Background of the Research
Discuss about the Impact Of Forensic Accounting On Organisation.
The current business world has been facing the considerable challenges from the fraudulent activities and numerous scandals in every industry. The forensic accounting is a terminology that deals with the accounting, investigation, and auditing skills to examine the financial statement of the company. With the help of a structured forensic accounting document, a company can present the proof to the court if any fraudulent act is suspected. According to Seda and Kramer (2015), it is important for each organisation to investigate the fraud and corruption, which are the significant elements of the role of a forensic accountant. In addition to this, forensic accounting even deals with several mismanagements occur within the organisation. The study will thus focus on the conceptual and theoretical analysis of the forensic accounting in the retail corporations in Australia. The identification of the research aim, objectives, and research questions will be connected to the findings obtained from the literature. The use of the appropriate methodologies will also be discussed in this study to gather the insightful knowledge on this context.
The current business scenario is widely surrounded by the extensive competition. Each of the organisations strives to achieve excellence and strengthen the competitive position. Louwers (2015) identified that this entire business arena has been experiencing the continuous frauds and scandals regularly. Forensic accounting is a practice that audits the internal financial statements of a firm to identify the loopholes and undertake the fruitful steps to mitigate the issues. Bhasin (2017) even defined that forensic accounting generally uses the different accounting skills that are effective enough to conduct an investigative act against the fraudulent activities underlying the organisational functions. The report acts as the proof for the fraudulent activities that can be shown to the court or any legal proceeding. It has been observed that the retail corporations face such discrepancy in their financial activities on a regular basis. Bhasin (2015) observed that the retail sectors often experience a collapsing situation that includes the date of insolvency, unauthorized leakage of commercially sensitive information, and theft of intellectual properties. In fact, in some of the cases, it is also observed that the retail corporations fail to comply with the regulatory governance, such as Competition and Consumer Act 2010 (Bologna and Shaw, 2013). The development of the forensic auditing process would be helpful in such case to identify the discrepancy and take the action against it to mitigate the challenges quickly.
Problem Statement
The research study is entirely concentrating on exploring the conceptual and theoretical underpinning related to the forensic accounting system. The research study is focusing on critically examine the recognizable impacts of the forensic accounting process for addressing and resolving the fraudulent activities within the retail firms. The observation of this examination report would suggest the appropriate corporate governance process that can be undertaken to mitigate the challenges in a significant manner. The research study intends to evaluate the extent to which the forensic accounting helps in aiding the diverse fraudulent activities and influencing the internal corporate governance process. Botes, and Saadeh (2016) implied that the external auditing credibility generally depends on the techniques and procedures undertaken by different countries. This analysis even involves with numerous criticisms directed by the external activities. Such financial scams cause the lack of integrity among the public that leads towards property losses, which is a greater concerns for the business.
On the other hand, Crain et al. (2016) argued that the transaction volumes enlarge the corporation size, which affects the external audit accountability. It is essential to present the appropriate financial statement to create a fair view of the financial reporting. This practices helps in detecting the probable frauds by drifting an external audit. The audit profession indicates that the management ensures a chief accountability for recognizing and preventing the fraudulent business concerns. It is important to develop the professional skepticism while identifying the frauds thorough the internal audit process (DiGabriele and Huber, 2015). The prevalent frauds may create the materially incorrect financial pronouncements. The accountant and legal practitioners may receive the fruitful insights by reviewing the failures in the various statutory and audit procedures that are generally used for detecting or preventing frauds. The study is thus concentrating on analyzing the issues with the financial losses and increasing rate of the fraudulent activities. The study even intends to identify the effectiveness of forensic accounting process to mitigate the challenges due to such inappropriateness in the financial accounting systems of the retail corporations.
The research study aims to identify the fruitfulness of the forensic accounting process to detect the internal fraudulent financial concerns within the retail corporations. The study also attempts to identify the challenges faced due to the financial frauds take place within the organisations and effects of these challenges to maintain the appropriate corporate governance.
- To identify the types of fraudulent activities and discrepancies within the retail corporations
- To critically examine the effectiveness of forensic accounting process to detect or prevent the internal financial frauds
- To investigate the challenges faced by the firms due to the external and internal fraudulent financial concerns
- To provide the preferable recommendations to mitigate the challenges with the Forensic Accounting planning within the retail corporations
- How the forensic accounting system helps in addressing and managing the financial frauds in retail corporations?
- To what extent the forensic accounting system becomes obligatory to undertake the audit process for developing sound corporate governance?
- What are the major challenges faced due to the emergence of the financial frauds within the corporation?
- How these challenges can be mitigated by using the appropriate forensic accounting process?
The literature study explores the conceptual and theoretical analysis of the subject areas and describes the associated elements to develop the complete understanding of the research study. The research concentrates on the considerable challenges faced by the corporations due to the emerging financial scams and internal fraudulent activities that cause greater financial loss and reputational damage (Domino, Giordano and Webinger 2017). It can be stated that the forensic accountants need to be much efficient in terms of developing the concerns regarding the internal control system of the organisation. In addition to this, it is noticeable that this aspect even involves the continuous monitoring if the institutional needs that are often affected by the fraudulent acts. It is noticeable that the current business arena has been experiencing extreme frauds in the financial calculations (Golden, Skalak and Clayton, 2011). The regular improvements in the forensic accounting process can help in identifying the mistakes or the fraudulent acts. Organisations require using the appropriate forensic audit report if there is the failure observed in governance or internal control. The examination of the internal audit reports sometimes unable to identify the loopholes due to which the corporations fail to achieve the success in developing the appropriate corporate governance procedures (Matson, 2016). Moreover, it affects the integrity level that leads to lack of faith and loss of customer base. The forensic accounting is a procedure to examine such discrepancy and resolve the issues for the organisational benefits. The literature study would provide the conceptual analysis of the key factors associated with the forensic accounting process. This study will also help in identifying the impacts of these elements on the corporate governance process within a firm. The obtained ideas from the literature will be used for developing the clear understanding of the research study in the further section.
Research Aim
Forensic accounting is a terminology that defines the method of internal financial audit to investigate the financial statement of a firm. According to Nelson, Brayman and Barry (2012), the forensic accounting process helps in preparing the financial statements that can be presented to any court or legal proceeding in order to address the identified issues with the fraudulent acts within the firm. Nelson, Brayman and Barry (2012) also defined that forensic accounting is the practice of internal and external financial audits that provides the clear explanations of the real and estimated disputes in the corporations. “Forensic” is the term, which is generally used in legal proceeding or courts in time of presenting the evidence of financial disputes. The forensic accountants are the external auditors who review the entire financial statement of the corporations by developing the deeper understanding regarding the parameter. The forensic accounting practice is adopted to identify the types of crimes and investigate the issues with the “crimes against property”. Especially, the external auditors review the financial statements if the internal auditor fails to identify the disputes. Rezaee, Larry Crumbley and Elmore (2004) also identified that the forensic accountants are often considered as the fraud investigators or the investigative accountants that belong to the external source of the firm.
The theoretical explanation of the forensic accounting determines that there are a set of activities due to which these practices are undertaken by the external and the internal auditors. Seda and Peterson Kramer (2015) stated that organisations require using the appropriate forensic audit report if there is the failure observed in governance or internal control. Supporting such statement, Singleton and Singleton (2010) analyzed that this process is most suitable in terms of creating the report on ‘conflict of interest’. In terms of identifying the reasons for the collapsing corporate scenario that often involves the date of insolvency. Taylor, Bogdan and DeVault (2015) presented the idea of the theft of intellectual property require the development of the clear audit report of the internal financial statement. The use of the forensic accounting practices is quite necessary in such cases. Furthermore, this suitable practice helps in identifying the challenges faced by the corporations due to the complex reconciliation unauthorized leakage of the information, which is commercially sensitive. In some of the cases, as stated by Smith (2015), the corporations fail to comply with some specifications associated with the regulatory requirements, such as Competition and Consumer Act 2010. The forensic accounting process helps in identifying the gap more specifically to fulfill the requirements with proper efficiency. In addition to this, the effective forensic accounting practices help in investigating the issues occur due to the multiple payments of the invoices, overpayments of the fees, taxes, and other charges.
Research Objectives
The detailed analysis regarding the role of forensic accountants determines the in-doeth investigations surrounding the alleged frauds, illegal activities, and corruptions conducted by any employee associated with the organisation. According to DiGabriele and Huber (2015), it often involves the investigations of several external concerns related to corruption, frauds, and other business crimes. The role of the forensic accountants depends on the term ‘fraud’ that identifies the crime made by a lay person that is needed to be investigated. Durtschi and Rufus (2017) defined that ‘fraud’ is conceptualized as the dishonest activity that causes the potential financial loss to any entity or person and it even includes the theft of property or money. Fraudulent activities even involve the deliberate concealment, falsification, and destruction of the documents that are used for performing business functions (Henry and Ganiyu, 2018). This type of theft of property is termed as ‘fraud’ within an entity. This terminology generally deals with crime focused legislations and creates the significant damage to the corporation. The forensic accountants need to perform their responsibility to deal with such Management and discrepancy to resolve the issues and protect the organisations from such practices.
There are numerous debates formulated over the concept of fraudulent acts within the Australian corporations. At the end, it becomes the significant aspects for the industry within which it operates. Taylor, Bogdan and DeVault (2015) argued that it might create the minor reputational damage due to which it is not supposed to be considered as the ‘major problem’. However, it is reported that the publicly listed corporations absorb the fraud value of $20 millions, but this value occur much frequently. The larger corporations often face the significant issues with the fraudulent concerns with the financial statements, which is also relatively rare. There is the perception among the smaller corporations that the victims of such frauds will not be recovered from the losses. In recent time, the Australian Securities and Investments Commissions (ASIC) reported that the fraudulent activities in the corporations increased mostly during December 2014. ASIC received the report of almost 348 outcomes that included the convictions, enforceable undertaking, and disqualifications. The statistics report presented by the Australian Institute of Criminology describes the fraudulent incidents since the year off 1950.
Graph 1: Estimation of Fraud
(Source: Cpaaustralia.com.au, 2018)
As per the report published by the Australia Bureau of Statistics, it was identified that in the year of 2012; the estimated level of fraud reached up to $1.4 billion. The extremeness of these crimes affected the corporation values and created the significant reputational damage that were needed to be investigated with the help of the forensic accountants.
Research Questions
According to Domino, Giordano and Webinger (2017), the identification of the Management in the accounting techniques is considered as one of the symbolic evidence of the fraudulent activity. In general case, the frauds usually remain in the safer line due to which it becomes difficult to prove the severity level. The frauds are even concealed in a smarter way, which makes it much difficult to detect the underlying frauds. The forensic accountants are the external auditors who review the entire financial statement of the corporations by developing the deeper understanding regarding the parameter. The regular improvements in the forensic accounting process can help in identifying the mistakes or the fraudulent acts. Organisations require using the appropriate forensic audit report if there is the failure observed in governance or internal control. it affects the integrity level that leads to lack of faith and loss of customer base. The forensic accounting is a procedure to examine such discrepancy and resolve the issues for the organisational benefits. The literature study would provide the conceptual analysis of the key factors associated with the forensic accounting process.
The retail sectors often experience a collapsing situation that includes the date of insolvency, unauthorized leakage of commercially sensitive information, and theft of intellectual properties. The techniques utilized in the forensic accounting process clarify the underlying issues that are needed to be addressed for mitigating the issues. The forensic accountant plays the most significant role in such cases.
Some of the specific government agencies like CIA, FBI, and IRS employ the forensic accountant when any of the fraudulent activity is suspected in the financial statement of the firm. Seda and Kramer (2015) implied that the forensic accountants maintain the higher level of audit skills, investigative efficiency, and legal capabilities. It creates the recognizable linking with the organisational efforts that maintains a high level of cohesiveness associated with the political and ethical behaviour of the company. There are two major aspects associated with the forensic accounting process. The first is the litigation service, which identifies the functionalities adopted by the accountant to investigate the skilled services of forensic accountants. It also implies that the forensic accountants need to be much efficient in terms of developing the concerns regarding the internal control system of the organisation. In addition to this, it is noticeable that this aspect even involves the continuous monitoring if the institutional needs that are often affected by the fraudulent acts. Taylor, Bogdan and DeVault (2015) identified another aspect in this context that is the development of the guidelines along with the considerable procurement associated with the investigating accounting. One can gather the enriched knowledge about the forensic accounting process that enhances the investigating skills for the future prospects.
Literature Review
The extensive research on the forensic accounting process reveals the fact that it is essential to create the centralized program as well as the established system for measuring and monitoring the internal controls. Domino, Giordano and Webinger (2017) identified that the internal controls need to be aligned with the corporate governance procedures that develops the complete understanding regarding the internal and external reporting activities. It is important to gather the better knowledge on such area of study to meet the institutional needs associated with corporate governance. In such context, the forensic accounting process plays the most significant part by determining the comprehensive governance policy. Seda and Peterson Kramer (2015) implied that the establishment of the positive working environment helps in preventing the fraudulent acts to address the underlying responsibilities. The effective forensic accounting procedures help in understanding the method of motivating the employees to maintain the high level of integrity. Forensic accounting process ensures that the field of the corporate governance takes the active participation in mitigating the emerging risks within the organisation. Moreover, this process helps in developing the regulatory policies that strengthen the internal corporate governance practices for making more improvements in the internal financial practices.
Forensic accounting is a financial practice that has been practicing for a longer period of time. It has the significant values in identifying the discrepancy associated with the organisational financial aspects. DiGabriele and Huber, (2015) suggested that this forensic accounting practice is generally conceptualized for developing the knowledge regarding the data accumulation for understanding the underlying fraudulent acts. It is notable that the investigation procedure has the ability to aid the determination process to establish the considerable facts concerning uphold legal factors. The forensic accounting tools develops the considerable ideas regarding the challenges faced by the corporations due to the complex reconciliation unauthorized leakage of the information, which is commercially sensitive. On the other hand, Henry and Ganiyu, (2018) implied that the forensic accounting process identifies the internal disputes, which can e solved by monitoring the financial statement developed by the external forensic investigators. The articles associated with this study clearly examine the role of the forensic accountants to identify the issue when the frauds are replicating the financial statement and formulate discrepancy. Seda and Kramer (2015) observed that the forensic accounting is the practice of internal and external financial audits that provides the clear explanations of the real and estimated disputes in the corporations. “Forensic” is the term, which is generally used in legal proceeding or courts in time of presenting the evidence of financial disputes. The enriched ideas gathered from the article determine the clear understanding of the concept with the elaboration of the associated elements. Therefore, it can be interpreted that the articles used in this research study has the significance and relevancy with the literature study.
Concept of Forensic Accounting
The literature develops the clear and concise ideas about the effectiveness forensic accounting process. The ideas obtained from this literature study is quite helpful in terms of understanding the internal legal proceeding that is needed to be undertaken to mitigate the challenges emerge due to the fraudulent acts. However, the current business world is highly advanced with the well-defined technologies that detect the problem instantly. The literature study lacks the argument on such basis. The lack of the updated information in such context is thus making the literature study quite limited. It is important to analyse these aspects as well to determine the current organisational practices. Moreover, the literature study does not imply whether the forensic accounting process takes any legal actions against such frauds or any of the damage affects the organisational reputations. The lack of such information thus creates the considerable limitation in the study.
Research methodology is the systematic approach utilized to conduct any research orienting any particular subject area. The study develops the complete understanding regarding the forensic accounting process, which is the internal and external financial audit procedure to identify the occurrence of any fraudulent activity. Therefore, it is essential to utilize the appropriate research methodology for developing the extensive research on this forensic accounting process. The further study will discuss the appropriate design and data collection process for investigating the major aspects of the research area. It is noticeable that this particular research study will develop the mixed method research process in which both the primary and secondary research technique would be used for obtaining the relevant data. The appropriate method and design is discussed further:
The research type is generally categorized into three divisions, such as exploratory, explanatory, and descriptive. The exploratory design develops the understanding of the concept that has not been studied previously (Lewis, 2015). On the other hand, the explanatory research is adopted to identify the in-depth analysis of the research process by gathering the extensive information from various other sources (Flick, 2015). Descriptive design is generally utilized to describe the underlying characteristics of the phenomenon or populations that are studied orienting the particular research area. It explains the actual concerns related to the research subject. The primary data for the study will be discussed by utilizing the descriptive design to develop the in-depth analysis of the subject matter.
The research is developed by utilizing the mixed method in which both the primary and the secondary data will be collected. The primary survey would be conducted among a larger population to gather the collective responses. The respondents are the ones who have been experiencing the scenario in their real life. The secondary data will be collected from the secondary sources, such as journals, books, and websites (Mackey and Gass, 2015). The utilization of the primary and secondary techniques would help in gathering the extensive data exploring the research subject in a significant way.
The research would be developed by conducting both the primary and secondary data. The primary data collection process will be developed by using both the quantitative and qualitative responses. In the quantitative data collection process, the managers and staffs from the various retail corporations of Australia will participate. The survey questionnaire will be distributed among the respondents by personal mails. On the other hand, the qualitative data collection process would include the interview process in which the telephonic interview will be undertaken. The managers would discuss the strategic ideas regarding this subject area. On the other hand, the secondary information will be collected from the secondary sources, such as websites, books, and journal articles. The data gathered from these sources will be liked together to develop the fruitful ideas about the research subject.
In order to develop the data collection procedures, there are two types of sampling procedures will be used in this study. The Probability Simple Random Techniques will be used for gathering responses from the 60 employees including managers and staffs from 4 retail corporations in Australia. On the other hand, the non-probability, convenience sampling would be used for interviewing 4 managers from four different retail corporations of Australia.
The collected data is required being analyzed by utilizing appropriate techniques and methods. The data gathered from the quantitative data collection process will be analyzed by utilizing statistical analysis and the software tool like MS Excel. The qualitative analysis of the data will be utilized by developing thematic analysis. In fact, the secondary data will also be developed by deploying the thematic analysis. The evaluation of the diverse case studies and information derived from the literature will be discussed in an elaborative way.
The researchers need to maintain the appropriate ethical parameter. It is notable that conducting the research study is not an easier process. It is necessary to ensure that the secondary information utilized in this study need to be updated and authentic. The researcher cannot persuade any respondents to answer the questions mentioned in the questionnaire. The learner even requires maintain the confidentiality and information privacy to develop the high level of integrity. The data will be gathered by deriving ethical consent from the respondents. The learner needs to comply with the Data Protection Act to maintain the privacy concerns of the respondents (Taylor, Bogdan and DeVault, 2015). Maintaining these ethical concerns would be necessary to develop the research that can be used even in the future.
References
Bhasin, M.L., 2015. Contribution of Forensic Accounting to Corporate Governance: An Exploratory Study of an Asian Country.
Bhasin, M.L., 2017. Role of Forensic Accounting to Strengthen Corporate Governance: An Empirical Study. Journal of Economics, Marketing and Management, 5, pp.17-36.
Bologna, J. and Shaw, P., 2013. Forensic Accounting Handbook. Madison, WI: Assets Protection Pub.
Botes, V.L. and Saadeh, A., 2016. Towards an understanding of forensic accounting.
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Crain, M.A., Hopwood, W.S., Pacini, C. and Young, G.R., 2016. Essentials of forensic accounting. John Wiley & Sons.
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Singleton, T.W. and Singleton, A.J., 2010. Fraud auditing and forensic accounting (Vol. 11). John Wiley & Sons.
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Taylor, S.J., Bogdan, R. and DeVault, M., 2015. Introduction to qualitative research methods: A guidebook and resource. John Wiley & Sons.
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