing the need for anti-fraud education and are increasingly responding to that demand. In 1999, only 20 out of approximately 900 accounting programs offered a course in fraud examination. There are now approximately 250 accounting programs offering some fraud education, largely as a result of the ACFE's Higher Education Initiative. The Higher Education Initiative provides colleges and universities with free videos, PowerPoint presentations, CDs and DVDs, as well as professional development for full-time faculty at accredited institutions, to enhance anti-fraud education worldwide. The value of these goods and services is estimated at $800,000 each year.

Along with the growth of anti-fraud education in the U.S., the need to establish some guidelines for fraud and forensic accounting programs has emerged. To further that end, the U.S. Department of Justice is funding, through a federal grant awarded to West Virginia University, a project to develop a model curriculum. These guidelines would be strictly voluntary and could be implemented for undergraduate, graduate, or certificate programs. The goal of this model curriculum is to ensure that entry-level graduates have the requisite knowledge, skills, and abilities on which to launch a successful career in this field. Although there are various career paths available to individuals interested in fraud and forensic accounting, virtually all the experts agree that there's a common body of knowledge that's relevant to the many career paths. According to the participants of the Technical Working Group for the West Virginia University project, the basic core foundation of knowledge needed for an individual to enter this profession, and that every introductory course should address, includes:

While broad knowledge of fraud is essential to successfully detecting and deterring fraud, colleges and universities must delve even further into fraud education by developing specific skills students can use to gather, analyze, and report information. For example, issues, such as how to use computer technology to search for data or how and where to find publicly available information, should be addressed. Data mining programs and techniques are useful for both gathering and analyzing data. (See page 33.) Effective interviewing techniques can be learned and are of vital importance when trying to uncover fraud. As Joseph T. Wells, CFE, CPA, founder and Chairman of the ACFE, has said, "Books and records don't commit fraud, people do." The importance of proficient communications - written and oral - plays an integral part in resolving allegations of fraud. In fact, an entire investigation may hinge on the quality of the end result - the written report. The difference between unlocking critical facts during an investigation or allowing them to slip through the cracks will depend on the skills and abilities of our future accounting and business professionals.

As chair of the ACFE's Higher Education Committee, I recently had the opportunity to meet with officials from the University of Economics, Prague in the Czech Republic. Our discussions focused on how they might best serve their students and their larger community. Many common issues emerged. As a publicly funded institution, they were balancing the realities of reductions in their budget appropriations with the needs of their academic programs. Some options under consideration include increasing student tuition and establishing partnerships with businesses for various mutually beneficial initiatives. Both the university's officials and the representatives from the business community acknowledged the growing awareness of, and need for, anti-fraud education to effectively fight the battle against fraud. The managing partner of PricewaterhouseCoopers (PwC), Michael W. Hackworth, CFE, CPA (ACFE Board of Regents member), and senior partner, Petr Kriz, participated in the discussions for potential ways they might engage in partnering with the university around fraud education.

Sponsoring endowed professorships and supplementing library resources were some of the possibilities they explored. The university's rector (a position that's comparable to a chancellor in our public university systems) was very supportive of initiating a fraud examination course at the college and recognized that successful academic institutions must also satisfy the needs of the organizations hiring their graduates.

The University of Economics, Prague is committed to preparing its students to be competitive in a global environment, and as such, offers some of its courses in English. In fact, the proposed fraud examination course looks to the U.S. for the fraud education expertise of Chairman Wells in his new textbook "Principles of Fraud Examination." An online companion site from the publisher, John Wiley & Sons Inc., also provides supplemental instructors' resources to use with the textbook, such as a test bank, solutions manual, PowerPoint slides and instructors' manual (authored by the writer of this column). These materials, along with the resources available from the ACFE, provide everything educators worldwide might need to help facilitate introduction of the course through the administrative approval process to the classroom.

The demand for fraud examiners and forensic accountants has increased exponentially over the past few years, and for the foreseeable future the global demand will continue to grow. As we move forward, new challenges will inevitably emerge and fraud education will need to adapt. We need to seek out and utilize every opportunity to further fraud education from basic fraud techniques to "cutting-edge" technologies related to fraud prevention and detection. This might include everything from stimulating our students' interest in fraud education at the introductory accounting level or in a stand-alone fraud examination course, to developing guidelines for basic fraud knowledge, to working with the business community to address our mutual needs and concerns. Only then will we ensure that our graduates have the skills necessary to not only detect fraud but also to prevent it.

Let us know what you're doing in your anti-fraud programs that you might share with our members.

Mary-Jo Kranacher, MBA, CFE, CPA, is an ACFE Regent and an assistant professor of accounting at York College of The City University of New York. She's also the chair of the ACFE's Higher Education Committee.