Research Proposal: Forensic Accounting and Corporate Fraud

This research proposal investigates the effectiveness of forensic accounting in controlling corporate fraud, money laundering, and other illegal activities. It explores the research background, poses key research questions, and outlines research objectives. The proposal includes a comprehensive literature review, examining financial accounting practices, corporate fraud cases like Satyam and Enron, and the role of forensic accounting in fraud detection. The research design involves collecting both secondary and primary data, including questionnaires distributed to business organizations. Ethical considerations are also addressed, ensuring responsible data collection and analysis. The proposal aims to determine whether forensic accounting can reduce the probability of financial crimes and assesses the knowledge and implementation of forensic accounting within organizations. The report also highlights the differences between statutory audits and forensic accounting and evaluates the financial resources required to implement forensic accounting within business models.

Applied Business Research
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Contents
Abstract......................................................................................................................................3
Research background.................................................................................................................4
Research question and research objective..................................................................................5
Literature review........................................................................................................................6
Research Design.......................................................................................................................11
Ethical consideration................................................................................................................13
References................................................................................................................................14
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Abstract
This is a research proposal that is developed for establishing whether forensic accounting can
be helpful in controlling corporate fraud, money laundering, and other illegal activities.
Controlling these illegal activities is important as general public and investors have made
significant amount of financial investment in such organizations. Various rules and
regulations have been developed over the period of time to prevent these corporate frauds but
the cases of corporate fraud resurface on a regular basis. This report will be providing beam
description of the different activities that will be used in the process of undertaking the
research. This research proposal has also conducted literature review in order to collect
secondary data. Primary data will also be collected from 20 business organizations that are
used in forensic accounting with the help of questionnaire. In addition to that different aspect
of research are included in this report such as research approach, research question,
background of the research, etc. At last ethical considerations has been listed out in this
research proposal as collection of data is concerned with actual person. All of the five ethical
considerations are required to be followed throughout the process of research.
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Research background
In the past there have been various cases of corporate fraud, money laundering and other
illegal activities undertaken by business organizations. Governing authorities have prepared
various rules and regulations to prevent these type of illegal activities but 100% prevention of
these activities is very difficult. Penalty and legal action to be taken against culprits can be an
effective manner in which it can be mitigated by invoking fear among the business
organizations (Sharma and Panigrahi, 2013). For this purpose it is very essential that
governing authorities are able to identify the causes of corporate fraud money laundering and
other illegal activities and forensic accounting can be very helpful in such identification.
Forensic accounting can be defined as a special branch which helps in examination of
financial accounts in order to find evidence of criminal activities undertaken by Business
organizations or any other authority (Huber, 2017).
Any action undertaken by business organizations will leave a certain trail behind it and the
purpose of forensic accounting is to identify this trail with the help of accounting processes
(Yadav and Yadav, 2013). Use of forensic accounting in current business environment has
increased as it is providing positive results in criminal proceedings. The main focus of this
research proposal will be to conduct secondary research and develop a research proposal
through which impact of forensic accounting in current business environment can be analysed
(Van Akkeren, Buckby and MacKenzie, 2013).
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Research question and research objective
Research question
Research questions can be defined as the questions that will be asked during the process of
the research proposal. This will be the primary structure on which whole research proposal is
based upon (Myers, 2019). Management of the organizations will be required to include these
research questions in their secondary research as well as primary research. During the data
collection process management will be required to focus on these secondary research
otherwise management will not be able to achieve research objective (Evertson and
Weinstein, 2013). Following are the research questions that will be helpful in this research
proposal-
 Forensic accounting will have any impact on reducing the probability of fraud, money
laundering, and other illegal activities associated with financial accounting?
 Do business organizations have knowledge about forensic Accounting in the current
business environment?
 Is prevention and detection of fraud is possible with the help of forensic Accounting?
 What is the difference between statutory audit and forensic accounting?
 Whether business organizations have sufficient financial resources to implement forensic
accounting in their business model? (Dawson, 2014)
Research objective- This is a final outcome expected from a particular project and success of
a research project will be evaluated on the basis of this factor. The main objective of this
research proposal is to identify whether forensic accounting can be helpful in reducing the
chances of fraud, money laundering, and other illegal activities (McDaniel and Gates, 2013).
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Literature review
Financial accounting can be defined as the process of mango and processing of financial
information in a specific format in order to provide a brief overview of a business
organization. This is considered as one of the most important aspects of business
management as financial accounting reports helps in identification of financial position of a
company. Majority of shareholders uses this financial accounting reports to analyse financial
position and make investment decisions. In addition to the decision-making process
undertaken by management of the company is also dependent on financial accounting (Barth,
2015). Therefore it is important to ensure that financial accounting is free from error,
mistake, and fraud.
Errors, election frauds in financial accounting has become very common in the current
business environment. Majority of these frauds are conducted by internal management of the
company which has access to financial accounting and financial resources. Majority of these
frauds are undertaken by manipulating financial accounts in order to gain personal profits. In
past there have been various cases in which directors and top management of the company
have pocketed investment made by investors in the company. It is very essential for an
organization to ensure that these type of cases are totally mitigated (Dyck, Morse, and
Zingales, 2013). Rules and regulations have been developed for management of fraud but
these rules and regulations will not be effective if management is involved in the fraud.
One of the prominent examples of corporate fraud can be identified in India with the case
study of Satyam computers Limited. In this case chief executive officer and founder of the
organization was manipulating financial accounts of the organization in order to present
strong value of company in market. More and more investors for investing in the organization
as financial accounts of the company were presenting high return on investment at the end of
financial year. In addition to the statutory auditors of the company foreign also involved in
this fraud as they were providing clean audit report in each of the financial years where is this
fraud continued for over 10 years. Therefore it can be said that even after implementation of
rules and regulations it is not necessary that corporate fraud will be eliminated.
Another significant case of corporate fraud that shook the trust of investors in the stock
market was Enron scandal in 2001. This case study is considered a mark in the industry of
regulating financial accounts of business organizations. Various rules and regulations in
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relation to Internal Audit External Audit and corporate governance were developed after this
case in 2001. Introduction of Sarbanes Oxley Act 2002 also resulted in the impact that this
case has on mind-set of investors. All of these steps were taken to ensure investors that such
cases will not be repeated in future and gain their trust in stock market.
One of the important step taken by regulatory authorities in different countries was making an
external audit of business organizations is compulsory for every publicly listed organization.
Over the period of time it is identified that independent audit is also not very efficient in
identification of fraud cases. There have been various cases in which auditors were
considered as the part of culprits that are involved in the fraud. Risk of accounting scandals is
still at large even after regulating the process of auditing among business organizations.
Forensic accounting is a new method that is currently being used by Business organizations
and regulatory authorities to examine fraud cases in financial accounts of corporate
organizations. Forensic accounting can be defined as a combination of accounting and law in
order to identify the causes of fraud and other illegal activities. Forensic accounting uses trail
of business transactions in order to identify its origin point which helps in providing physical
or logical evidence of fraud (Kranacher and Riley, 2019).
One of the article analysed in this literature review has identified the impact of forensic
Accounting in fraud prevention among Nigerian public sector organizations. Article has
identified significant relationship between forensic accounting and fraud detection.
According to the opinion presented by authors it is very essential to implement forensic
accounting procedures in public sector organizations as investors are investing significantly
with the opinion that these organizations are presenting true and fair financial accounts. Data
collected in this article has suggested that overall fraud detection and prevention can be
increased significantly with the help of forensic accounting. They have suggested that
forensic accounting techniques should be used by anti-graft agencies like the EFCC and
ICPC in Nigeria public sector organizations.
One of the methods that can be very helpful in investigation of small-scale accounting
scandal is net worth method in forensic accounting investigations. This method was used in
financial crime case study of John and Gayle Fawn. According to the article under
consideration this method was used by comparing the net worth of owners and revenue and
profitability reported by their businesses. It was identified that overall net worth of the
owners was increased significantly as compared to increase in profitability. In addition to that
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these owners did not have any kind of other sources of income which resulted in conclusion
that revenue reported by these organizations was significantly lower as compared to actual
revenue. This is one of the strategies that can be used for identification of fraud in forensic
accounting.
According to another journal article cases of corporate fraud in Nigeria are having a
significant impact on the economic and overall development of country. This is one of the
primary reason that federal government has making different committees and the regulatory
authorities in order to cope up with these cases of fraud. Authors have collected 572
questionnaires in this research to identify effective and efficient methods that can be used by
these regulatory authorities for identification of corporate frauds. This report has concluded
that like a professional forensic Accountants are required to be appointed in investigation
cases. This is far better method of identifying fraud as compared to internal auditing or
external auditing.
According to the views presented by MK Shah through the Journal of Commerce and
accounting research", importance of risk-free financial statements and accounts is very
important for any stakeholder. The author has suggested combination of auditing and forensic
accounting for the purpose of fraud detection. Qualities of both these for retention strategies
will be helpful in providing better results as compared to results provided by their individual
efforts. The efficiency of external and statutory audit has decreased significantly due to
quality of audit services provided by audit organizations. Now there is a requirement of
introducing new system of examining financial statement by independent authorities. Authors
in this literature have suggested that forensic accounting can be an effective replacement of
auditing or both of these methods can be used together.
Quality of auditing has been decreasing over the period of time and it is one of the primary
reason that cases of fraud have been increasing regularly even when such business
organizations are using audit services of big four audit organizations. One of the primary
reason behind decreasing quality of audit service is increased to level of competition among
audit organizations. These organizations are also becoming profit-oriented and they are
taking more and more audit assignments which have decreased the quality of audit
procedures. There is a requirement of regulating these authorities with respect to number of
audit assignments that can be taken in a particular financial year. In addition to that policies
and procedures used for auditing should also be regulated by relevant authorities.
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Forensic accounting is a very complex process and it requires a significant amount of skills
and experience to be possessed by the person that is conducting search accounting. Core
skills that are acquired by an auditor are not sufficient to identify fraudulent cases. Over the
period of time different countries have been developing different accounting and
investigation courses in order to develop forensic accounting courses. They're also promoting
these courses with attractive job offers in order to ensure that more and more people are
enrolling in these courses (Bhasin, 2015). The demand for forensic accountants in current
business environment is very high as it is one of the most efficient methods of identifying
fraud cases.
Corporate governance in business organizations can also play a significant role in the
implementation of forensic accounting in business organizations. Corporate governance is
defined as overall structure of top management in a particular business organization and basic
values of an organization. Business organizations are required to adopt the concept of
forensic accounting either by developing internal forensic accounting team or by taking
services from outside organization. This type of corporate culture will definitely help to
ensure that financial resources invested by investors are not misused by employees of the
company. In addition to that it will also help in contributing to economy of the country as
right amount of tax will be paid to government.
The research was undertaken among manufacturing organizations operating in Nigeria with
respect to the impact that forensic accounting has on identifying fraudulent cases. This
research was conducted on around 306 manufacturing organizations and it was identified that
level of corporate fraud in Africa has been increasing significantly which is also affecting
development of the country (Madumere, Onumah, and Legon, 2013). These studies identified
that owners of the organization are the people that are defrauding the investors in order to
increase their personal net worth. Introduction of forensic accounting is very important in this
scenario as other methods of identifying fraudulent activities such as external and statutory
audit has not been very effective in past.
One of the primary factors that are preventing business organizations to adopt the concept of
forensic accounting is cost associated with such accounting. Cost of hiring experts in the field
of forensic accounting is very high and it cannot be afforded by small scale and medium-
sized organizations as they have limited resources even for production process. This type of
organizations are cutting cost on every level and implementation of forensic accounting in
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such organizations is very difficult. Adoption of forensic accounting for large-scale
organizations with sufficient resources will be very easy (Imoniana, Antunes and Formigoni,
2013). It is essential for such organizations to adopt this concept as impact of fraud in such
organizations is significantly higher as compared to fraud in small scale organizations.
Overall benefits achieved from such implementation will be higher as compared to cost as
they will be able to provide satisfaction to customers and investors.
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Research Design
Research design can be defined as the overall structure of research that is required to be
undertaken in a particular research project. It is very essential for a researcher to ensure that
effective and efficient research design has been developed before starting the process of
actually collecting the data and conducting a literature review. Formation of Research Design
requires following factors to be considered-
Type of research
There is two types of research that can be undertaken by a researcher i.e. quantitative
research and qualitative research. Quantitative research is focused on collecting maximum
amount of data whereas qualitative research is focused on the quality of data collected
irrespective of quantity. Both to this type of research they have their own advantages and
disadvantages and selection of a particular method is totally based upon needs and
requirements of particular research (Barnham, 2015). The research proposal will be using
combination of quantitative research and qualitative research in order to provide an effective
balance with respect to collected data.
Research approach
Generally there are three types of research approach i.e. deductive approach, inductive
approach and abductive approach. In this is an ideal inductive approach will be used as will
be using known premises to generate untested conclusions. Conclusions made in this report
will be based upon the analysis of primary and secondary data collected by researcher. The
conclusion made by different researcher with respect to simulating letter can be different
from each other (Ormston et.al, 2014). Other methods of approach cannot be used in the
scenario as they are not in accordance with the subject matter under consideration.
Type of data
Data to be collected in particular research can be divided into two categories i.e. primary data
and secondary data. Primary data is the data that is collected for the first time specifically for
the purpose of research under consideration whereas secondary data is already collected and
it is altered to use in particular research. It is very essential for an organization to ensure that
data collected will be helpful in achieving overall research objectives. In the given scenario
researcher will be using combination of secondary data as well as primary data. Secondary
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data will be undertaken with the help of literature review conducted in the above section. This
literature review has been conducted with the help of 16 journal articles issued with respect to
forensic accounting and its impact on fraud (Berthiaume et.al, 2014). On the other hand
primary research will be conducted by collecting information with respect to use of forensic
accounting in actual business organizations.
Data collection method
Data Collection method is concerned with the collection of primary data and secondary data
will be collected from internet sources. There are different sources through which primary
data can be collected purchase online survey, interviews, questionnaire, focus group, direct
observation, etc. in the given scenario a questionnaire will be prepared that will include 10
questions with respect to forensic accounting and its use in business organizations (Clark,
2013). This questionnaire will be sent to managers of 20 business organizations that are using
forensic accounting and their response will be analysed to make conclusions.
Sample plan
In the given scenario sample plan will not be used as it is already selected that the data will
be collected from 20 business organizations. These business organizations are not selected on
the basis of sampling as their strategically selected as they are using forensic accounting.
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Ethical consideration
Five ethical considerations that are required to be addressed in this research proposal are as
follows
 Identity of the business manager should not be disclosed.
 Identity of business organizations from which data is collected should not be disclosed if
it is not permitted by such organizations (McDaniel and Gates, 2013).
 Personal information in relation to employees or any other human involved in the
research process should not be disclosed.
 Permission is required to be taken from the business organization before publishing the
information in final research.
 Anonymity and confidentiality should be maintained in the research process (Walliman,
2017).
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