Forensic accounting and fraud: A review of literature and policy implications

Abstract

This review present some evidence on fraud, forensic accounting, the skills and education of the forensic investigator. Also, some explanation for the diverging views among academics and regulators in relation to detecting fraud are provided. To regulators, I address the question on why academic research in forensic accounting have little significance to inform policy. Further, I present some rich set of questions and identify a number of important directions for future research in forensic accounting. This paper is intended to stimulate debates and future research of the issues identified.

Advances and issues in fraud research: a commentary

“…An extensive literature focus on forensic accounting education (e.g. Rezaee 2002;Crumbley, 2009;Ozili, 2015). The second category focus on fraud detection and prevention techniques by empirically investigating the financial report of firms that have a fraud history to observe whether unusual financial reporting patterns or trends can be detected.…”

“…Fleming et al, 2016), implementing fraud reporting policies, staff job rotation, fraud hotlines and the use of forensic accountants (see. Othman et al, 2015;Ozili, 2015) among others.…”

Forensic Accounting Theory

“…Some scholars agree that forensic accounting can help to uncover fraud (Singleton, 2010;Silverstone et al, 2004), but such consensus depends on how fraud is defined. Some studies define fraud and identify the motivations to commit fraud (Rezaee, 2005;Crumbley, 2003;Zahra et al, 2005;Ozili, 2015;Calavita et al, 1997). Fraud in financial reporting may be defined as a deliberate attempt by corporations to deceive or mislead users of published financial statements, especially investors and creditors, by preparing and disseminating materially misstated financial statements (Rezaee, 2005: p.279).…”

“…Fraud in financial reporting may be defined as a deliberate attempt by corporations to deceive or mislead users of published financial statements, especially investors and creditors, by preparing and disseminating materially misstated financial statements (Rezaee, 2005: p.279). Fraud can be committed by employees, former employees and outright outsiders (Crumbley, 2003;Zahra et al, 2005;Ozili, 2015), and there is a general consensus that fraud involves the intentional alteration or manipulation of material financial records and supporting documents (Ozili, 2015). Fraud schemes vary in scope and context, and some types of fraud are industry-specific (Calavita et al, 1997, Ozili, 2020.…”

Advances and Issues in Fraud Research: A Commentary

“…There is no generally agreed definition of fraud in the literature; however, there are informative keywords or terminologies that are associated with the definition of fraud. For instance: fraud is an 'intentional', 'deliberate', 'purposeful act', 'omission', 'disclosure of less information', 'misrepresentation', 'non-disclosure of relevant information', 'to disguise', 'cheat', 'mislead investors' and 'deceive firm owners, regulators, and stakeholders' (Rezaee, 2005;Apostolou et al, 2000;Ozkul and Pamukcu, 2012;Ozili, 2015;etc.). These informative keywords have been used to describe fraud which is broadly an attempt by individuals, employees and firm managers to obtain pecuniary benefits that would not be obtained without taking such actions (Zahra et al, 2005;Ozili, 2015).…”