A Forum for Fraud-Fighting Faculty in Higher Ed

I had the good fortune to first meet Dr. Joseph T. Wells, CFE, CPA, the founder and Chairman of the ACFE, on March 25, 2004, the day before a team of professionals embarked on the National Institute of Justice (NIJ) project to develop an educational model for forensic accounting and fraud examination for the nation’s colleges and universities. He was the quintessential professional; a charismatic leader; a person passionate about anti-fraud practice, education and research; and an executive committed to completing work at the highest levels of quality. It was an experience I’ll never forget and for which I’m truly grateful.

As a starting point for the NIJ curriculum development, the project leaders attempted an Internet search of colleges and universities with programs in fraud examination, forensic accounting, white-collar crime, economic crime and other related fields. The search revealed a dearth of programs. Many colleges and universities offered a single course in fraud examination, but I could almost count on one hand the number of multi-course programs that were offered. Also, textbooks dedicated to the anti-fraud and forensic accounting profession were almost nonexistent.

Look how far we’ve come! In the spirit of the new year, this column celebrates just three of the advances in anti-fraud higher education: the NIJ’s model educational curriculum, ACFE resources for academics and budding fraud examiners, and current textbooks chock-full of anti-fraud principles and practices.

Anti-fraud educators, like practicing professionals, are dedicated to combating fraud. We can be proud of our accomplishments. But we’re just getting started.

MODEL EDUCATIONAL CURRICULUM  

In December 2005, the results of the NIJ project were presented in draft form as “Education and Training in Fraud and Forensic Accounting: A Guide for Educational Institutions, Stakeholder Organizations, Faculty and Students.” This model educational curriculum provides a road map for institutions looking to develop single courses, higher-education programs and professional education and training in the anti-fraud and forensic accounting arena.

The NIJ released the formal document in 2007. It’s available free online at www.ncjrs.gov/pdffiles1/nij/grants/217589.pdf 

MATERIALS AND EDUCATION FOR ALL  

The ACFE has been visionary in its support of academics going back to the creation of ACFE student chapters and the ACFE Anti-Fraud Education Partnership (www.ACFE.com/community/higher-ed.asp), which provides professors with free course materials. The ACFE established the partnership to address the unprecedented need for fraud examination education at the university level.

After the ACFE approves professors’ applications, it supplies a free course syllabus, teaching aids, 11 ACFE videos and accompanying workbooks, and copies of ACFE reference materials for campus libraries.

Full-time, higher-education students can join the ACFE as Student Associate Members for $25 and receive an electronic version of the Fraud Examiners Manual and a one-year subscription to Fraud Magazine. Alternatively, graduating seniors in a bachelor’s program or students enrolled in a master’s program are eligible to purchase the ACFE Student Package ($350), which includes the CFE Exam Prep Course, and waived CFE Exam fee and first-year CFE membership dues after passing the CFE exam.

TEXTBOOK OFFERINGS  

In 2011, at least five textbooks are available to professors instructing anti-fraud and forensic accounting courses in higher education:

“Forensic Accounting and Fraud Examination” (Wiley, 2011) Mary-Jo Kranacher, MBA, CFE, CPA; Dr. Wells, and I coauthored this book, which was originally released in September 2010. After the completion of the NIJ curriculum project, the authors realized that several excellent textbooks were available on fraud examination or forensic accounting, but none adequately explored all the topical areas addressed by the model curriculum.

The book helps entry-level students master skills by thoroughly exploring areas necessary to enter this emerging professional specialization:

• Foundational skills

• Career opportunities

• The psychology of the fraud perpetrator: why people make bad choices

• Complex frauds and financial crimes such as money laundering, organized crime and cyber crime

• Best practices in detection and investigation

• Effective interviewing and interrogation techniques

• Using information technology for fraud examination and financial forensics engagements

• A detailed review of fraud schemes

º Asset misappropriation

º Corruption

º Financial statement fraud

• A detailed examination of the work of consultants, litigation support professionals and expert witnesses

º Damage claims

º Valuations

º Other civil litigation engagements

• Cleaning up the mess: remediation and litigation advisory services

The authors were able to gather, synthesize, and present this material as a result of their professional experiences combined with auspicious interactions with the other 43 subject-matter experts from the NIJ project, the work of pioneers in the field, and their contacts with other exceptional professionals at conferences, seminars, and in the classroom.

“Principles of Fraud Examination” (Wiley, 2005) Dr. Wells wrote this excellent text centered on complex human behaviors such as greed and deception – factors that are difficult to identify and quantify. He shares his insights from a lifetime war against greedy corporate titans and crooked politicians. This book defines and describes fraud and how it’s committed, prevented, and remediated. Dr. Wells emphasizes that understanding the ways fraud is committed is paramount to preventing and detecting it.

The text begins with an overview of the fraud examination methodology. Thereafter, it describes the schemes used by executives, managers, and employees to commit fraud against their organizations including:

• Skimming

• Cash larceny

• Billing schemes

• Check tampering

• Payroll schemes

• Expense reimbursement schemes

• Register disbursement schemes

• Non-cash asset schemes

• Corruption

• Accounting and fraud

• Fraudulent financial reporting schemes

• Interviewing witnesses

Dr. Wells examines practically every major fraud scheme in detail with statistics and flowcharts. Case studies help students understand how fraudsters accomplish the schemes. The text then considers prevention, detection and investigation strategies. Dr. Wells shows how fraudsters use technology to perpetrate and conceal fraud and convert the gains into useable cash. He also provides excellent insight into fraud symptoms and detection strategies in cyber space.

“Fraud Examination” (Thompson-Southwestern, 2006) W. Steve Albrecht, Ph.D., CFE, the first president of the ACFE and the 1998 recipient of the ACFE’s Cressey Award, wrote the first edition. Albrecht is joined in the second edition by his coauthors and talented sons, Conan, professor of information systems and eBusiness Fellow at Brigham Young University, and Chad, assistant professor at the Jon M. Huntsman School of Business at Utah State University.

Albrecht uses his considerable experience on the witness stand and his and his sons’ consulting, research and educational knowledge. They craft their thorough fraud examination methodology to help students become professionals in numerous fraud-related fields, including consulting, auditing, tax, management or investments.

Just as in “Forensic Accounting and Fraud Examination,” the topical coverage in this book addresses important investigative techniques and fraud schemes, both of which are necessary to become an effective anti-fraud professional. They include, among many others:

• The nature of fraud

• Who commits fraud and why

• Fighting fraud: an overview

• Preventing fraud

• Recognizing the symptoms of fraud

• Investigative methods

• Inquiry methods and fraud reports

• Financial statement fraud

• Revenue- and inventory-related financial statement frauds

• Liability, asset and inadequate disclosure frauds

• Other complex frauds

The Albrechts do an excellent job of striking a balance between succinct coverage of general topics and detailed investigation and specific knowledge that experienced fraud professionals require. Student readers of the text will become excited about career opportunities while others will refocus their career aspirations.

“Forensic Accounting” (McGraw-Hill Irwin, 2008) For several years, Florida Atlantic University has offered excellent educational opportunities with the Forensic Accounting Masters Program, which has been offered online or in the classroom. Three of the central figures behind this program’s success joined forces to create a superior student-centered text. Authors William Hopwood, Ph.D.; Jay Leiner, CFE, CFS, CHS; and George Young, Ph.D., CPA, provide comprehensive coverage of forensic accounting through a wide range of relevant topics. Although this book doesn’t incorporate “fraud” in its title, more than a third of the text considers fraud–related material, including:

• The forensic accounting and auditing environment

• The Sarbanes-Oxley Act of 2002

• Forensic science and information technology

• Forensic auditing and investigation

• Financial statement fraud

• Employee, vendor and other fraud against the organization

• Tax fraud

• Bankruptcy, divorce and identity theft

• Organized crime and terrorism investigations

• Dispute resolution and litigation services

Student readers develop a solid set of anti-fraud and forensic accounting fundamentals and the required tools and techniques to be successful professionals. In the last several chapters, the authors explore detailed applications of the fundamentals, tools, and techniques.

“Forensic and Investigative Accounting” (CCH, 2009) This text has gone through several iterations; its fourth edition provides a very good overview of the anti-fraud and forensic accounting landscapes. Joining author Lester Heiter, a 25-year veteran of investigations, engagements and deposition, and litigation testimony, are academics Larry Crumbley and G. Stevenson Smith. The authors cover, among other topics:

• Forensic accounting detection and investigation

• Fraudulent financial reporting

• Employee fraud: the misappropriation of asset

• Money laundering and transnational flows

• Proper evidence management

• Commercial damages and litigation support in special situations

• Investigation of electronic data: a brief introduction

• Digital forensic analysis

• Cybercrime: legal issues and loss valuations

• Business valuations

• A review of forensic accounting in action

This book presents material from the “twin towers” of forensic accounting – litigation support and investigative auditing – by exploring the tools and techniques associated with investigative auditing, computers, criminology and courtroom procedures. Also, the authors help students understand the contemporaneous and ever-changing landscape derived from new schemes outlined in the news, in the legal and regulatory environment, and by practitioners in the field.

FROM IRREGULARITIES TO FRAUD  

When visionary Joseph T. Wells founded the ACFE in 1988, no association served the needs of the anti-fraud professional. While the anti-fraud field had little direction, academics had virtually none. At that time, accountants didn’t even use the word “fraud,” preferring instead to discuss “irregularities”!

As academics we’ve come a long way. Looking back, we have the ACFE to thank for much of our progress. But thanks, also, to each of you for persevering. Keep fighting the good fight and educating those anti-fraud professionals!

Columnist’s note: Generally, higher-education practitioners and professors can receive free “review copies” of textbooks by contacting the publishers or their schools’ publisher representatives. 

INSTITUTE FOR FRAUD PREVENTION GENERATES MORE ANTI-FRAUD RESEARCH  

The Institute for Fraud Prevention (IFP) recently met for its winter meeting at the New York City offices of BNP Paribas, an IFP member organization.

“The IFP meetings have been growing in both interest and quality of research,” said Timothy A. Pearson, Ph.D., CPA, executive director of the IFP. Pearson is also director of the Division of Accounting in the West Virginia University (WVU) College of Business and Economics in Morgantown. “

Mary-Jo Kranacher, MBA, CFE, CPA/CFF, the IFP’s president, welcomed the attendees. “IFP researchers are breaking new ground in the fight against fraud,” said Kranacher. “They’re looking to develop synergies without compromising investigations, identify potential predictive tools for terrorist activities and pinpoint anti-money laundering red flags implicated in fraud.”

Richard A. Riley Jr., Ph.D., CFE, CPA/CFF, the IFP’s vice president of research and operations, presented updates on the ongoing research projects on quantifying risk intuition, psychological measures and risk of fraud, and small business bankruptcy and allegations of fraud. “We had the largest attendance ever at an IFP meeting – 68 individuals,” said Riley.

After the general meeting, the IFP board of directors approved grants for research projects on the influence of financial and non-financial inconsistencies in audit quality, motivation of fraudsters in local government, and fraud response and litigation readiness in small- and medium–sized businesses.

ACFE founder and Chairman Dr. Joseph T. Wells, CFE, CPA, began the IFP in consultation with the University of Texas at Austin and in conjunction with the American Institute of Certified Public Accountants. The institute is a collation of industry leaders, law enforcement agencies and academic institutions all working to support multidisciplinary research and education on the prevention of fraud and corruption. For more information visit www.theifp.org. 

Richard “Dick” A. Riley Jr., Ph.D., CFE, CPA, is a Louis F. Tanner Distinguished Professor of Public Accounting in the College of Business and Economics at West Virginia University in Morgantown. He is chair of the ACFE Higher Education Advisory Committee and the vice president of operations and research for the Institute for Fraud Prevention.

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