When refundee.com about Enron, Conrad Black, Kimberly Rogers or WorldCom, 1 will unquestionably think about theft, bribery and fraud. The important word right here is “fraud” exactly where many research have been performed about this subject. What is fraud and how is it detected and dealt with, and how is it attainable to be protected from it? Such inquiries and their answers are essential terms in the domain of forensic accounting, because fraud has played a main function in the existence of accounting, therefore forensic accounting. Understanding fraud is necessary for those who want to fully grasp what Forensic Accounting is, how it has come into the method, how it exactly bargains with the concerns we face, and to what degree it has helped in specific problems of fraud, or even in strengthening the accounting method in common (Economist Intelligence Unit, 2007).
Analysis has been carried out on fraud and has been offered different definitions, all which come in line with one particular one more. Other researches had been done to highlight the job of internal controls in minimizing the opportunity of theft or misappropriation. However, tiny analysis was carried out on forensic accounting diffusion and correct 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 avert similar acts from encountering. These preventions have shed lights on a new idea and practice recognized as “Forensic Accounting (FA)”, which has turn out to be a frequent notion to fight against fraud and equivalent unethical acts. No matter how significantly fraud activities improve, there will have to normally be an anti-fraud scheme to shield against it. To deliver availability of balance and protection is the principal reason why FA existed.
Nonetheless, the legal, supervisory, and regulatory systems of financially corrupted countries produce important possibilities and tools for the laundering and protection of the proceeds of crime, and enable criminals who make use of those systems to substantially increase their possibilities to evade helpful investigation or punishment. A country’s commitment to bank secrecy and the absence of particular essential supervisory and enforcement mechanisms aimed at stopping and detecting cash-laundering increase the possibility that transactions involving the country’s entities and accounts will be utilised for illegal purposes.
Since one of the most potent tools applied today is forensic accounting, it is advantageous to study its feasible implementation in countries with enterprise opacity, and to probe the essential methods needed to establish the implementation of this procedure in diverse sectors and at quite a few levels. Consequently, in order to achieve these objectives, there is a need to have to investigate the following research question: “What are the circumstances of possibility for implementing FA in a nation characterized by an opaque monetary sector?” A lot more particularly, this investigation has two objectives:
1. To determine the ideal way to highlight the value of applying forensic accounting activity in order to clear the roads of the future of enterprise activities by finding out from past mistakes such as Enron and WorldCom and by employing other instances of economic fraud related to the international ones.
2. To determine the way to diffuse and implement forensic accounting as a important tool that, when made use of professionally, can tremendously help fight against fraud activity.
Additionally, the gap is that forensic accounting is not identified in numerous countries. FA is not so a lot spread in the planet, it is only recognized in USA and some developed nations. The study is contributed in getting the most effective way to implement FA especially with the current 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 study question and to show how forensic accounting can be implemented in the countries characterized by an opaque financial sector the overall aim is to accomplish this goal.
Literature Overview
Distinctive analysis has been performed to define fraud including the varieties of fraud such as that of Gilbert (1997, p. 124) who defined “fraud” as: “an act utilizing deceit such as intentional distortion of the truth of misrepresentation or concealment of a material reality to gain an unfair advantage more than yet another in order to secure some thing of worth or deprive another of a suitable. Fraud is grounds for setting aside a transaction at the option of the celebration prejudiced by it or for recovery of damages.”
Farrell & Healy (2000) revealed about fraud that is escalating worldwide and is becoming far more expensive to businesses every single year as fraudsters use intricate methods to commit and cover their criminal acts. Consequences of fraud can differ from public morality corrosion, weakened faith in the organization, to loss in market place valuation and confidence of stakeholders.
With the various definitions attributed to fraud, other investigation accomplished highlighted the significance of obtaining internal control that would limit the continuous fraudulent behaviors. External audits are also undertaken to ensure that internally instituted fraud control mechanisms are sufficient in scope, productive in application and complied with. Nevertheless, it is pretty unfortunate to note that the complexity of the human brain and its dynamic technique of reasoning have tremendously diversified present-day scams away from the hitherto identified modes of fraudulent activities that now render accurate corporate governance ideals nearly unworkable.
It is therefore worth mentioning that in an attempt to stop fraud, the Auditing Regular Board (ASB) in 2002 issued the Statements of Auditing Normal 99 (SAS 99) which introduced a “Fraud Triangle”. Fraud Triangle indicates that the probability of committing fraud is higher in situations when managements or other workers have incentive or are beneath economic stress, the situations that supply possibilities for management or workers to commit fraud exists, or the ethical values or qualities that bring about management or personnel to rationalize the fraudulent act exists (Maranjan, 2010).
Fraud can be detected and investigated to avoid the probable damages the activity can lead to. So what guidance would a forensic accountant give to a enterprise suffering from fraud activity? A qualified can list 4 issues that can be completed to mitigate the occurrence of fraud and they involve fraud prevention, fraud detection, fraud investigation and stick to-up legal action or resolution. The anti-fraud plan of any firm should concentrate on all four.
The previous two decades have witnessed considerable modifications in the business atmosphere like globalization, technological advances and now with reported higher-profile monetary scandals, ways to increase public trust and investor confidence in financial reports. Emerging regulatory, social, financial, ethical, and legal challenges facing the globe of organizations contribute to an growing demand for FA that encourages accounting.