Magazine article Strategic Finance

Fraud Prevention Education in the Accounting Curriculum

Magazine article Strategic Finance

Fraud Prevention Education in the Accounting Curriculum

Article excerpt

In the last several years, the importance of preventing and detecting fraud has been brought home as never before. Articles on Enron, Tyco, WorldCom, and other accounting-related scandals have recently appeared in the pages of many newspapers and magazines, including Strategic Finance. Top company executives are being tried and sent to jail for "cooking the books." These high-profile cases have made the general public aware of the importance of proper accounting procedures and internal controls and led to the passage of the Sarbanes-Oxley Act of 2002. Therefore, education in the prevention and detection of fraud should be incorporated into the college accounting curriculum.

A massive corporate bankruptcy such as Enron can have disastrous financial ramifications on that organization's employees, retirees, and investors. But fraud by top executives of large companies is only one example. Small businesses are also very susceptible to fraud by insiders. In a 2004 study by the Association of Certified Fraud Examiners (ACFE), small businesses reported median losses of $98,000 at the hands of their own employees. This is often due to the failure to implement adequate segregation of duties. The impact of such a fraud on a small business can be disastrous and shows that businesses of all sizes need employees educated in the prevention and detection of fraud and other forms of white collar crime.

Some large companies have antifraud units either as part of or aligned with their internal audit department. Unfortunately, most companies don't have antifraud units or forensic accountants. Some public accounting firms have established forensic accounting practices that provide a variety of services to clients to meet this need.

Although experienced forensic accountants are said to be in short supply, many colleges and universities still haven't incorporated forensic accounting concepts into their accounting curriculum in any substantial way. A four-year college or university-level accounting curriculum often has a chapter or two on internal controls in an auditing and/or accounting information systems course, but that is typically the extent of the fraud prevention training that an accounting major will receive as an undergraduate.

The ACFE has been taking steps to help college professors in their efforts to incorporate forensic accounting into the accounting curriculum. Established in 1988 in Austin, Texas, by Joseph T. Wells, a former auditor and FBI agent, the ACFE is a 36,000-member international professional organization dedicated to fighting fraud and white collar crime. It has local chapters, presents training seminars, has developed self-study workbooks and video courses, and offers the Certified Fraud Examiner (CFE) certification.

As part of its continuing education courses, the organization has produced a series of 11 original videos on fraud that professors may use in college-level courses on fraud examination or a related subject per the ACFE's Terms of Use. The videos contain interviews with the actual perpetrators and descriptions of what the criminal did and what could have been done to prevent the fraud. Educators may obtain these videos at a reduced cost from the ACFE. …

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