Journal entries

Professional Journal Article Assignments: Each student will select three articles on different areas of accounting (e.g., financial accounting, managerial accounting, taxation, auditing, AIS, fraud/forensic, valuation, etc.) from current professional journals, and write a paper in professional form that synopsizes the article, including a thorough discussion of the background, issues involved, rationale applied and conclusions/solutions proffered. Students will be graded on the quality of the presentation and discussion. This writing assignment will be submitted to the Blackboard drop box by the end of the semester

Jeff Youngbrandt
ACCT-8965
Prof. Kresse
Apr 29, 2021
Journal Article #1 Forensic Accounting
Over the past 70 years, forensic accounting has developed in order to detect fraud from the
most basic form to the most complex. It is commonly said that Donald Cressey and Edwin
Southland were given credit of creating and molding the foundation of fraud through their 1934
text, “Principles of Criminology.” Within the text itself, there were numerous references to a
specific diagram or framework called the “fraud triangle.” To put it simply, the fraud triangle was a
framework that consisted of three components; rationalization, opportunity, and motivation, of
which could be used to explain an individual’s reason for committing a fraudulent act. The fraud
triangle can be found throughout modern day forensic accounting and even governs most of the
work that auditors do. Much like the fraud triangle, laws were created over the years in order to
better understand, catch, and prevent fraud from occurring. One law in specific that was created in
according with fraud, in which all accounting students should know, is the Sarbanes-Oxley Act of
2002.
Within the past decade alone, the job of a forensic accountant has become a much more
specialized profession requiring a range of skills covering a broad scope of the accounting world.
Throughout the 1980’s and 90’s many scandals involving savings, loans, and the banks were
taking place. This was because of the lack of regulation within the accounting realm and the real
estate markets being very speculative. During this period, the role of the forensic accountant was
not cut and dry. Many of these issues were simply being fixed by introducing new laws and
regulations. On the other hand, for companies like WorldCom and Enron, increased auditing
standards were turned to as the solution, which in turn gave rise to the ideology of CPA’s as antifraudsters and professionals when dealing with internal controls. Although the reason for the
accounting fields being so specialized may simply be evolution, it can not be ignored that the need
and niche for where forensic accounting thrives has widened over the decades.
Forensic accounting is usually performed by someone who has sufficient financial or
accounting experience. Along with their experience withing the financial or accounting field, one
must “specialize in acquiring, analyzing, and reporting on financial events for the purpose of the
‘forum’” (Rechtman, 2020). For clarification, a forum is any decision-making entity. In this case,
investors, judges, and even insurance companies are all examples of forums who receive and
decide upon the forensic analysis the accountant was asked to provide. Due to the wide variety of
knowledge and skills needed for forensic accounting, the profession itself contains a multitude of
disciplines from different fields. Forensic accounting also contains subfields including tax fraud,
business valuation, due diligence, electronic discovery, etc… Though very complex from the
outside, forensic accounting can be broken down into two simple concepts or notions, perception
and reality, of where all subfields come to intersect. For example, in fraudulent investigations
there is typical a person or manager in a position of trust who have benefited from acts causing
harm to others. The perception of the position in power, the fraudster, is that they will never be
caught, and they haven’t don’t anything wrong. This is where the role of the forensic accountant
comes into play, bringing reality closer to those who perceive it and then report on the findings of
the reality. Understanding these two concepts or forces with help readers gain an understanding on
what forensic accountants actually, which is bridging the gap of what someone perceives to be the
truth versus what the evidence shows being reality.
The development of forensic accounting and the specialization within the field has evolved
overtime, with a notable increase in the mid 90’s due to all the scandals. With all the new rules and
regulations that were put into action, CPA’s were now accountable for antifraudulent measures
within the financial markets. “Asset misappropriation, another class of occupational fraud, also
came within the purview of specialists, promoted in particular by the ascendancy of the
Association of Certified Fraud Examiners (ACFE) in 1987” (Rechtman, 2020). At the time, fraud
investigation services such as damage valuation and testimonies by CPA’s had evolved and
specialized thus extending past the scope audit or compliance. Now in modern day, forensic
accounting is a field that stands on its own two feet. Valuation and business appraisal, both of
which all CPA’s were familiar with, are now job specific and adopted into the field of forensic
accounting. Modern technologies like electronic discovery, big data, and visualization are all tools
now readily available to those forensic accountants in need. Especially nowadays, in a technology
driven era, forensic accountants are reliant upon the development and use of these new
technologies in order to properly provide the correct analysis.
References
Rechtman, Y. M. (2020, April 7). The Past, Present, and Future of Forensic Accounting. The CPA
Journal. https://www.cpajournal.com/2020/04/10/the-past-present-and-future-of-forensicaccounting/.