Student evaluations and judgments of the accounting method used in the restatement of financial statements by a public company for channel stuffing are examined. To reduce any heuristics and biases that may have affected student judgments, a group brainstorming method was incorporated to supplement individual assessments made by the students. The case study was administered to 206 students in three student groups: non-degree, justice school and business school students. Qualitative evidence about the efficacy of the use of the brainstorming technique is provided. Between-subjects’ assessments of the accounting restatements show that justice school and business school students are more likely than non-degree students to disagree with the assessment that the restatement was appropriate. Empirical evidence was also found for the presence of social identity bias between business school and justice school students’ evaluation of sanctions. Implications on the use of behavioral techniques in accounting and ethics education are discussed.
{"title":"CAUGHT IN A COGNITIVE TRAP? AN EXAMINATION OF STUDENT HEURISTICS AND DEBIASING WHEN ANALYZING AN ACCOUNTING RESTATEMENT CASE STUDY","authors":"Vijay S. Sampath","doi":"10.2308/JFAR-2021-002","DOIUrl":"https://doi.org/10.2308/JFAR-2021-002","url":null,"abstract":"Student evaluations and judgments of the accounting method used in the restatement of financial statements by a public company for channel stuffing are examined. To reduce any heuristics and biases that may have affected student judgments, a group brainstorming method was incorporated to supplement individual assessments made by the students. The case study was administered to 206 students in three student groups: non-degree, justice school and business school students. Qualitative evidence about the efficacy of the use of the brainstorming technique is provided. Between-subjects’ assessments of the accounting restatements show that justice school and business school students are more likely than non-degree students to disagree with the assessment that the restatement was appropriate. Empirical evidence was also found for the presence of social identity bias between business school and justice school students’ evaluation of sanctions. Implications on the use of behavioral techniques in accounting and ethics education are discussed.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131324438","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using design science methodology, this article describes a field-tested model of forensic accountants assisting average citizens in improving local governmental accountability and the provision of services via forensic acculturation. While most citizens lack the skills of forensic accountants, citizens have several traits that make them uniquely capable of detecting unhealthy financial behaviors. The field research uncovered systematic patterns of citizens being stymied in moving from the “being aware stage” to the “making improvements” or “holding accountable” stages. We label the patterns of being stymied as 10 Ds (delay, deflect, distort, etc.). We also discovered more successful individuals using behaviors we label the 3 Ps (polite, persistent, and professional) that are common traits among forensic experts. We provide case study evidence of the effects of citizen training and consultation processes, and refine a teaching tool (“3 Ps and 10 Ds”) for use in further field tests. JEL Classifications: D71; D72; D85; G34; G38; H70; I22; M48. Data Availability: Data are available from the author and the public sources cited in the text.
{"title":"Forensic Acculturation for Accountability in Local Governments: A Design Science Approach for School Leaders and Citizens","authors":"J. Kurpierz, Ken A. Smith","doi":"10.2308/jfar-19-035","DOIUrl":"https://doi.org/10.2308/jfar-19-035","url":null,"abstract":"\u0000 Using design science methodology, this article describes a field-tested model of forensic accountants assisting average citizens in improving local governmental accountability and the provision of services via forensic acculturation. While most citizens lack the skills of forensic accountants, citizens have several traits that make them uniquely capable of detecting unhealthy financial behaviors. The field research uncovered systematic patterns of citizens being stymied in moving from the “being aware stage” to the “making improvements” or “holding accountable” stages. We label the patterns of being stymied as 10 Ds (delay, deflect, distort, etc.). We also discovered more successful individuals using behaviors we label the 3 Ps (polite, persistent, and professional) that are common traits among forensic experts. We provide case study evidence of the effects of citizen training and consultation processes, and refine a teaching tool (“3 Ps and 10 Ds”) for use in further field tests.\u0000 JEL Classifications: D71; D72; D85; G34; G38; H70; I22; M48.\u0000 Data Availability: Data are available from the author and the public sources cited in the text.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128840614","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Yi‐Hung Lin, Meghann Cefaratti, Chih-Chen Lee, H. Huang
The purpose of this research is to investigate the relationship between internal control material weaknesses (ICMWs), as measured by presence, number, and type, and Foreign Corrupt Practices Act (FCPA) violations. Our results indicate that firms with ICMWs are more likely to violate the FCPA and firms with multiple ICMWs have a higher likelihood of violating the FCPA than firms with fewer ICMWs. Further, firms with ICMWs related to the risk assessment, control environment, and control activities components of internal controls (based on the COSO Internal Control—Integrated Framework) present a higher risk of FCPA violations than firms without ICMWs in those areas. These findings substantiate the importance of effective internal controls in supporting firms' regulatory compliance. JEL Classifications: M42; M48; D73.
{"title":"Internal Control Material Weaknesses and Foreign Corrupt Practices Act Violations","authors":"Yi‐Hung Lin, Meghann Cefaratti, Chih-Chen Lee, H. Huang","doi":"10.2308/JFAR-52296","DOIUrl":"https://doi.org/10.2308/JFAR-52296","url":null,"abstract":"\u0000 The purpose of this research is to investigate the relationship between internal control material weaknesses (ICMWs), as measured by presence, number, and type, and Foreign Corrupt Practices Act (FCPA) violations. Our results indicate that firms with ICMWs are more likely to violate the FCPA and firms with multiple ICMWs have a higher likelihood of violating the FCPA than firms with fewer ICMWs. Further, firms with ICMWs related to the risk assessment, control environment, and control activities components of internal controls (based on the COSO Internal Control—Integrated Framework) present a higher risk of FCPA violations than firms without ICMWs in those areas. These findings substantiate the importance of effective internal controls in supporting firms' regulatory compliance.\u0000 JEL Classifications: M42; M48; D73.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"206 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113999979","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Prior research finds that although auditors assess fraud risk accurately, they generally fail to adjust audit procedures appropriately. The most recent Public Company Accounting Oversight Board (PCAOB) inspections in 2016 still identify response to risks of material misstatement (RMM) as a major area of inspection focus and cite it as a recurring audit deficiency. In this study, participants assess RMM and make audit-planning judgments in a high/low fraud risk environment using either a traditional source-based representation of RMM (i.e., based on inherent, control, and fraud risk) or a newer type-based representation of RMM (i.e., based on error and fraud risk). The results indicate that while auditors in both groups show similar sensitivity to risk, the type-based group of auditors are better able modify their audit plans by using more procedures that are new to a standard audit program and assigning more experienced staff to address high fraud risk. Data Availability: Contact the author.
{"title":"Integration of Fraud Risk in the Risk of Material Misstatement and the Effect on Auditors' Planning Decisions","authors":"Velina K. Popova","doi":"10.2308/JFAR-52228","DOIUrl":"https://doi.org/10.2308/JFAR-52228","url":null,"abstract":"\u0000 Prior research finds that although auditors assess fraud risk accurately, they generally fail to adjust audit procedures appropriately. The most recent Public Company Accounting Oversight Board (PCAOB) inspections in 2016 still identify response to risks of material misstatement (RMM) as a major area of inspection focus and cite it as a recurring audit deficiency. In this study, participants assess RMM and make audit-planning judgments in a high/low fraud risk environment using either a traditional source-based representation of RMM (i.e., based on inherent, control, and fraud risk) or a newer type-based representation of RMM (i.e., based on error and fraud risk). The results indicate that while auditors in both groups show similar sensitivity to risk, the type-based group of auditors are better able modify their audit plans by using more procedures that are new to a standard audit program and assigning more experienced staff to address high fraud risk.\u0000 Data Availability: Contact the author.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"87 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124985774","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Students learn about the many different aspects of occupational fraud by reading the Association of Certified Fraud Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse (Report) and applying what they learn to one of two episodes of the television show Mystery Diners, which features an undercover fraud investigation in a restaurant setting. Applying the ACFE Report to a setting generally familiar to students helps them gain insight into occupational fraud. Pre-/post-test and survey results reveal that students significantly increased their knowledge of how occupational fraud is committed and detected, traits of victim organizations, characteristics of perpetrators, and case results (what actions are or are not taken against perpetrators) across two different episodes and two editions of the ACFE Report. Feedback shows students found the case valuable and enjoyable and would find more cases like this beneficial. Instructors can modify the case for other episodes (more than 100 are available) and further editions of the ACFE Report to help students learn about occupational fraud.
{"title":"Solving the “Mystery” of Profiling Fraud: Teaching Students About Occupational Fraud by Examining Episodes of Mystery Diners","authors":"Ronald J. Daigle, David C. Hayes, D. McSwain","doi":"10.2308/JFAR-52109","DOIUrl":"https://doi.org/10.2308/JFAR-52109","url":null,"abstract":"\u0000 Students learn about the many different aspects of occupational fraud by reading the Association of Certified Fraud Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse (Report) and applying what they learn to one of two episodes of the television show Mystery Diners, which features an undercover fraud investigation in a restaurant setting. Applying the ACFE Report to a setting generally familiar to students helps them gain insight into occupational fraud. Pre-/post-test and survey results reveal that students significantly increased their knowledge of how occupational fraud is committed and detected, traits of victim organizations, characteristics of perpetrators, and case results (what actions are or are not taken against perpetrators) across two different episodes and two editions of the ACFE Report. Feedback shows students found the case valuable and enjoyable and would find more cases like this beneficial. Instructors can modify the case for other episodes (more than 100 are available) and further editions of the ACFE Report to help students learn about occupational fraud.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127687847","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Association of Certified Fraud Examiners (2016) indicates that asset misappropriation is the most common form of occupational fraud. Based upon a real company, this case contains six frauds: collusions, commissions, fictitious sales, rebates, refunds, and write-offs. It also includes several asset misappropriation (e.g., theft of cash, misuse of inventory, and fraudulent reimbursement) schemes. Furthermore, four of the six frauds are not found in other published case studies. The case seeks to enhance learning by having students (1) examine multiple fraudulent schemes within a single company, (2) identify frauds after examining firm procedures and documents, (3) suggest applicable fraud protection procedures, (4) identify internal control weaknesses, and (5) apply the fraud triangle. Undergraduate and graduate students from two universities performed well on the case.
{"title":"AIM Corporation: A Business Fraud Case Study","authors":"T. Weirich, Natalie T. Churyk","doi":"10.2308/JFAR-52124","DOIUrl":"https://doi.org/10.2308/JFAR-52124","url":null,"abstract":"\u0000 The Association of Certified Fraud Examiners (2016) indicates that asset misappropriation is the most common form of occupational fraud. Based upon a real company, this case contains six frauds: collusions, commissions, fictitious sales, rebates, refunds, and write-offs. It also includes several asset misappropriation (e.g., theft of cash, misuse of inventory, and fraudulent reimbursement) schemes. Furthermore, four of the six frauds are not found in other published case studies. The case seeks to enhance learning by having students (1) examine multiple fraudulent schemes within a single company, (2) identify frauds after examining firm procedures and documents, (3) suggest applicable fraud protection procedures, (4) identify internal control weaknesses, and (5) apply the fraud triangle. Undergraduate and graduate students from two universities performed well on the case.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"23 4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115948748","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Ben and Cindy Johnson have been partners in marriage and business for 20 years, jointly owning and operating Scratchpad, a software production and distribution company. In recent years the couple drifted apart, and Ben, with Cindy's agreement, has filed for divorce. The couple has also agreed that they will not work together post-divorce. As a result, the divorce settlement will include compensation to Ben for transferring his ownership interest in Scratchpad to Cindy. In this case, you will be the valuation analyst to develop the valuation of Scratchpad to support this matrimonial dissolution.
{"title":"Scratchpad: A Private Company Business Valuation Case","authors":"James A. DiGabriele, Richard A. Riley","doi":"10.2308/JFAR-52119","DOIUrl":"https://doi.org/10.2308/JFAR-52119","url":null,"abstract":"\u0000 Ben and Cindy Johnson have been partners in marriage and business for 20 years, jointly owning and operating Scratchpad, a software production and distribution company. In recent years the couple drifted apart, and Ben, with Cindy's agreement, has filed for divorce. The couple has also agreed that they will not work together post-divorce. As a result, the divorce settlement will include compensation to Ben for transferring his ownership interest in Scratchpad to Cindy. In this case, you will be the valuation analyst to develop the valuation of Scratchpad to support this matrimonial dissolution.","PeriodicalId":149240,"journal":{"name":"Journal of Forensic Accounting Research","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115560546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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