The emergence of forensic accounting programs in higher education.
By Seda, Mike,Kramer, Bonita K. Peterson
Publication: Management Accounting Quarterly
Date: Saturday, March 22 2008
Publication: Management Accounting Quarterly
Date: Saturday, March 22 2008
AS THE DEMAND GROWS FOR PROFESSIONALS WITH FORENSIC ACCOUNTING SKILLS, SOME UNIVERSITIES ARE NOW OFFERING CERTIFICATE PROGRAMS, MASTER'S DEGREES, AND UNDERGRADUATE MAJORS/MINORS IN FORENSIC ACCOUNTING. A SURVEY EXAMINES THE TYPES AND LOCATIONS OF PROGRAMS OFFERED AS WELL AS OBSTACLES THAT IMPEDE
OTHER UNIVERSITIES FROM OFFERING SIMILAR PROGRAMS.
In 2006, U.S. companies suffered an estimated $652 billion in losses from fraud, according to the Association of Certified Fraud Examiners (ACFE). (1) Because not all cases of fraud are discovered nor are all discovered frauds reported, any fraud statistic is an estimate. Regardless, national and international fraud surveys repeatedly report that the magnitude of the problem is significant. (2)
Because of the large amount of employee and management fraud, embezzlement, and other financial crimes occurring in today's society, accounting and auditing professionals must have appropriate forensic accounting training and skills to help prevent, detect, and investigate those crimes. Widely publicized corporate scandals such as Enron, WorldCom, and Adelphia have made the accounting profession and general public more aware of the prevalence and magnitude of fraud. Consequently, the demand for professionals who can help investigate these white-collar crimes has also increased.
Emerging regulations and professional pronouncements issued by a number of regulatory bodies--such as the U.S. Securities & Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB)--challenging businesses and government agencies to improve their corporate governance have also contributed to the increased demand for forensic accounting professionals. (3)
NEED FOR FORENSIC ACCOUNTING SKILLS
A major problem with the implementation of emerging regulations and pronouncements is that CPAs have neither the training nor the hands-on experience to tackle fraud examination and forensic accounting investigation assignments alone. (4) Leaders in the accounting profession have recognized that accounting students need fraud-specific education in order to be effective in the fight against fraud. Courses in financial accounting and auditing, for example, do not provide the type of training that accounting students--society's future accountants--need in order to understand fraud and its deterrence. Underscoring this point, Barry Melancon, president and CEO of the AICPA, asked accounting educators in 2002 to provide students with "the knowledge and skills to understand the fundamental characteristics of fraud, identify factors that may indicate it exists, and acquire enhanced interviewing techniques." (5)
To help address this deficiency in fraud-related education, researchers have published papers to help other educators develop fraud courses. (6) In 2002, the ACFE established an educational support program at the grassroots level that provided free pedagogical materials to help enable instructors at colleges and universities develop forensic accounting courses and programs. (7) This program was awarded the American Accounting Association's annual Innovation in Accounting Education award that year. Before that program was initiated, only 19 universities offered a separate fraud course. (8) There are now approximately 300 universities listed on the ACFE website as participating in the antifraud education partnership program. In addition to the ACFE materials, more fraud-related pedagogical materials are being developed and published. (9)
Offering a specific course on fraud for accounting students is an important step forward in the effort to educate future accountants so that they might be better equipped to prevent and detect fraud, but many universities have recognized the need to provide students with more fraud-related education beyond a specific course and are now offering programs in forensic accounting. This development is consistent with what was predicted in recent research, which found that academicians and practitioners saw the need for more specialized training in this area. (10) This need may have arisen in part because a multidisciplinary investigative team trained as specialists in fraud examination and forensic accounting is needed to complement the traditional audit process by proactively assisting in identifying problematic areas where fraud could exist or in investigating any allegation of fraud. To fill this void, national CPA firms have created multidisciplinary forensic investigative teams with the help of specialized forensic training consultants. For example, individuals who possess skills in electronic evidence gathering and preservation, interviewing techniques, or investigative report writing may be needed to assist in a fraud investigation. In addition, the AICPA is currently partnering with the ACFE in an effort to create a Forensic Accounting Specialist Designation with a related continuing professional education program. (11)
RESEARCH SURVEY
In light of the developing need to bridge the gap between forensic accounting supply and demand, we conducted a survey of academics to determine the extent to which colleges and universities are offering more depth in their fraud-related education to the benefit of students, organizations, and society.
We surveyed 1,000 randomly selected academicians and asked them to complete an online survey of 22 questions related to forensic accounting education. We received a usable response rate of 15% (150) from the survey participants (see Table 1).
We designed the survey instrument to answer the following questions:
1. How do you integrate forensic accounting education into your curriculum?
2. For universities that offer more extensive forensic accounting education (beyond one specific course): a. What type of program is offered (master's, undergraduate major, minor, certificate)? b. What is the content of the curriculum?
3. If you do not currently offer any forensic accounting coverage, when are you planning to do so?
Of our survey respondents, 34% offer a separate course on forensic accounting or fraud examination, 7% offer a forensic accounting program track, 34% indicated that forensic accounting is integrated throughout traditional accounting and auditing courses, and 25% of the academic respondents do not currently cover any forensic accounting. In short, there seems to be no consensus on how to uniformly integrate forensic accounting into the accounting curriculum, however much positive momentum exists.
FORENSIC ACCOUNTING PROGRAMS
The forensic accounting certificate programs typically require only two to five specialized courses. A few schools, such as Georgia Southern University, Florida Atlantic University, the University of West Florida, Carlow University and Edinboro University in Pennsylvania, Franklin University and Tiffin University in Ohio, Rider University in New Jersey, the University of Wollongong in Australia, and Villa Julie College in Maryland, have created a separate forensic accounting undergraduate or graduate degree (see Tables 2 and 3). These degrees require several fraud-specific courses, the number and content of which depend upon the type of degree offered (e.g., minor vs. major) and the level of degree (undergraduate vs. graduate).
The Criminal Justice program at New York's Utica College offers a multidisciplinary approach with a separate certificate in financial crimes investigation as well as a separate degree in economic crime investigation with a concentration in financial investigation. Utica's program is unique because it approaches the topic of forensic accounting and related topics of crime, fraud management, financial investigation, cyber security, and information assurance services from the perspectives of not only the accounting discipline but also from economics, finance, law, criminal justice, sociology, psychology, management information systems, international relations, communications, and ethics.
Villa Julie College's master's of science degree in forensic studies also offers a multidisciplinary approach with separate tracks in the areas of accounting, computer forensics, legal issues, and investigations. In addition, students have the option to select an interdisciplinary track that requires taking six credits of courses from each track.
These programs have experienced a significant growth in enrollment, anecdotal evidence suggests. One survey participant stated, "The academic profession has made a big mistake by undervaluing the richness and variety of forensic accounting content in the accounting curriculum."
GAP IN SUPPLY AND DEMAND
While it is encouraging to note the emergence and depth of forensic accounting programs in higher education, there still appears to be a gap between the demand for forensic accountants and the supply through university education. Forensic accounting is viewed as one of the hottest career tracks, yet there are only a limited number of accounting programs offering forensic accounting programs. As far back as 1996, The Wall Street Journal called forensic accountants "the accounting profession's new glamour kids" and reported that not only did the FBI double its forensic accountant agent force between 1992 and 1996, but several large public accounting firms doubled or quintupled their forensic ranks during the same period. (12) In a career guide for current and potential accounting students, the AICPA lists "forensic accounting" as one of eight sizzling accounting specialty areas. Further, the antifraud resource center on the AICPA website reports that there is expected to be a shortfall of 50,000-75,000 forensic accounting professionals in the U.S. alone in the next few years. In addition, U.S. News & World Report listed forensic accounting as one of the 20 hot job tracks in 1996 and one of the eight more secure career tracks in America in 2002. (13) That same year, SmartMoney magazine listed forensic accounting as one of the 10 hottest jobs with a salary potential in excess of $100,000. (14)
The results from our respondents suggest that the primary obstacles facing delivery of forensic accounting education are institutional in nature (i.e., faculty, administration, curriculum structure) and not because of a perceived lack of demand by employers and students (see Table 4). The perception by academics that there is not enough room in the accounting curriculum, even with the 150-semester hour requirement to sit for the CPA exam now adopted by nearly every state, has persisted for years. (15) As one respondent stated, "It has a place in accounting. However, with so many required courses (and with ethics and international courses likely to be required soon), I am not sure that most schools have the luxury of offering a separate forensic course, and electives are quickly disappearing (i.e., required courses are taking the place of electives)."
There are, however, some encouraging signs. Of respondents who indicated they currently do not cover any forensic accounting in their accounting curriculum (25%), half plan to offer a specific course by 2011. Offering a course is often the first step to eventually providing more forensic accounting education, such as a certificate, minor, or master's program.
The perception that the greatest obstacle is a lack of room in the accounting curriculum for another course, whether required or elective, can perhaps be overcome by allowing forensic accounting courses to be used as general electives for all students, not only those in accounting. This approach is followed at West Chester University of Pennsylvania. (16) Employees are often the first to notice symptoms of fraud, but they must be educated as to the red flags of various fraud schemes. Very little, if any, accounting is required to be included in a fraud course. As fraud is considered to be a problem for business and society in general, a general elective model is logical. (17)
FUTURE OF FORENSIC ACCOUNTING EDUCATION
At the 2007 Fraud and Forensic Accounting Conference in Savannah, Ga., sponsored by Georgia Southern University, a keynote speaker from the ACFE predicted that the PCAOB will soon require a multidisciplinary forensic accounting team to accompany every audit of a public company. The Big Four public accounting firms, along with Grant Thornton and Binder Dijker Otte (BDO) International, also recommend a forensic audit on a regular basis for all public companies.
If such a requirement is passed, there may be a sense of urgency for administrators and faculty of accounting programs to create multidisciplinary fraud examination and forensic accounting tracks to meet the demand for training future forensic accountants. West Virginia University received a grant from the U.S. Department of Justice to provide educational guidelines for fraud and forensic accounting. With this funding, it formed a technical working group in 2004 comprising representatives from private industry, law enforcement and other members of the legal community, higher education, governmental agencies, and professional service firms to develop recommendations for the content of a forensic accounting curriculum (see Table 5).
Institutions of higher education, the accounting programs, academics, practitioners, students, the economy, and society in general will all benefit from the inclusion of forensic accounting at the undergraduate and graduate levels. As some survey participants stated:
* "... Academics need to get off the fence regarding the integration of fraud education into the curriculum. We need to accept the professional responsibility to defuse the fraud epidemic in society and regain public confidence."
* "I believe that this is a growing field, and, by the reaction I have received from students, I think this will be the perfect type of discipline that will attract students back into accounting degrees."
* "Exposure to forensic accounting will promote ethics, responsible corporate governance, and enhance the professional skepticism of all accountants. It will teach them to think in a certain way that is needed to detect major frauds sooner and more often, reducing the cost of fraud to society and freeing up taxpayer and other resources for more productive uses."
* "You are addressing a very important and neglected area within accounting education and within the profession. The accounting profession has dodged this important responsibility for too long, and we are now paying the price. Thankfully, we are starting to do a better job."
OTHER UNIVERSITIES FROM OFFERING SIMILAR PROGRAMS.
In 2006, U.S. companies suffered an estimated $652 billion in losses from fraud, according to the Association of Certified Fraud Examiners (ACFE). (1) Because not all cases of fraud are discovered nor are all discovered frauds reported, any fraud statistic is an estimate. Regardless, national and international fraud surveys repeatedly report that the magnitude of the problem is significant. (2)
Because of the large amount of employee and management fraud, embezzlement, and other financial crimes occurring in today's society, accounting and auditing professionals must have appropriate forensic accounting training and skills to help prevent, detect, and investigate those crimes. Widely publicized corporate scandals such as Enron, WorldCom, and Adelphia have made the accounting profession and general public more aware of the prevalence and magnitude of fraud. Consequently, the demand for professionals who can help investigate these white-collar crimes has also increased.
Emerging regulations and professional pronouncements issued by a number of regulatory bodies--such as the U.S. Securities & Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB)--challenging businesses and government agencies to improve their corporate governance have also contributed to the increased demand for forensic accounting professionals. (3)
NEED FOR FORENSIC ACCOUNTING SKILLS
A major problem with the implementation of emerging regulations and pronouncements is that CPAs have neither the training nor the hands-on experience to tackle fraud examination and forensic accounting investigation assignments alone. (4) Leaders in the accounting profession have recognized that accounting students need fraud-specific education in order to be effective in the fight against fraud. Courses in financial accounting and auditing, for example, do not provide the type of training that accounting students--society's future accountants--need in order to understand fraud and its deterrence. Underscoring this point, Barry Melancon, president and CEO of the AICPA, asked accounting educators in 2002 to provide students with "the knowledge and skills to understand the fundamental characteristics of fraud, identify factors that may indicate it exists, and acquire enhanced interviewing techniques." (5)
To help address this deficiency in fraud-related education, researchers have published papers to help other educators develop fraud courses. (6) In 2002, the ACFE established an educational support program at the grassroots level that provided free pedagogical materials to help enable instructors at colleges and universities develop forensic accounting courses and programs. (7) This program was awarded the American Accounting Association's annual Innovation in Accounting Education award that year. Before that program was initiated, only 19 universities offered a separate fraud course. (8) There are now approximately 300 universities listed on the ACFE website as participating in the antifraud education partnership program. In addition to the ACFE materials, more fraud-related pedagogical materials are being developed and published. (9)
Offering a specific course on fraud for accounting students is an important step forward in the effort to educate future accountants so that they might be better equipped to prevent and detect fraud, but many universities have recognized the need to provide students with more fraud-related education beyond a specific course and are now offering programs in forensic accounting. This development is consistent with what was predicted in recent research, which found that academicians and practitioners saw the need for more specialized training in this area. (10) This need may have arisen in part because a multidisciplinary investigative team trained as specialists in fraud examination and forensic accounting is needed to complement the traditional audit process by proactively assisting in identifying problematic areas where fraud could exist or in investigating any allegation of fraud. To fill this void, national CPA firms have created multidisciplinary forensic investigative teams with the help of specialized forensic training consultants. For example, individuals who possess skills in electronic evidence gathering and preservation, interviewing techniques, or investigative report writing may be needed to assist in a fraud investigation. In addition, the AICPA is currently partnering with the ACFE in an effort to create a Forensic Accounting Specialist Designation with a related continuing professional education program. (11)
RESEARCH SURVEY
In light of the developing need to bridge the gap between forensic accounting supply and demand, we conducted a survey of academics to determine the extent to which colleges and universities are offering more depth in their fraud-related education to the benefit of students, organizations, and society.
We surveyed 1,000 randomly selected academicians and asked them to complete an online survey of 22 questions related to forensic accounting education. We received a usable response rate of 15% (150) from the survey participants (see Table 1).
We designed the survey instrument to answer the following questions:
1. How do you integrate forensic accounting education into your curriculum?
2. For universities that offer more extensive forensic accounting education (beyond one specific course): a. What type of program is offered (master's, undergraduate major, minor, certificate)? b. What is the content of the curriculum?
3. If you do not currently offer any forensic accounting coverage, when are you planning to do so?
Of our survey respondents, 34% offer a separate course on forensic accounting or fraud examination, 7% offer a forensic accounting program track, 34% indicated that forensic accounting is integrated throughout traditional accounting and auditing courses, and 25% of the academic respondents do not currently cover any forensic accounting. In short, there seems to be no consensus on how to uniformly integrate forensic accounting into the accounting curriculum, however much positive momentum exists.
FORENSIC ACCOUNTING PROGRAMS
The forensic accounting certificate programs typically require only two to five specialized courses. A few schools, such as Georgia Southern University, Florida Atlantic University, the University of West Florida, Carlow University and Edinboro University in Pennsylvania, Franklin University and Tiffin University in Ohio, Rider University in New Jersey, the University of Wollongong in Australia, and Villa Julie College in Maryland, have created a separate forensic accounting undergraduate or graduate degree (see Tables 2 and 3). These degrees require several fraud-specific courses, the number and content of which depend upon the type of degree offered (e.g., minor vs. major) and the level of degree (undergraduate vs. graduate).
The Criminal Justice program at New York's Utica College offers a multidisciplinary approach with a separate certificate in financial crimes investigation as well as a separate degree in economic crime investigation with a concentration in financial investigation. Utica's program is unique because it approaches the topic of forensic accounting and related topics of crime, fraud management, financial investigation, cyber security, and information assurance services from the perspectives of not only the accounting discipline but also from economics, finance, law, criminal justice, sociology, psychology, management information systems, international relations, communications, and ethics.
Villa Julie College's master's of science degree in forensic studies also offers a multidisciplinary approach with separate tracks in the areas of accounting, computer forensics, legal issues, and investigations. In addition, students have the option to select an interdisciplinary track that requires taking six credits of courses from each track.
These programs have experienced a significant growth in enrollment, anecdotal evidence suggests. One survey participant stated, "The academic profession has made a big mistake by undervaluing the richness and variety of forensic accounting content in the accounting curriculum."
GAP IN SUPPLY AND DEMAND
While it is encouraging to note the emergence and depth of forensic accounting programs in higher education, there still appears to be a gap between the demand for forensic accountants and the supply through university education. Forensic accounting is viewed as one of the hottest career tracks, yet there are only a limited number of accounting programs offering forensic accounting programs. As far back as 1996, The Wall Street Journal called forensic accountants "the accounting profession's new glamour kids" and reported that not only did the FBI double its forensic accountant agent force between 1992 and 1996, but several large public accounting firms doubled or quintupled their forensic ranks during the same period. (12) In a career guide for current and potential accounting students, the AICPA lists "forensic accounting" as one of eight sizzling accounting specialty areas. Further, the antifraud resource center on the AICPA website reports that there is expected to be a shortfall of 50,000-75,000 forensic accounting professionals in the U.S. alone in the next few years. In addition, U.S. News & World Report listed forensic accounting as one of the 20 hot job tracks in 1996 and one of the eight more secure career tracks in America in 2002. (13) That same year, SmartMoney magazine listed forensic accounting as one of the 10 hottest jobs with a salary potential in excess of $100,000. (14)
The results from our respondents suggest that the primary obstacles facing delivery of forensic accounting education are institutional in nature (i.e., faculty, administration, curriculum structure) and not because of a perceived lack of demand by employers and students (see Table 4). The perception by academics that there is not enough room in the accounting curriculum, even with the 150-semester hour requirement to sit for the CPA exam now adopted by nearly every state, has persisted for years. (15) As one respondent stated, "It has a place in accounting. However, with so many required courses (and with ethics and international courses likely to be required soon), I am not sure that most schools have the luxury of offering a separate forensic course, and electives are quickly disappearing (i.e., required courses are taking the place of electives)."
There are, however, some encouraging signs. Of respondents who indicated they currently do not cover any forensic accounting in their accounting curriculum (25%), half plan to offer a specific course by 2011. Offering a course is often the first step to eventually providing more forensic accounting education, such as a certificate, minor, or master's program.
The perception that the greatest obstacle is a lack of room in the accounting curriculum for another course, whether required or elective, can perhaps be overcome by allowing forensic accounting courses to be used as general electives for all students, not only those in accounting. This approach is followed at West Chester University of Pennsylvania. (16) Employees are often the first to notice symptoms of fraud, but they must be educated as to the red flags of various fraud schemes. Very little, if any, accounting is required to be included in a fraud course. As fraud is considered to be a problem for business and society in general, a general elective model is logical. (17)
FUTURE OF FORENSIC ACCOUNTING EDUCATION
At the 2007 Fraud and Forensic Accounting Conference in Savannah, Ga., sponsored by Georgia Southern University, a keynote speaker from the ACFE predicted that the PCAOB will soon require a multidisciplinary forensic accounting team to accompany every audit of a public company. The Big Four public accounting firms, along with Grant Thornton and Binder Dijker Otte (BDO) International, also recommend a forensic audit on a regular basis for all public companies.
If such a requirement is passed, there may be a sense of urgency for administrators and faculty of accounting programs to create multidisciplinary fraud examination and forensic accounting tracks to meet the demand for training future forensic accountants. West Virginia University received a grant from the U.S. Department of Justice to provide educational guidelines for fraud and forensic accounting. With this funding, it formed a technical working group in 2004 comprising representatives from private industry, law enforcement and other members of the legal community, higher education, governmental agencies, and professional service firms to develop recommendations for the content of a forensic accounting curriculum (see Table 5).
Institutions of higher education, the accounting programs, academics, practitioners, students, the economy, and society in general will all benefit from the inclusion of forensic accounting at the undergraduate and graduate levels. As some survey participants stated:
* "... Academics need to get off the fence regarding the integration of fraud education into the curriculum. We need to accept the professional responsibility to defuse the fraud epidemic in society and regain public confidence."
* "I believe that this is a growing field, and, by the reaction I have received from students, I think this will be the perfect type of discipline that will attract students back into accounting degrees."
* "Exposure to forensic accounting will promote ethics, responsible corporate governance, and enhance the professional skepticism of all accountants. It will teach them to think in a certain way that is needed to detect major frauds sooner and more often, reducing the cost of fraud to society and freeing up taxpayer and other resources for more productive uses."
* "You are addressing a very important and neglected area within accounting education and within the profession. The accounting profession has dodged this important responsibility for too long, and we are now paying the price. Thankfully, we are starting to do a better job."
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