Understanding the Importance of Forensic Accounting in Controlling Fraudulent Activities in Organizations

This research analyses the role of forensic accountants in controlling fraudulent activities in organizations. It studies the difference between forensic accountants and auditors, investigates financial fraud, and analyses corporate social responsibility. Primary and secondary methods are used to collect data.

Running head: BUSINESS RESEARCH
Business research
Name of the student
Name of the university
Author note

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Abstract
The research is based on the contemporary conditions of the business sectors. The important
part of any business is the department of forensic that controls the fraudulent activities. The
report analyses the role of the forensic accountant and it studies the difference between the
forensic accountant and the auditor. This include the differences between the fraud and the
omissions. It includes the process of investigating and detecting the frauds in the light of
financial options that are available in the organization. It studies the corporate social
responsibility that has a huge impact on the organizations. The primary and the secondary
methods have been used to collect the data and the survey has been used to analyse the data.
The proposal ends with the justification and the adoption of the methodology.

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Table of Contents
1. Research problem:..............................................................................................................3
2. Background:........................................................................................................................3
3. Ethical consideration:.........................................................................................................5
4. Literature review:................................................................................................................6
Forensic accounting and accountants:....................................................................................6
Forensic auditor and forensic accounting..............................................................................8
Financial fraud:......................................................................................................................8
6. Aims and objectives of the research:..................................................................................9
7. Research design/ methodology:..........................................................................................9
References................................................................................................................................12

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Understanding the importance of forensic accounting and accountants taking control
over the frauds and scandals in an organisation.
1. Research problem:
The objective of the research is to analyse the methods that are used by the forensic
accounting and also the accountants in order to help the business sector in resolving the
issues. It is considered that the forensic accountants does the same with the help of various
methods and techniques. The problem that arises in this context is while helping the business
sector, the accountants have to control over the frauds and the scandals that might arise in the
organizations. The department is required to examine the legal frameworks through
investigation and audit that might create some inconvenience.
2. Background:
The contemporary business activity requires a proper security of their financial
information. This is the reason they need to seek help from a forensic accountant. It is not
possible for the large-scale organizations to deal the frauds from the past and the beginnings
of the century. The frauds have disrupted the trust of numerous users in the financial
information that usually included the financial statement. In the past the greatest fraud have
been presented in the form of presenting false financial statements. This is the responsibility
of the organization to detect the fraud cases, investigate about the cases and take measures to
prevent the fraud cases. It can be controlled by other institutions as well. This can be done
through internal control, internal auditing (Dorminey et al. 2012). They can control the
disputes like preventing the property misuse cases as well as those cases that use the financial
statements as the biggest tool of fraud. In the last few years and even in the current business

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practice the accountants are called the forensic investigators or the forensic accountants.
Their primary purpose is to investigate and record the financial frauds or to detect those
information that are inaccurate. This is important for the forensic accountant to have the
knowledge of accounting and auditing. The person should have a good skill of
communication. The communication consist of the verbal communication as well as the
written communication. In order to deal the case of fraud a considerable degree of knowledge
is required (Coope, Dacin and Palmer 2013).
The paper would deal with the causes of the inaccuracy and the role of the accountant
in dealing the issues. The fraud mostly include the false presentation of the facts and the
figures that include the improper character. It consists of the negligence of the committer.
The person who receives the information considers it to be true and he blindly relies on the
information and makes decision based on the information. This is the situation when the need
of the forensic accountant is felt the most. They investigate the illegal cases and they also
assist the lawyers, courts and the regulatory bodies and other institutions in conducting the
investigations of the financial frauds. The role of the forensic accountants under the
contemporary situations is extremely important (Bhasin 2013). The attention of the auditors
are not directed towards the financial statements as a final products as this is the job of the
external auditor. The job of the forensic auditor should be to check and regulate the
transactions, the people and the environment in order to establish the indications about the
frauds. However, this should be kept in mind that all the transactions does not require
investigation (Özkul and Pamukçu 2012). After the investigation the accountant is supposed
to make a report of the same and to provide the organization with the report. It required
dedication and immense amount of hard work to make the report. The quality of the report
should be such that the accurate decisions and estimations can be made based on that (Bhasin
2015).

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3. Ethical consideration:
Ethics are the consideration of the standards and the principles that is responsible for
controlling the behaviour of the individuals or any groups inside the organization. It has
become a necessary aspect for the accountants to maintain the ethics while conducting the
research. Similarly the researcher should maintain few ethics while conducting the research.
If a person is not ethically correct he might land up in doing something wrong. He might
produce wrong information or he might not make enough effort to conduct a responsible
research. Some of the ethics that will be considered in the following study are, the deception
that should be avoided at any cost, the risk or the harm that can be caused should be avoided
(Hammersley and Traianou 2012). The harm might include the mental harm as well as the
physical harm. The maintenance of the ethics might include the maintenance of the decorum
that can be obtained by having a full consent. In this case while collecting the data the
consent of the participant should be taken. It should be taken on a consent form and they
should not collect the data forcefully from the participants. In many case it has been observed
that the paper has been released without taking the full consent of the responsible person. It
can treated as an ill manner which is not healthy for a research (Mealer and Jones 2014).
However, the most important aspect of the ethical consideration is maintaining the
confidentiality at an adequate level. The identity if the participants should be kept
confidential. Even the reports should not be shown to the persons who is not related with the
research. The leakage of the information can be considered guilty in the grounds of ethical
consideration. The final thing that should be taken into consideration is the objectivity should
be maintained at high level (Haggerty 2016). The objective of the research should be clear.
The questions of the research should be based on the objective of the research and not on
other topics. There should be honesty and transparency. The research should be conducted
with honesty or else the purpose of the research will not be accomplished. The collection of

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the data and the analysis the data has to be done using the genuine methods (Greaney et al.
2012).
4. Literature review:
The presence of a separate department that is designed to deal the frauds and the gaps
have helped the organizations to maintain a transparency within the organizations. In the
earlier times the organizations did not paid much attention on the research of the fraud of the
financial accounts that sometimes occurred inside the organization. They had an accountant
who took care of the financial records. It is relevant even today in the small-scale
organizations. The large-scale organizations have a separate forensic accounting department.
According to Pedneault et al. (2012), this makes the system more organized and it prevents
the organization from the misconduct. The operations of the organization is made smoother
with the formation of a special forensic department. It has prevented the organization from
any kinds of disputes. The theory of the forensic accounting remained to be the specialty
practice sector. The activities of the forensic department helps in the professional intelligence
(Bhasin 2013). It enables the accountants to access the casualty in the fraud case and it also
enables them to comment on the duty of other professionals. In all the counties the forensic
accountants are held to be the most important sector as it is responsible for delivering the
social corporate responsibility. They manage the threats of poor governance that might
remain in all the organizations. The audit and the investigations in the organizations enables
in meeting the corporate responsibilities with honesty and transparency. This section will
analyse the views of different critics and will try to compare and contrast the views of those
critics (Bhasin 2013).
Forensic accounting and accountants:
Scholars like Bodnar and Hopwood (2012), have argued that there are various
definitions of forensic accounting. Zadeh and Ramazani (2012), have defined the forensic

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accounting as the duty of collecting data and the analysis of those data in the field of
litigation support consultation, expert witnessing and fraud examination. On the other hand
Imoniana, Antunes and Formigoni (2013), argues that the forensic investigation included the
determination and the establishment of the fact taking help from the legal cases. This the
forensic techniques can be used to detect and investigate a crime in order to expose the
culprits. Efiong (2012), have presented a different view in which he mentioned that the
technique is exhaustive, that the accountant can deliver a findings as to accounts, inventories
or the presentation. It includes the summarising of the complex financial issues concisely in
the court of law as an expert.
It has been argued by Pedneault et al. (2012), that the forensic accounting is the
mixing of the concepts of the accounting, auditing and the investigative skills. He described
the concept as the concept that is related to the legal problems. The report where the fraud has
been detected can be presented in the court of law. The report is so strong that it can be
presented as an evidence. It is recognized as a particular form of professional expertise and it
is gifted with specific attributes. It serves as a serious facts that is important in the business
litigation. On the contrary Dada, Owolabi and Okwu (2013), argues that this department does
not deal with only the facts and the figures. This department is relevant with the dealings of
the situations of a business. The department requires to analyse, interpret and summarise the
complex financial scenario of a business organization. He further comments that the role of
the forensic accounting is to present report of the financial evidence and to communicate the
findings of the report. It includes the assistance of the accountant in the legal proceedings. It
would expect the accountant to present a visual aid in order to support the trail evidence.
Huber (2012), adds to it that the forensic accounting is the service where the application of
the specialised knowledge is required. The knowledge of tax, economics, accounting,
auditing and other skills related to this is mandatory in this. Through the application of these

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skills the fraud can be avoided (Bhasin 2013). This is a different view compared to the
previous view. According to this view, before the act of fraud commits the forensic
department can form strategies to avoid it. This is the first and foremost responsibility of the
forensic accountant. The scholar commented that there is a difference between the forensic
accounting and fraud auditing. In the case where the auditor does not immense knowledge of
proper communication and skills that is required for auditing the report generated will not be
genuine and the organization might suffer from the threat of fraud.
Forensic auditor and forensic accounting
According to Imoniana, Antunes and Formigoni (2013), a fraud auditor is an
accountant who is especially skilled in auditing. The job of a forensic accountant is basically
to indulge in the accounting consulting and the execution of the legal skills in broader
engagements. The participation in the fraud auditing can be done by him but his priority is
not that. Bhasin (2013), stated that forensic accounting is the science of gathering and
presenting the information in a form that will be accepted by a court of jurisdiction against
the perpetrators of economic crime. The research made by the department should be such that
it meets the standards of the court of law. The failure in the understanding the roles and the
responsibility of the auditor and the accountant might lead to different scandals inside the
organization. This might serve as the biggest gap.
Financial fraud:
In order to understand the study it is important to understand the definition of the
financial fraud. It can be defined as the crime of cheating someone in order to get money or
goods in an illegal manner. This can be crime against the property, this sometimes even
include bribe, cronyism, nepotism, political donation, kickbacks, artificial pricing and the
activities related to this. It has been countered by Fiia (2013), by commenting that there are
three basic kinds of frauds, they are external, internal and mixed. The former one is

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committed by the member who are a part of the organization. The second one is committed
by the ones who are not the part of the organization and the mixed fraud is the collision
between the outsider and the members of the organization. In case the organization does not
recruit a separate department to manage this frauds the organization might face the threat of
illegal activities (Fiia 2013).
6. Aims and objectives of the research:
The aim of the research is to establish a connection between the knowledge and skills
of the forensic accountants and the role they play in controlling the illegal and the fraud
activities that might take place in an organization. The objective of the research is analyse the
gaps that might develop if the auditor or the accounting does not perform his duty. The study
further understands and analyses the definitions of the fraud activity and the ways to tackle
those. The report focuses on the way the forensic accounting benefits the detection of the
fraud.
7. Research design/ methodology:
Design & Methodology Plan and justification
Type of data
(primary or secondary data)
In this particular research the primary data as well
as the secondary data has been used. The reason for
this is that the data has been collected with the help
of survey and interview. The survey and the
interview helps to record a diverse view of the
research topic. The use of secondary data has been
done in the literature review section. In order to
understand the roles and the responsibilities of the
forensic department, it is important to understand

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the different types of frauds that has occurred in the
past and this is the reason an analysis of the same
from the journals of the scholars has been done
(Smith 2015).
Data collection plan
(survey, experiment, observation,
interview or focus group)
The survey method has been taken into account in
this research. The survey method enables multiple
participants and unlimited response can be collected
in a short span of time. This would help to have a
genuine view. The survey will be conducted on the
supervisors of the management and the different
forensic accountant of the organization. The survey
will be conducted by distributing both the soft copy
and the hard copy of the form in which the
participants will mark on the likart scale. It will start
from the option, “strongly agree” to “strongly
disagree” (De Leeuw, Hox and Dillman 2012).
Sampling Plan :
- Sampling frame
- Sampling methods
(probability or non-
probability)
- Sampling technique
- Sampling characteristics
- Sampling size
The sampling plan would include the employees of
an organization. That might include nearly 100
employees. The employees will be able to know the
matter of the internal matters of the organization.
The sampling method would include the probability
method as the use of qualitative method has been
done in this research.
Out of the population the researcher selects the
correspondents according to his feasibility.

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The size of the survey will include nearly 100
employees (Hippler, Schwarz and Sudman 2012).
Data Analysis plan
(theme-based or statistical analysis)
The data will be analysed be a statistical analysis as
the research method include the survey method. A
quantitative method has to be applied in this
research this is the reason statistical analysis has
been done (Panneerselvam 2014).
Ethical consideration regarding data
collection plan
While collecting the data the researcher must keep
in mind that the identity of the participant should
not be revealed. The data should be transparent and
genuine. Tampering the data is considered to be the
violation of the ethical acts (Recker 2012).

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