Importance of Forensic Accounting in Countries of Business Opacity: A Means to End Fraud

Introduction

If you hear of Enron, Conrad Black, Kimberly Rogers or WorldCom, you will be thinking about the theft, bribery and fraud. The most important word in this case is “fraud” and a lot of investigations have taken place on this topic. What exactly is fraud, and how can it be detected and handled and how do you to avoid it? These questions and the answers are essential within the field of forensic accounting because fraud plays a significant impact on the creation of accounting, which is why accounting forensically. Understanding the concept of fraud is essential for anyone who wants to know the basics of what Forensic Accounting is and how it was introduced into the accounting system and how it deals with the challenges we confront, and to what extent it has contributed in the resolution of certain fraud issues or even in strengthening the overall system of accounting (Economist Intelligence Unit 2007).ZZP Boekhouder Amsterdam

The research has focused on fraud and it has been provided with different definitionsthat coincide with each other. Additional research was conducted to emphasize the role of internal controls to reduce the possibility of theft or misuse. However, there was not much research conducted on the diffusion of accounting for forensic purposes and its appropriate implementation.

Fraud-related activities have been stealing, manipulating and devastating several industries and businesses. To combat these harmful patterns, fraud examination was created. significant efforts have been put into to identify, investigate, and stop similar crimes from occurring. These safeguards shed light on a fresh idea and practice referred to as “Forensic accounting (FA)” that is now a standard practice to tackle fraud and other unethical actions. Whatever the extent to which fraud activity increases there should always be an anti-fraud strategy to protect against it. To ensure security and balance is the primary reason FA was established.

Yet it is true that the legal, supervision and regulatory system of countries with financial corruption offer significant opportunities and tools to protect and wash of proceeds of crime. These systems permit criminals who take advantage of these systems to increase their chances of avoiding an effective investigation or apprehension. A country’s commitment to banking secret and the absence of important enforcement and supervisory methods for preventing and detecting money laundering increase the likelihood that transactions involving the nation’s institutions and accounts are used for illegal motives.

One of the most effective tools of nowadays is forensic accounting it is beneficial to research the possibility of its application in nations with a high degree of business opaqueness and also to study the fundamental methods for the establishment of this process in various areas and on a variety of levels. To meet these goals there is a need to research the following inquiry: “What are the conditions of possibility to implement FA in a country that is characterized by an opaque financial system?” This research has two goals:

1. Find the most effective method to emphasize the significance of the forensic accounting process to ensure how businesses can continue to conduct through the lessons learned from previous mistakes, such as Enron or WorldCom and by utilizing other instances of financial fraud that are similar to those of international origin.

2. To find out how to disperse and use the concept of forensic accounting as an essential tool , when applied professionally, will greatly aid in the combat fraud.

Furthermore, the reason for this can be attributed to the fact that forensic accounting isn’t widely known in several nations. FA is not widely distributed throughout the world, and is only recognized in the USA and certain developed nations. This study contributes to discovering the most effective way to implement FA specifically with regard to the existing deficit, with the aim of addressing it, primarily because it is difficult in implementing forensic accounting, particularly that it isn’t widely spread across the globe. The aim is to find an answer for the research question , and to illustrate how the forensic accounting system can be used in countries with an opaque financial system The ultimate goal is to reach this objective.

Literature Review

Different studies have been carried out to define fraud, including the various types of fraud, like that of Gilbert (1997 (p. 124)) which stated “fraud” as “an act that involves deceit, that is based on intentional disinformation of the truth, the truth or concealment of a significant fact to gain unfair advantages over another person in order to gain something valuable or to deny another rights. Fraud is a reason to set an action aside at the discretion of the person who was harmed by it, or to seek recovering damages.”

Farrell & Healy (2000) exposed the extent of fraud that is growing globally and is becoming increasingly costly for businesses every year, as fraudsters employ intricate ways to conceal their crimes. The consequences of fraud may range from a decline in morale of the public as well as a decrease in trust in the business, the loss of market value and trust among stakeholders.

Based on the many definitions that are attributed to fraud, additional research has pointed out the need for internal controls that can restrict the recurring fraudulent activities. Audits by outside auditors can also be conducted to verify that internal fraud-control measures are sufficient in their scope, efficient in their application, and adhered to. But, it’s sad to see that the human brain’s complexity and its ever-changing method of thinking have created a vast array of frauds, which are far removed from the previously established methods of fraudulent activity that have rendered the true corporate governance principles virtually unusable.