How Divergent Are Pedagogical Views toward the Fraud/forensic Accounting Curriculum?
Smith, G. Stevenson, Crumbley, D. Larry, Global Perspectives on Accounting Education
As a result of numerous accounting scandals in recent years, forensic accounting is the hottest topic to affect the university business curriculum since the early rush into MBA programs in the 1970s.1 In addition, these financial frauds have significantly changed accounting practices used in identifying fraudulent activities. For example, the potential effect of "forensic audits" on practice is apparent in the report entitled Serving Global Capital Markets and the Global Economy (Global Public Policy Symposium 2006) released by the Big Four along with Grant Thornton and BDO International (hereafter the "Global Report").
The Global Report is concerned with the legal liabilities facing accounting firms from a host of expanding lawsuits based on stockholders' and others' losses from after-audit negative financial events, such as fraud. To improve this situation, the Global Report's authors suggest that all public companies have forensic audits, although the report does not identify the nature of a "forensic audit." The Global Report is a defense of the accounting profession, but it also represents a potential strategic shift for practitioners to bring forensic practices into the consultative track of available accounting services. Both in academic circles and within accounting practice, forensic accounting is being widely discussed, but a clear definition has not yet been formulated.
Here, it is argued that the development of new curricula needs to be tempered with an understanding of the underlying differences that may exist in "fraud versus forensic" concepts. Before course revisions start, course developers need to identify the foundation for introducing "fraud/forensics" into the accounting curriculum. Should auditing, traditional fraud examinations, or forensics provide the underlying foundation for accounting curriculum development? Or should it be a combination of these three approaches? This is not a semantic argument as the answer limits the content of courses as well as the fraud/forensic orientation of the accounting curriculum.
This article identifies the pedagogical issues related to selecting an auditing, fraud, or forensic model for curricula revision. Next, a survey of faculty members who teach fraud/forensic courses is reviewed along with a sample of fraud/forensic course syllabi.
For accounting programs, there is no scientific answer identifying the best pedagogical approach to use in developing a fraud/forensic curriculum, but there are philosophical beliefs about a best approach. Traditional auditing courses have presented fraud instruction within the accounting curriculum in the past, and as such auditing serves as the starting point in developing a fraud/forensic curriculum. However, a revision from traditional audit-based content to either a fraud or forensic approach changes the scope of analytical techniques used as well as the understandings in the revised curriculum. The next section reviews the differences in audit, fraud examination, and forensic accounting perspectives to curriculum development.
Auditing: A Foundation for Fraud/Forensic Curriculum Revisions
Auditing students are introduced to the procedures for testing internal company controls. The results of evaluating a company's internal controls determine the extent of necessary transaction sampling needed to provide assurances of properly prepared financial statements. Financial auditing procedures are performed in a well-structured and documented fashion to evaluate management's financial statement representations. Students learn about the need to show that properly documented auditing procedures were followed to answer any after-audit legal inquiries. They use statistical sampling to ensure that there is a ninety-five percent level of confidence, for example, and that account balances are accurate.2 Auditing courses introduce students to detailed checking procedures followed in conducting an audit. …