Definition and Explanation of Forensic Accounting

Discuss about the Structured Literature Review on Forensic Accounting.

Bhasin (2018) referred forensic accounting as the observation of auditing as well as accounting that is being carried parallelly with the investigation of the financial statement of the concerned organization. Forensic accounting is considered to conduct the accounting evaluation as per the situation of the court. It has also been stated that forensic accounting is a practice which explains the involvement that is the outcome of actual as well as estimated disputes. In this theory, “Forensic” is the term which is widely used in court for which it is considered as suitableand the likely outcome is of almost same standards which the forensic accounting generally uses. The theory of forensic accounting is referred to as the specialty practice within the various accounting processes which encompasses all the types of crime those are related to property (Carcello, Hermansonand Ye2015). In other words, forensic accounting deals with the crimes against property. The forensic accountants can also be termed as the investigators of fraud who actually with other fraud auditors investigate the accountants. Moreover, forensic accounting is also referred to as the investigation of the financial records in order to reveals the evidence related to lawsuit or criminal prosecution. While analyzing the theory during and its purpose as an effective tool against fraud within Australian retail companies, there are four articles which is highlighted. This includes “Effect of Forensic Accounting Services on Fraud Reduction in The Nigerian Banking Industry”, “The Impact of Forensic Accounting on Fraud Detection”, “Corporate Governance and Forensic Accountants’ role: Global Regulatory Action Scenario” and “Communion of Corporate Governance and Forensic Accounting: A Study of an Asian Country”.

The common explanation of the finding from the four selected articles are as follows:

Analysis of the aforementioned articles has highlighted that the symptoms of fraud are reflects itself within a proper check following the accounting techniques by an organization. It has also indicated that the part of accounting that has been frauded is hidden from naked eyes in he safe line in which the conviction becomes tough. This also can be said as the fraudsters are in an advantage due to mistakes caused by some of the accountants. Hence, this turns out to make the work of forensic accountants tough to detect the fraud (Koh, Arokiasamy and Suat 2015). This also points out that a deep analysis is needed to be carried out to detect the defaulter’s act. Therefore, an active involvement of the public is also needed with forensic accountants to detect the fraud. In other word it can also be said that an increase in such financial fraud has been successful due to failure of addressing the anticipation and expectation of public and shareholders. The article also throws a light on the perception of accountants on forensic accounting (Adekola andSergi2016).

Symptoms of Fraud and the Role of Forensic Accountants in Detection

The articles selected in this paper also revels the employers of the forensic accountant who are generally the government agencies such as IRS, CIS and FBI for detecting the cases of fraud. These articles reflect that there has been need of such forensic accountant for their capabilities for accounting, investigating auditing and taking on the necessary legal actions. This also explains the importance of forensic accounting on linking the effort of the organization on its policies on ethics (Gray 2014). The two major aspects of the articles have been highlighted that is the litigation services that considers the skill of accountant as a proficient consultant and the investigating services which takes the help of forensic accountants. This also reflect that the financial accountant must be well equipped with the knowledge of internal control system along with that of auditing the financial statement. The chosen articles also state that in order to trap the fraud, the support of government is of utmost importance. Hence, there are certain government bodies those have developed certain guidelines and procedures that is concerned with the forensic accounting. An individual with a proper training under a forensic accountant can sharpen his/her skill by receiving a certificate (Nigrini 2017).

The different explanation of the finding from the four selected articles are as follows:

The article “Corporate Governance and Forensic Accountants’ role: Global Regulatory Action Scenario” refer to the requirement of the organization to centralize the program while establishing system which would monitor as well as measure the internal control effectively. It also reveals the relationship among the internal control and corporate governance along with external reporting actions. It has also been stated that it also improvises the background knowledge of legal and corporate governance of the institution (Pedneaultet al.2014). Therefore, in such a scenario, the forensic accountant should showcase his/her skill to develop as well as maintain a proper governance policy. The article “Communion of Corporate Governance and Forensic Accounting: A Study of an Asian Country” reflects that an effective program for fraud prevention creates a positive surrounding at the workplace which acts as a motivation for the employees who are avoiding their responsibilities. The core responsibility of forensic accounting is to ensure that the corporate governance policies should deal with environments with high risk when he management is weak. The finding also includes the proper implementation of the policies which is vital in order to keep the employees honest (Singleton and Singleton 2017).

Relationship between Forensic Accounting and Corporate Governance

The article “Communion of Corporate Governance and Forensic Accounting: A Study of an Asian Country” has highlighted the relationship between the forensic accounting and corporate governance. It has been observed that the financial curriculum has a less literature on the forensic accounting. However, another article “The Impact of Forensic Accounting on Fraud Detection” reveals that fraud detection could effectively be realized by the forensic accountant while maintaining an effective control system encompassed with an improvised control as per the management’s ethical policy as well as other improved corporate governance policies (Van Akkeren, Buck and MacKenzie 2014). It is also indicated that the to discourage fraud practice, a punishment is also expected s it helps to deter the same. Therefore, the forensic accountant ae capable of facilitating the development of policies which reflect the intention of the organization and its capability to take actions against the criminal. Furthermore, the article also highlights that the integrity of financial statements can be ensured by the forensic accountants by understanding the risk areas and finding fraud symptoms through active investigation (Carroll andBuchholtz2014).

With analysis of the aforementioned articles, the managerial implication that is associated the same can be evaluated. It has been learned that the forensic accounting service can provide the companies with important tools which analyze the fraudulent actions but does not curb the same. It has also been gathered that the forensic accounting can also provide a support regarding litigation along with other professional service to the retail sector as well (Ewa and Udoayang 2017). Moreover, the forensic accounting can provide various other support which can help the institute to implement improved corporate governance to the retail industry. Hence, it can restore the confidence of public on government as well as the overall system. As discussed previously that the fraud is tough to find within the financial statement as it remains within the safe line, it increases the work for the accountants to find it. This has increased the demand for the forensic accountant within the retail industry as they also provide with various other services to ascertain risk and decrease the level of fraud within the industry (Golden, Skalak and Clayton 2016). This has been a vital aspect in the retain industry to deal with the fraud especially during the accounting process. The accounting standard is also very vital for its managerial implication concerning the regulatory authorities. Hence, the relevant implication isconsidered vital within the retail firm in Australia.

Managerial Implications for Retail Companies in Australia

While analyzing the selected articles, it has been learned that prior researches have not investigated the forensic accounting properly to improve the corporate governance of the companies. There are certain limitations that generally focuses on the barriers of he forensic accounting and its uses such as it fails to exaggerate current research which concerns with the effectiveness of corporate governance mechanism (Digabriele 2016). It also did not consider the growth prospective of the forensics especially the forensics regarding the computers as todays world is driven by technology as so there is an increase in cyber-crimes. With a limited number of research available in this area, the research which are to be held in future will be of probing nature. Hence, the researches that are to conducted in future will address the gaps while carrying the investigation process in essential skills while incorporating the training and education on Forensic accounting in order to improve the corporate government system. 

References

Adekola, A. andSergi, B. S., 2016. Global business management: A cross-cultural perspective.Routledge.

Bhasin, M. L., 2015. Contribution of Forensic Accounting to Corporate Governance: An Exploratory Study of an Asian Country.

Carcello, J. V., Hermanson, D. R., and Ye, Z., 2015. Corporate governance research in accounting and auditing: Insights, practice implications, and future research directions. Auditing: A Journal of Practice & Theory, 30(3), 1-31.

Carroll, A. andBuchholtz, A., 2014. Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.

Digabriele, J. A., 2016. An empirical investigation of the relevant skills of forensic accountants. Journal of Education for Business, 83(6), 331-338.

Ewa, E. U., and Udoayang, J. O., 2017. The Impact of Internal Control Design on Banks? Ability to Investigate Staff Fraud, and Life Style and Fraud Detection in Nigeria. International Journal of Research in Economics & Social Sciences, 2(2), pp. 32-43.

Golden, T. W., Skalak, S. L., and Clayton, M. M., 2016. A guide to forensic accounting investigation. John Wiley & Sons.

Gray, D., 2014. Forensic Accounting and Auditing: Compared and Contrasted to Traditional Accounting and Auditing. American Journal of business education, 1(2), pp. 115-126.

Koh, A. N., Arokiasamy, L., and Suat, C. L. A., 2015. Forensic accounting: Public acceptance towards occurrence of fraud detection. International Journal of Business and Management, 4(11), p. 145.

Nigrini, M., 2017. Benford’s Law: Applications for forensic accounting, auditing, and fraud detection (Vol. 586). John Wiley & Sons.

Pedneault, S., Silverstone, H., Rudewicz, F. and Sheetz, M., 2014. Forensic accounting and fraud investigation for non-experts. John Wiley & Sons.

Singleton, T. W., and Singleton, A. J., 2017. Fraud auditing and forensic accounting (Vol. 11). John Wiley & Sons.

Van Akkeren, J., Buckby, S., and MacKenzie, K., 2014. A metamorphosis of the traditional accountant: An insight into forensic accounting services in Australia. Pacific Accounting Review, 25(2), 188-216.