When hearing about Enron, Conrad Black, Kimberly Rogers or WorldCom, one will definitely think about theft, bribery and fraud. The key word here is “fraud”; where many studies have been conducted about this subject. What is fraud and how is it detected and dealt with, and how is it possible to be protected from it? Such questions and their answers are key terms in the domain of forensic accounting, since fraud has played a major role in the existence of accounting, hence forensic accounting. Understanding fraud is necessary for those who want to understand what Forensic AcAcounting is, how it has come into the system, how it exactly deals with the issues we face, and to what degree it has helped in certain issues of fraud, or even in strengthening the accounting system in general (Economist Intelligence Unit, 2007).
Research has been conducted on fraud and has been given different definitions, all which come in line with one another. Other researches were done to highlight the job 먹튀검증. of internal controls in minimizing the chance of theft or misappropriation. However, little research was done on forensic accounting diffusion and proper implementation.
Fraud activities have been manipulating, stealing, and destroying many businesses and industries. To face such harmful trends, fraud examination has been created; and great efforts have been exerted to detect, investigate, and prevent similar acts from encountering. These preventions have shed lights on a new concept and practice known as “Forensic Accounting (FA)”, which has become a common notion to fight against fraud and similar unethical acts. No matter how much fraud activities increase, there must always be an anti-fraud scheme to shield against it. To provide availability of balance and protection is the main reason why FA existed.
Nonetheless, the legal, supervisory, and regulatory systems of financially corrupted countries create significant opportunities and tools for the laundering and protection of the proceeds of crime, and allow criminals who make use of those systems to significantly increase their chances to evade effective investigation or punishment. A country’s commitment to bank secrecy and the absence of certain key supervisory and enforcement mechanisms aimed at preventing and detecting money-laundering increase the possibility that transactions involving the country’s entities and accounts will be used for illegal purposes.
Since one of the most powerful tools used today is forensic accounting, it is advantageous to study its possible implementation in countries with business opacity, and to probe the essential methods needed to establish the implementation of this procedure in different sectors and at many levels. Therefore, in order to achieve these objectives, there is a need to investigate the following research question: “What are the conditions of possibility for implementing FA in a country characterized by an opaque financial sector? ” More specifically, this research has two objectives:
1. To identify the best way to highlight the importance of using forensic accounting activity in order to clear the roads of the future of business activities; by learning from past mistakes such as Enron and WorldCom and by using other cases of financial fraud similar to the international ones.
2. To identify the way to diffuse and implement forensic accounting as a vital tool that, when used professionally, can greatly help fight against fraud activity.
Moreover, the gap is that forensic accounting is not known in many countries. FA is not so much spread in the world, it is only known in USA and some developed nations. The study is contributed in finding the best way to implement FA especially with the existing gap, with the objective of covering it mainly because it is so hard to implement forensic accounting especially that it is not diffused worldwide. The objective is to arrive at an answer to the research question and to show how forensic accounting can be implemented in the countries characterized by an opaque financial sector; the overall aim is to achieve this goal.
Different research has been conducted to define fraud including the types of fraud such as that of Gilbert (1997, p. 124) who defined “fraud” as: “an act using deceit such as intentional distortion of the truth of misrepresentation or concealment of a material fact to gain an unfair advantage over another in order to secure something of value or deprive another of a right. Fraud is grounds for setting aside a transaction at the option of the party prejudiced by it or for recovery of damages. ”
Farrell & Healy (2000) revealed about fraud that is increasing worldwide and is becoming more costly to businesses every year as fraudsters use intricate methods to commit and cover their criminal acts. Consequences of fraud can vary from public morality corrosion, weakened faith in the organization, to loss in market valuation and confidence of stakeholders.
With the various definitions attributed to fraud, other research done highlighted the importance of having internal control that would limit the continuous fraudulent behaviors. External audits are also undertaken to ensure that internally instituted fraud control mechanisms are adequate in scope, effective in application and complied with. However, it is quite unfortunate to note that the complexity of the human brain and its dynamic method of reasoning have tremendously diversified present-day scams away from the hitherto known modes of fraudulent activities that now render true corporate governance ideals almost unworkable.
It is thus worth mentioning that in an attempt to prevent fraud, the Auditing Standard Board (ASB) in 2002 issued the Statements of Auditing Standard 99 (SAS 99) which introduced a “Fraud Triangle”. Fraud Triangle indicates that the probability of committing fraud is high in situations when managements or other employees have incentive or are under financial pressure, the conditions that provide opportunities for management or employees to commit fraud exists, or the ethical values or characteristics that cause management or employees to rationalize the fraudulent act exists (Maranjan, 2010).