Journal of Forensic & Investigative Accounting
Senior Editor:  D. Larry Crumbley
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Journal of Forensic & Investigative Accounting

Senior Editor
D. Larry Crumbley

Louisiana State University
Department of Accounting
2833 Business Education Complex
Baton Rouge, LA 70803
Phone: 225-578-6231
Fax: 225-578-6201

Volume 6: No. 1, January - June, 2014

Table of Contents

+ An Examination of the Availability and Composition of Forensic Accounting Education in the United States and Other Countries

    • Mike Seda

    • Bonita K. Peterson Kramer

Abstract: Fraud is a global problem for business and society that knows no geographical boundaries.  For over a decade, leaders in the accounting profession have been calling for educators to teach fraud prevention, detection, and investigative skills, as well as skills in other areas of forensic accounting to students.  At the time, published research found that very few courses in fraud auditing or other forensic accounting services, such as business valuation, litigation support and expert witnessing, were offered at colleges and universities, and majors, minors, degrees, or certificates in this area did not exist.  This paper examines whether educators across the globe have responded to this call for action.  Our results find that both USA and international accounting educators have greatly increased the availability of forensic accounting education in the past decade.  Not only have the number of separate forensic accounting courses increased significantly, but numerous colleges and universities worldwide now also offer forensic accounting certificate and degree programs, or forensic accounting concentrations, minors, tracks, or specialization within a degree.

Keywords: Forensic accounting; fraud; education; curriculum; international

+ Bringing Freud to Fraud

    • Sridhar Ramamoorti

    • Daven Morrison

    • Joseph W. Koletar

Abstract: In this paper we use a primarily “behavioral lens” to try to understand the state-of-mind and motivations of the C-level suite/white collar offender before, during, and after the perpetration of management fraud. We offer a useful conceptual approach called “A-B-C Analysis” to understand the incidence of fraud from  individual and group perspectives, as well as more macro-oriented, cultural/contextual levels. Our hypothesis that fraud occurs either because of an individual criminal’s calculated/intentional betrayal of trust, a duo or team of “bad boys” who push ethical envelopes, and/or an organizational/social/national culture of passivity, indifference or accommodation that is tantamount to condoning such behaviors. We call it the Bad Apple, Bad Bushel, or Bad Crop Syndrome: the so-called ABCs of white collar crime. Our interdisciplinary review of the literature, spanning (social) psychology, sociology and criminology, psychoanalysis and psychiatry, and anthropology, as well as our collective experience as practicing fraud examiners, investigators and consultants, have yielded some rich insights.

Towards the end of the paper we provide a list of research questions that could be useful to academic researchers in crafting a responsive research agenda that exploits insights from the behavioral sciences.

Keywords: Behavioral lens, Freud, white collar crime, A-B-C analysis.

+ The Anatomy of a Whistle-Blower Letter: A Descriptive Study

    • Kelly Richmond Pope

    • Natalie Tatiana Churyk

Abstract: Over 40% of employees who observed misconduct did not report their findings (Ethics Resource Center (ERC) 2007).  Documented fraud reporting literature finds that whistle-blowers tend to over focuses on corporate retaliation (ERC 2011).  This over focus could result in the whistle-blower not focusing on content, voice, and/or tone when developing verbal and/or written communication within an organization. With regard to written communication, little guidance is offered on how to construct a credible whistle-blower letter.  The extant literature shows how to credibly and persuasively write letters of recommendations and fundraising letters, considering the author’s self-interest, writing complexity, and specificity.  We examine successful and unsuccessful examples of whistle-blower letters for these factors and find that each of our measures is significant for successful whistle-blower letters and differences exist between successful and unsuccessful letters.  Since written communication comprises 41% of frauds (KPMG 2003), showing employees how to document potential corporate malfeasance could increase whistle-blowers’ reporting of potential fraud.  Thus, the results from this analysis can 1) instruct individuals on how to correctly draft a whistle-blower letter and 2) help organizations develop stronger employee whistle-blower training programs.

Keywords: Whistle-blower; LIWC, content analysis; fraud, letter writing; communication.

+ Content Analysis for Detection of Reporting Irregularities: Evidence from Restatements During the SOX-Era

    • Chuo-Hsuan Lee

    • Edward J. Lusk

    • Michael Halperin

Abstract: The main purpose of this study is to examine whether or not the content analysis approach of Churyk, Lee, and Clinton (2009) [CLC] is still an effective tool for detection of irregularities or fraud leading to financial statement restatements in the Sarbanes-Oxley [SOX] era. Churyk et al. (2009) applied content analysis to analyze the MD&A section of 10-K reports issued before the enactment of SOX. CLC found significant differences in the language used in the MD&A section of the 10-K filings between the firms required by the SEC to restate their financial statements and firms not filing such restatements. We replicated their information generating and testing procedures using different matching protocols.  We find that (1) content analysis as detailed by CLC is still an effective tool for detection of irregularities or fraud, (2) detection of linguistic differences is robust with respect to our matching protocols, and (3) the recent developments in the reporting environment shaped by the SOX and the PCAOB resulted in an expansion in the length of the MD&A section for both the restatement firms and non-restatement firms. In addition, we find, in an exploratory mode, that firms may have gamed the detection protocols for the easy-to-adjust variable “For example."

Keywords: Deception, content analysis, SAS 99, irregularities.

+ An Experimental Economics Approach to the Study of Whistle-blowing

    • Dutch Fayard

    • R. Cameron Cockrell

    • Mary B. Curtis

Abstract: Whistle-blowing research is limited by the availability of research participants who have experienced the conflict of whistle-blowing. Thus, researchers typically employ scenario-based cases in which they ask participants to imagine what they would do in similar situations. This study addresses the limitations of such a tactic by employing an experimental economics methodology as an alternative approach. In this method, workers actually report (or not) when confronted with the unethical behavior of their manager, rather than predicting whether they would report were they to face such circumstances. In addition to demonstrating the efficacy of this methodology, we manipulate two previously unexplored organizational controls: extent of punishment for the wrongdoer and form of reporting mechanism, in a 3 x 2 full factorial design.

 In a laboratory experiment, we place research participants in a context where their manager engages in self-interested practices in violation of organizational policies. The organization provides either a 360-degree report or a hotline as possible reporting mechanisms. Punishment expectations for the manager impact employee reporting of the unethical manager in our predicted inverse-U shaped manner, but form of reporting mechanism does not. Ethical ideology is also related to reporting, as are fairness perceptions of company actions and a number of demographic variables. Supplemental analysis reveals the manager can influence reporting via the performance evaluation they award the worker.

Keywords: Whistle-blowing, experimental economics, ethical ideology, distributive justice, 360-degree reporting.

+ Examining the Effects of Motive and Potential Detection on the Anticipation of Consequences for Financial Statement Fraud

    • Joseph C. Ugrin

    • Marcus D. Odom

    • Richard L. Ott

Abstract: Financial statement fraud has been shown to be a thoughtfully conceived behavior that is highly influenced by attitudes that are developed through careful consideration of benefits and consequences.  In legal settings, research suggests that consequences tend to be imposed less severely when a deviant act benefits others in addition to the perpetrator.  What has not been shown is if would-be fraudsters consider consequences before engaging in fraud.  Accordingly, this study tests if potential perpetrators expect that less dire consequences will be leveled against them if they commit financial statement fraud with the interest of others in mind.  Using an experiment with 76 graduate accounting students and 48 practicing accountants, this study shows that when a fraud scheme benefits others in addition to the perpetrator, participants acting as potential perpetrators feel that consequences will be less likely and consequences that are incurred will be less severe. The results have implications for academics, practitioners, and agencies that set and enforce policy and law.

Keywords: Financial statement fraud, consequences, motive, detection, emotions.

+ Audit Committee Expertise and Early Accounting Error Detection: Evidence from Financial Restatements

    • Haeyoung Shin

    • Randall Zhaohui Xu

    • Michael Lacina

    • Jin Zhang

Abstract: We study the effect of audit committee expertise on the time it takes firms to detect material financial statement misstatements.  The time a firm takes to detect misstatements is measured by the length of the financial statement restatement period, and the four types of expertise studied are accounting expertise, non-accounting financial expertise, supervisory expertise, and industry expertise.  The results show that the presence of any of the aforementioned types of expertise on the audit committee reduces the length of the restatement period.  Also, audit committee expertise reduces the length of the restatement period for misstatements that involve earnings overstatements or non-overstatements, involve errors or irregularities, and occur before or after the passage of the Sarbanes-Oxley Act (SOX).  Additionally, industry expertise reduces the length of the restatement period for earnings overstatements (but not non-overstatements) and interacts with the other three types of expertise in reducing the length of the restatement period.  Moreover, accounting expertise on the audit committee reduces the length of the restatement period after the passage of the Sarbanes Oxley Act (SOX).

 Keywords: Audit committee expertise, accounting restatement, restatement length, accounting error.

+ A Review of the Impact of Client Trustworthiness On the Audit Decision-Making Process

    • Samantha A. Messier

    • Richard A. Bernardi

    • Jeffrey J. Bernard

Abstract: Our research reviewed the methodologies and findings of the auditing and forensic accounting disciplines concentrating on the associations between auditors’ perceptions of client trustworthiness and the audit-decision process. In our research, we review 20 studies that examined client trustworthiness between 1987 and 2009. Our research documents associations between the trustworthiness of an auditor’s client (i.e., operationalized in many studies as client integrity) and various aspects of the audit environment such as the client base of an auditor; and the audit planning process and auditor judgment. The foundation of corporate governance and the value of the audit are weakened when client integrity is questionable and may not result in implementing more rigorous audit procedures suggested by Mautz and Sharaf (1961). While this study is a review of the existing literature, we organize the existing 20 articles into a comprehensive matrix.

Keywords: Client trustworthiness, fraud detection.

+ Big Oil Versus Big Ideals

    • Mary B. Curtis

    • Eileen Z. Taylor

Abstract: This case presents facts and opinions gathered from personal interviews and public documents that describe how one individual discovered and reported what he perceived as accounting fraud at a large U.S. public company. George (a pseudonym), the Director of Technical Accounting Research and Training, concluded that his employer was improperly recording revenue using a flawed bill-and-hold policy. George reported his concerns internally to company management and externally, to the auditors. He then reported his concerns to the SEC, the PCAOB, and finally to the audit committee of the company’s Board of Directors.  However, his e-mail was provided directly to the individuals implicated by his complaint who divulged his identity within the company as a whistleblower. Using the remedies available under the Sarbanes Oxley Act, George sued his employers, charging them with retaliation. This study describes the situation George faced from both his and the company’s perspective, details his decision process, and reveals the consequences of his actions. This case increases awareness among accounting and business professionals, and students about the protections and possible outcomes of decisions they make regarding reporting of questionable accounting practices. After completing this case, individuals should have a greater understanding of the benefits and limitations of the current U.S. regulatory system in regard to whistle-blowing.

Keywords: Whistleblower, ethics, professionalism, bill-and-hold.

+ Moha Computer Services Limited: A Fraud Case

    • Srinivasan Ragothaman

Abstract: This article describes the implementation of a “Fraud case study” in an undergraduate auditing class. The author developed an instructional case based on the financial statement fraud that occurred at Satyam Computer Services Limited (Satyam) in India.  Satyam is the largest corporate fraud ($1.5 billion) in India that came to light in 2009.  Ironically, Satyam in Sanskrit means “truth.”   This teaching case exposes students to several auditing-related concepts: 1) corporate governance issues; 2) financial statement fraud; 3) fraud auditing (SAS No. 99); 4) ethical reasoning and utilitarian principles; 5) internal control evaluation (AS 5); and 6) regulation. This case is appropriate for auditing courses at the undergraduate and Master’s levels.  This “teaching innovation” provides students with an opportunity to put on an auditor’s hat and participate in some active learning.  During Fall 2011, a total of 43 accounting majors participated in this case project.  The students worked in groups outside of class to answer questions.  They came up with several red flags associated with fraud and suggested many new internal controls.  Students found the case to be interesting and were engaged in the learning process.  Student learning was assessed by grading written answers (for credit) provided by student groups.  Student opinion surveys were also conducted about the learning outcomes of this project and the survey results indicate strong student engagement, group learning, and satisfaction. 

Keywords: Fraud, utilitarianism, internal control, professional skepticism.

+ Duplicity and Diligence: An Ethical Forensic Case Study of International Espionage

    • Michael C. Knapp

    • Carol A. Knapp

Abstract: Guy Enright, a KPMG employee, unwittingly became a pawn in an international chess match of corporate espionage.  Representatives of Diligence, Inc., a London-based “business intelligence” firm, persuaded Enright to give them copies of “confidential audit documents” obtained during a KPMG audit of IPOC International Growth Fund, a Bermuda-based company with ties to an important Russian bureaucrat who was also a close ally of Vladimir Putin.  Those documents and other information that Enright provided regarding IPOC were relayed to a Russian company, Alfa Group.  At the time, IPOC and Alfa were battling each other in court to acquire a 25 percent ownership interest in MegaFon, one of Russia’s largest cell phone companies.

The “sting operation” used by Diligence to pry information out of Enright was eventually disclosed to KPMG, which then promptly sued Diligence.  The lawsuit was reportedly settled by a $1.7 million payment to KPMG by Diligence.  Enright, who received a Rolex watch for his role in the international intrigue, left KPMG and accepted a job with Deloitte during the general time frame when the details of the sting operation were leaked to the press.  After a multi-year and multinational court battle between IPOC and Alfa, the two combatants mutually agreed to drop the lawsuits and counter-lawsuits that they had filed against each other.  Although the matter was settled out of court, one of the key individuals involved in the IPOC-Alfa legal battle, an American citizen of Russian descent who was an outspoken critic of Vladimir Putin, wound up missing after he was apparently abducted while on a business trip to Latvia.  Skeletal remains of that individual were discovered in a remote area of Latvia in late 2012

Keywords: Client confidentiality, money-laundering, audits vs. consulting engagements.

Books Reviews

Corporate Valuation: Theory, Evidence & Practice

R.W. Holthausen, M.E. Zmijewsk, 2014

Cambridge Business Publisher



           The authors believe that after mastering the concepts and tools in this book, you will be able to value a company. The chapters provide a detailed, step-by-step approach to valuing businesses. The book provides the necessary knowledge to adjust and implement the valuation methods to many valuation situations. Contains exercises, problems and solutions for review exercises. Excellent textbook for a forensic valuation course.

Skills for Accounting and Auditing Research

Shelby Collins, 2014

Cambridge Business Publisher



            Research simulations are key components of the national CPA exam. This high-quality hands-on textbook can teach students these important skills. Students will gain experience locating and applying guidance within key research tools (including the FASB Codification and eIFRS), in a variety of accounting environments. In learning to use these research tools, students will have the opportunity to apply guidance to a variety of actual accounting topics.

A.B.C.’s of Behavioral Forensics: Applying Psychology to Financial Fraud Prevention and Detection

Sri Ramamoorti, 2013, $43.36

D.E. Morrison
J.W. Koletar
K.R. Pope

John Wiley & Sons
Hoboken, N.J.


Highly educated, experienced, and well-paid professionals often risk everything and commit foolish—even criminal—acts. "Good" people do "bad" things! How do accountants understand the human actions that are behind every fraud? Fraud requires accounting professionals to "think like a crook to catch a crook."

This book turns business fraud on its head, focusing less on the how of fraud, and more on the why, with a no-nonsense examination of fraud as a result of human behavior. Written by an author team imparting diverse yet specialized perspectives to the understanding of fraud in all its complexity, this behavioral book provides striking insights on the psychology of white-collar crime with practical tools to help you detect and prevent fraud.

Behavioral topics include:

  • The relevance of behavioral approaches

  • The fraud triangle and beyond

  • The bad apple, bad bushel, and bad crop (A.B.C.) theory

  • How the basics of human behavior tie into fraud.

  • Understanding the "balance sheet basics" of the mind

  • The mind of the predatory fraudster—a la "Step into my parlor . . ."

  • When honesty reverses course—and stays there.

  • Helping senior executives stay on the right side of the line—"good ethics is good business."

  • Developing psychological awareness and recognizing behavioral/integrity risks surrounding financial fraud suspicions

Managing Electronic Records: Methods, Best Practices, and Technologies

Robert F. Smallwood, editor, 2012
John Wiley & Sons
Hoboken, N.J.




This compilation gives professionals the tools to not only mitigate risk, but also position their organizations to leverage the many benefits that flow from effective records management. This comprehensive guide offers users both a strategic overview of current Electronic Risk Management (ERM) issues and a practical road map for implementing specific ERM solutions. Edited by Robert Smallwood, in collaboration with a number of noted subject matter experts, this authoritative resource will appeal to a wide range of managers and practitioners, including those performing legal, compliance, records management, risk management, IT, operations, and information governance (IG) functions.

The book provides hard-hitting advice on e-records management methods, best practices, and technologies, including:

  • Choosing which records to archive

  • Deciding how to organize records

  • Critical standards considerations

  • Information governance policies

  • Taxonomy development and metadata strategies

  • E-record considerations for email, IM, social media, and cloud computing

  • MS SharePoint® governance

  • E-document security measures

  • International standards and frameworks

  • Long-term digital preservation of records

  • Business process management considerations

  • E-record storage and hardware considerations

  • Making the business case for ERM

  • Project management

  • And more.

Zero Day

Mark Russinovich, 2011, $14.99

Thomas Dunne Books
St. Martin’s Press
175 Fifth Avenue
New York, N.Y. 10010




This novel starts as an airliner’s control suddenly stops responding mid-flight over the Atlantic. Then, in Japan, an oil tanker runs aground when its navigational system unexplainably fails. Meanwhile in the U.S., a nuclear power plant is on the verge of becoming the next Chernobyl.

            Are these computer failures unrelated? A former government analyst, Jeff Aiken, saw the mistakes made before 9/11, and he fears that there may be more serious attacks coming from Al Qaeda.  There is little time left if he hopes to stop an international disaster. A good, scary read, even for a non-computer geek


Trojan Horse

Mark Russinovich, 2012, $24.99

Thomas Dunne Books
St. Martin’s Press
175 Fifth Avenue
New York, N.Y. 10010




           This is the follow-up novel to the IT Zero Day thriller about technology around the world going awry. Our hero, Jeff Aiken, now owns a flourishing IT company.

            But the Western world is facing its greatest threat yet. A revolutionary, invisible Trojan that alters data without leaving a trace, more sophisticated than any virus seen before, has been identified, roiling international politics. Jeff and his sidekick Daryl Haugen are summoned to root it out and discover its source. As the Trojan penetrates Western intelligence, and the terrifying truth about its creator is revealed, Jeff and Daryl find themselves in a desperate race to reverse it as the fate of both Eastern and Western world hangs in the balance.

            This suspense novel provides a sober warning from a leading expert on cyber-security. The novel exposes the already widespread use of international cyber-espionage as a powerful and dangerous weapon, and the lengths to which one man will go to stop it


Accosting the Golden Spire

D. Larry Crumbley, 2013
Christopher Jones
Stacy Mastrolia

Carolina Academic Press
700 Kenth Street
Durham, N.C. 27701
Fax: 919-493-5668



While the third edition of this educational novel has been completely revised to include recent updates in accounting theory and practice, the biggest change is the focus on accounting ethics. The new edition includes several new ethical situations and an instructor’s guide for facilitating discussion of accounting ethics and professional codes of conduct.

Lenny Cramer, the protagonist, is a professor at the University of Pennsylvania’s Wharton School and has been described in the past as the “Indiana Jones of the ledger set.” Professors in the real-world have successfully used the first and second editions of “Accosting the Golden Spire” near the end of principles of accounting and at the beginning of intermediate accounting courses. The novel now can be used in a variety of ways to augment an ethics course.

           Periodic reading assignments can be used as a springboard for classroom and online discussions, as a basis for reflective journaling, as a tool for developing reading comprehension and communication skills, or as a way to reinforce accounting concepts.  An instructor can assign the novel to be read, and students will be tested at the end of the semester with provided multiple choice and true/false questions


Investigative Computer Forensics

Erik Laykin, 2013,

John Wiley & Sons
Hoboken, N.J.



           The author explains the investigative computer forensics process in layman’s terms that users of these services can easily digest. Laykin provides readers with a cross section of information gleaned from his broad experience, covering diverse areas of knowledge and proficiency from the basics of preserving and collecting evidence through to an examination of some of the future shaping trends that these technologies are having on society.

The book takes the reader step by step though:

  • Issues that are present-day drivers behind the converging worlds of business, technology, law, and fraud

  • Computers and networks—a primer on how they work and what they are

  • Computer forensic basics, including chain of custody and evidence handling

  • Investigative issues to know about before hiring a forensic investigator

  • Managing forensics in electronic discovery

  • How cyber-firefighters defend against cyber-crime and other malicious online activity

  • Emerging standards of care in the handling of electronic evidence

  • Trends and issues affecting the future of the information revolution and society as a whole


Forensic Analytics: Methods and Techniques for Forensic Accounting Investigators

Mark J. Nigrini, 2011, $90

John Wiley & Sons
Hoboken, N.J.




Nigrini devotes three chapters to a review of the use of Access, Excel, and PowerPoint in a forensic setting. The next eleven chapters discuss data interrogation tests that could be used in a forensic setting to detect employee fraud, biases, and errors. In each chapter, the tests are discussed in general terms and are then demonstrated using case studies with real data. In addition, the steps needed to run the tests are illustrated with screenshots from Access and Excel. Two chapters review, with examples, a risk-scoring technique that can be used to score divisions, agents, or locations for fraud risk.

A full chapter presents various tests, along with real-world examples and case studies, to detect financial statement fraud. The concluding chapter is a case study showing an analysis of purchasing card data using selected tests from the prior chapters, and a presentation of the findings.


Fraud: the Counter Fraud Practitioner’s Handbook

Alan Doig, editor, 2012

Gower Publishing Company
Suite 420
101 Cherry Street
Burlington, Vt 05401-4405




           Thirty-seven authors have 32 chapters on various aspects of fraud from the practitioner’s point of view. The book is broken into these four parts: Themes, trends, and perspectives; fraud: how to investigate; prevention; sanction routes. Some interesting chapters include:

  • Why commit fraud?

  • Procurement fraud

  • Company investigators

  • Bribery and corruptions

  • Managing forensics in electronic discovery

  • Fraud as a financial investigation

  • Using the Internet as an investigative tool

  • How to prevent internal fraud


Bribery and Corruption: How to Be an Impeccable and Profitable Corporate Citizen

Michael J. Comer, 2013, $250
Timothy E. Stephens

Ashgate Publishing Company
110 Cherry Street
Suite 3-1
Burlington, Vt 05401-3818




           This 35 chapter book (882 pages) is written mostly from the United Kingdom’s point of view. However, the message applies to most countries. For example, there are five pages of how bribes are paid (more than 150 ways). The authors show 49 examples of controls in the procurement process. They break corruption into five main categories: incoming, internal, outgoing, competitive, and conflict of interest. The book spends eight chapters on effective controls to identify and respond to improper behavior by competitors. This book is definitely a good one to have handy on your shelf.


The 2014 Annual Fraud and Forensic Accounting Conference

The LSU Fraud and Forensic Accounting Conference will be held July 28 and 29, 2014, in Baton Rouge, Louisiana, at the Crowne Plaza. Please mark your calendar now! Our speakers will include Richard Scrushy, former CEO of HealthSouth; Frank J. Panepinto, Toby Groves, Sri Romamoorti, Timmy Naddy, and more.


Registration for the 2014 Conference will open in May 2014.


More information:


The 2014 AAA Forensic and Investigative Accounting Section Meeting will be held in San Antonio, TX on March 28-29, 2014 at Hilton Palacio Del Rio.


Advertise in the JFIA

Would you like to advertise in this journal? Full page advertisement is $300. Half page ad is $150. Contact Larry Crumbley ( Checks are to be made out to Journal of Forensic and Investigative Accounting and sent to Larry Crumbley at 2833 Business Education Complex, Dept. of Accounting, L.S.U., Baton Rouge, LA 70803.