10.1108@JMLC 05 2013 0017

Journal of Money Laundering Control
Better, faster, smarter: developing a blueprint for creating forensic accountants

Yogi Prabowo Hendi
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Yogi Prabowo Hendi , (2013),"Better, faster, smarter: developing a blueprint for creating forensic
accountants", Journal of Money Laundering Control, Vol. 16 Iss 4 pp. 353 - 378
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Blueprint for
Better, faster, smarter: creating forensic
developing a blueprint for accountants
creating forensic accountants
353
Hendi Yogi Prabowo
IsCentre for Forensic Accounting Studies,
Islamic University of Indonesia, Yogyakarta, Indonesia
Abstract
Purpose The purpose of this article, which is based on authors study, is to highlight the essential
attributes of forensic accountants and to construct the forensic accountant blueprint as a reference
for forensic accounting education and training.
Design/methodology/approach This study uses primary and secondary data on forensic
accounting profession in Indonesia and the USA. Such data were collected by means of literature
reviews, in-depth interviews, and a focus group discussion with a number of forensic accounting
professionals in Indonesia and the USA.
Findings The author establishes that the problem-based nature of forensic accounting requires a
unique approach in producing forensic accountants compared to ordinary accountants. The essential
attributes that a forensic accountant needs to possess are mentality, method, and experience.
Mentality consists of elements such as ability to differentiate the right from the wrong, courage to
stand up for what is right, ability to withstand pressures from the works, and puzzle solving mindsets.
Methods refer to the understanding of the fraud investigation process such as fraud detection,
evidences, investigation methods, and investigation report. Experience as the third attribute is
gained primarily through involvement in fraud investigation process in which a forensic accountant
utilizes his or her knowledge previously acquired through education and training.
Research limitations/implications Forensic accounting is a problem oriented skill that may
differ across countries. Due to the time and financial resource constraint, this study is limited only on two
countries and a small number of respondents. For future study, more countries and respondents should
be included in analysis to gain a more complete picture on what constitute a forensic accountant.
Practical implications The results of this study contribute to the development of human resource
in the forensic accounting profession. More specifically, they serve as a reference in the development of
curriculum for forensic accounting education and training especially in Indonesia.
Originality/value This paper sees forensic accountant skill development from the demand point
of view by highlighting what that the profession expects from a forensic accountant.
Keywords Education, Universities, Fraud, Forensic accountant, Forensic accounting,
Fraud investigation
Paper type Research paper
Introduction
A decade had passed since Enron collapsed and yet fraud remains a major international
problem. Efforts have been made to fully identify the types of fraud for prevention and
Journal of Money Laundering Control
The author would like to acknowledge the support provided by the US Indonesia Society Vol. 16 No. 4, 2013
(USINDO) through its Sumitro Fellowship Award and the Directorate General of Higher pp. 353-378
q Emerald Group Publishing Limited
Education of Indonesia (Dirjen Dikti) through its Doctorate Development Program for the 1368-5201
funding of this study. DOI 10.1108/JMLC-05-2013-0017
JMLC investigation purpose without success as there appears to be new kind of fraud emerging
16,4 every day. This has created a high demand for forensic accounting skills globally
(Kranacher et al., 2008). Such demand has been responded widely by higher education
institutions all around the globe in the form of forensic accounting programs or courses
(West Virginia University, 2007; Kranacher et al., 2008). Similarly in Indonesia, numerous
universities have been trying to set up their own forensic accounting programs to cope
354 with the rising demand. The lack of agreed upon standard has been among the major
challenges particularly in academically developing forensic accounting discipline. This
underscores the need for more studies on what a forensic accountant really is, what the
profession demands, and how to fulfill such demand in particular through education and
training. Funded by the US Indonesia Society (USINDO) and the Directorate General of
Higher Education of Indonesia (Dirjen Dikti), this study represents an effort to fulfill this
need. Based on extensive literature review and in-depth interviews with forensic
accounting practitioners in Indonesia and the USA, this study aims primarily at
identifying the essential attributes of a forensic accountant as a reference for designing
effective forensic accounting education and training. As will be discussed in this paper,
due to its nature, forensic accounting has a wide coverage of areas. Therefore, for the sake
of this study, the discussions will focus on fraud investigation as a service that can be
performed by forensic accountants in public and private sectors.
The fraud problems

Fraud has been in existence for generations. For example, the so-called financial
scandals have plagued the worlds economy since before the Industrial Revolution
(Pearson and Singleton, 2008). Many of the scandals (such as that of the equity funding
in 1970 where computers were used to as a means in perpetrating fraud) became
milestones with historical importance in our journey in combating fraud (Pearson and
Singleton, 2008). According to the Blacks Law Dictionary (2009), fraud is:
A knowing misrepresentation of the truth or concealment of a material fact to induce another
to act to his or her detriment [. . .] A misrepresentation made recklessly without belief in its
truth to induce another person to act.
As argued by Ramamoorti (2008, p. 522):
Fraud involves intentional acts and is perpetrated by human beings using deception, trickery,
and cunning that can be broadly classified as comprising two types of misrepresentation:
suggestio falsi (suggestion of falsehood) or suppressio veri (suppression of truth).
The essential part of any fraud is the use of deception to obtain benefits. As defined by
Wells (2005, p. 8), four general elements must be present for an offence to be called fraud:
(1) a material false statement;
(2) knowledge that the statement was false when it was uttered;
(3) reliance on the false statement by the victim; and
(4) damages resulting from the victims reliance on the false statement.
There are many types of fraud in the society and so far as literatures are concerned,
no single classification system in the world can comprehensively identify all of them.
The Association of Certified Fraud Examiners (ACFE), for example, has been using the
Fraud Triangle system in its biannual global studies on fraud (Association of Certified
Fraud Examiners, 2012b, a). The system divides fraud into three major categories: Blueprint for
corruption; asset misappropriation; and financial statement fraud (Association of creating forensic
Certified Fraud Examiners, 2012b). From the existing cases, there are many ways fraud
can be perpetrated, from the simple misuses of trust to the sophisticated computer based accountants
offence. Also, by nature, fraud is an interdisciplinary issue requiring the understanding
of a number of different areas of knowledge for prevention and investigation.
Often mentioned as white collar crime, losses from fraud have been estimated by the 355
ACFEs global study to be around $3.5 trillion in 2011 alone (Association of Certified
Fraud Examiners, 2012b, p. 4). In this study, asset misappropriation is considered as
the most common fraud category with 87 percent of reported cases during the study
period (Association of Certified Fraud Examiners, 2012b, p. 4). According to the study,
the most costly type of fraud is financial statement fraud which, despite making only
8 percent of the cases in the study, it caused median loss of $1 million (Association of
Certified Fraud Examiners, 2012b, p. 4).

Over half a decade ago the term white collar crime was not largely known even
among criminologists and sociologists. Edwin H. Sutherland was credited as the first
and criminologist who integrated crimes of the upper white collar class with economics
and business activity (Dorminey et al., 2012, p. 557). During Sutherlands time, whereas
economists were, naturally, very familiar with business issues but were much less so to
crime, sociologists were well acquainted with crime but were not used to see it from
business point of view (Sutherland, 1940, p. 1). Sutherland (1940, p. 1) argued that the
seemingly low crime incidents among member of the upper class was attributed to the
inaccurate depiction by the crime statistics of the time. He was of the opinion that
(Sutherland, 1940, p. 1):
The criminal statistics show unequivocally that crime, as popularly conceived and officially
measured, has a high incidence in the lower class and a low incidence in the upper class; less
than two percent of the persons committed to prisons in a year belong to the upper class [. . .]
The criminologists have used the case histories and criminal statistics derived from these
agencies of criminal justice as their principal data. From them, they have derived general
theories of criminal behavior. These theories are that, since crime is concentrated in the lower
class, it is caused by poverty or by personal and social characteristics believed to be
associated statistically with poverty, including feeblemindedness, psychopathic deviations,
slum neighborhoods, and deteriorated families. This statement, of course, does not do
justice to the qualifications and variations in the conventional theories of criminal behavior,
but it presents correctly their central tendency.
Sutherlands apprentice, Donald Cressey, later proposed, based on his PhD study, what
is now known as the Fraud Triangle in which he believed that fraud is a convergence
of three factors, pressure or motivation, opportunity, and rationalization (Cressey,
1950). In his original work, Cressey used the term trust violation in describing the
offence in question embezzlements. For his PhD study, Cressey, in the late 1940s,
interviewed nearly 200 incarcerated embezzlers, including convicted executives[1].
Despite formulated over a half-decade ago, Cresseys theory, currently known as the
Fraud Triangle, remains highly regarded to date particularly in the discipline of
forensic accounting. It provides explanations for many fraud related phenomenon.
From the pressure or motivation point of view, as suggested by various studies, greed
has always been thought as a driving factor behind many fraud cases (Prabowo, 2011c).
This is often seen in what is known as the living beyond means phenomenon. The 2012
JMLC global study by the ACFE, for example, put ones desire to life beyond means as a the
16,4 most observable behavioral symptoms from fraud offenders (Association of Certified
Fraud Examiners, 2012b, p. 57). The offenders lavish lifestyle is evidenced mainly by
their personal assets such as large houses, fancy apartments, luxurious cars, top of the
line jewelries, etc. The possession of such assets is part of what is known as the
conversion element of the Fraud Element Triangle (Albrecht et al., 2012, p. 81).
356 Whereas the Fraud Triangle explains about the why element of fraud, the Fraud
Element Triangle focuses more on how it is perpetrated. According to the framework,
three essential elements of a fraud are: act; concealment; and conversion (Albrecht et al.,
2012, p. 81). The act is where offenders stole the assets, concealment is concerning
offenders efforts to hide fraud from others, and conversion is when offenders spends
or convert the proceeds of their crime (Albrecht et al., 2012, p. 42).
Opportunity for committing fraud may come from ones position in his or her
organization that can be misused for obtaining unlawful benefits (Dorminey et al.,
2012, p. 565). According to the ACFEs biannual study, generally, the higher a fraud
perpetrators position in his or her organization, the more damaging his or her fraud
will be (Association of Certified Fraud Examiners, 2012b). To be able to misuse their
positions successfully, fraud offenders need to know how to overcome the existing
barrier such as his or her organizations internal control. In this case, a potential
perpetrator must be sufficiently knowledgeable about the internal control weaknesses
and be able to use position, function, or authorized access to his or her advantage
(Dorminey et al., 2012, p. 565). Based on the latest global fraud study by the ACFE,
around 54 percent of fraud offenders had a college degree or higher (Association of
Certified Fraud Examiners, 2012b, p. 50). The above definition of fraud by Joseph Wells
implies that only those with sufficient degree of intelligence can utter convincing false
statements by which they can deceive others into doing their bidding.
Rationalization in ones fraud is a more (sometimes much more) subtle causal factor to
be observed in the Fraud Triangle framework. It is simply a way for the offender to justify
their actions. According to Cressey (1950, p. 201), rationalizations are not merely ex post
facto justifications for conduct which have already been enacted, but are pertinent and real
reasons which the person has for acting. This is to say that offenders may have their
justifications before or after their actions. Clark et al. (2006, pp. 135-136) are of the opinion
that rationalization can take various forms, such as: its just temporary, management
doesnt care, management participates in, expects and rewards this kind of behavior,
no one is hurt and the company is helped and I deserve this.
When planning a fraud, a potential fraud offender will commonly perceive an
inconsistency between what is right and what I am about to do which needs to be
reconciled in order for the offence to progress (Dorminey et al., 2012, p. 558). It is through
rationalization that such reconciliation can be achieved (Dorminey et al., 2012, p. 558). As a
way of justifying misconduct, fraud rationalization is thought by many behavioral
scientists as a complex psychological process inside ones mind. It includes not only
offenders deceiving others but also deceiving themselves into thinking that what they do
is not a crime. To ease the guilt from committing fraud, they justify the crime by using
situation-specific perception. As argued by Murphy and Dacin (2011, p. 610):
An individual who rationalizes a behavior still holds the same overall attitude toward that
behavior, but justifies it with situation-specific perceptions. Individuals who rationalize
fraudulent behavior are able to sleep at night, believing they are honest and ethical.
Cressey, in his work highlighted that, despite the fact that what they do is a crime, Blueprint for
fraud offenders simply does not want to be seen as a trust violator since they believe creating forensic
that their case is an exception by which they may view themselves not in a negative
manner (Cressey, 1950; Dorminey et al., 2012). In fact, there are cases where fraud accountants
offenders think that they are helping their organization or fellow employees in solving
their financial problems. An example is financial statement fraud where the offenders
manipulate their companies financial statements so as to attract more investors from 357
the stock market in order to avoid bankruptcy (Murphy and Dacin, 2011, p. 610). In
other cases, fraud offenders argued that their misconducts are not too bad compared to
other more damaging frauds (Murphy and Dacin, 2011, p. 610). Even men of integrity
may have their morality be temporary overwhelmed by certain situational factors such
as obedience to their superiors and organizations ethical climate and normalization
and choose to commit fraud (Murphy and Dacin, 2011, pp. 604-605).
Fraud is a complex and dynamic problem. Every nation has its own specific fraud
problem. In Indonesia, corruption is known to be the most common or at least the most
exposed type of fraud. The Indonesian Corruption Eradication Commission (KPK) in its
fraud statistics classifies corruption into five categories: procurement of goods and
services; bribery; budget misappropriation, unauthorized collection and inappropriate
licensing (Corruption Eradication Commission, 2012). Among these categories,
procurement of goods and services is known to be the most prevalent offence. One
thing worthy of a note is that despite the high level of corruption in Indonesia, it is only the
tip of a huge iceberg. This is so since media coverage is focusing primarily on corruption in
public sectors whereas, in reality, it is also a pandemic in the private sectors. In public
sectors, it seems that new corruption cases emerge everyday perpetrated by high profile
public figures such as members of the parliament, political figures, ministers, etc.
A noticeable trend in the corruption cases in public sectors is that the perpetrators
are seemingly getting younger and smarter by the day. For example, Gayus
Tambunan, a low-level government tax official had engaged in money laundering and
embezzlement for major companies in Indonesia is evidence that young professionals
may have been exposed to the corruption culture of the country (Kimura, 2012, p. 187).
In the case of Gayus Tambunan, among the things that made him famous was his act
of bribing police and immigration officials so as to be able to take frequent trips abroad
during his detention time (Kimura, 2012, p. 187). In November 2010, he was accidently
photographed at an international tennis competition, the Commonwealth World
Championship, in Bali during his detention time. Despite early denials, he eventually
admitted that it was really him in the photograph. Another high profile case involving
young public figure is that of Muhammad Nazaruddin, a Former Treasurer of the
Democratic Party who allegedly arranged kickback deals for the 2011 SEA Games in
Palembang, Sumatra (Kimura, 2012, p. 188). Similar to Gayus, Nazaruddins case
caught media attention for his adventurous escape to Singapore, Vietnam, Cambodia,
Spain, and the Dominican Republic before his arrest in Colombia (Kimura, 2012, p. 188).
At the regional level, there have been many cases of corruption in Indonesia
perpetrated by the head of the regions. Corruption commonly occurred in the areas
such as goods and services procurement[2], budgetary misappropriation and bribery.
Such areas are prone to corruption due to, among other things, the need for political
funding in particular during the regional elections. According to the Ministry of
Internal Affairs, there are approximately 36 percent of the heads of regions who are
JMLC having legal problems related to the goods and services procurement, 44 percent are
16,4 involved in budget misappropriation and the rest are involved in bribery, unauthorized
collection and inappropriate license granting (Kompas, 2012). According to the data of
cases investigated by the Corruption Eradication Commission (KPK), procurement
fraud and bribery appear to be the most common types of major corruption (more than
Rp. 1 billion or US$104,000).
358 In private sectors, the Citibank embezzlement case uncovered in 2011 perpetrated by
one of its own senior managers indicates that severe fraud problems also exist within the
private sectors. In the Citibank embezzlement case, Malinda Dee, a bank senior manager,
managed to misuse her wealthy customers trust and embezzled US$1.95 million
(Prabowo, 2011b). In her fraud scheme, Malinda, who was once known as a model
employee at Citibank unlawfully transferred huge amount of customers fund to her own
accounts using several companies as intermediaries. At least 30 accounts have been
identified by the authorities as being used by Malinda to facilitate her criminal activities.
In Citibank, Malinda was assigned to handle the VIP customers with account balances of
Rp. 500 million (US$51,000) or more. Before transferring customers money to her own
accounts, Malinda often forged their signatures so as to be able to access the fund. She
also used her close relationship with her customers to acquire blank signed forms or
blank checks which were then used to withdraw funds at higher amounts than what
were actually requested by customers.
Combating fraud
Understanding the problems
In order for us to be able to formulate the most effective solution to combat fraud in the
society, we first need to gain sufficient knowledge about it. Although Enron and
WorldCom have always been used as references when discussing fraud and forensic
accounting, they are only representing part of the problem. To be able to solve the
growing fraud problem, one needs to comprehend the nature and dynamics of fraud.
Many literatures have attempted to define fraud in the way that is best representing
the actual structure and dynamics of the offence. In practice, the definition of fraud is often
determined by the existing legal system which, in many cases, differs across countries.
For example, according to Section 380(1) of the Criminal Code of Canada provides the
general definition for fraud in Canada is (Department of Justice of Canada, 2012):
380(1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a
false pretence within the meaning of this Act, defrauds the public or any person, whether
ascertained or not, of any property, money or valuable security or any service:
(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding
fourteen years, where the subject-matter of the offence is a testamentary instrument or the
value of the subject-matter of the offence exceeds 5,000 dollars; or
(b) is guilty:
(i) of an indictable offence and is liable to imprisonment for a term not exceeding two years; or
(ii) of an offence punishable on summary conviction.
where the value of the subject-matter of the offence does not exceed 5,000 dollars.
In Indonesia, fraud has often been narrowly defined as synonymous to corruption.
According to the Law No. 31 Year 1999, only offences which cause losses to the state are
considered as corruption. As defined by the Law No 31 Year 1999 (Article 2) (The Blueprint for
Republic of Indonesia, 1999): creating forensic
Anyone who illegally commits an act to enrich oneself or another person or a corporation, accountants
thereby creating losses to the state finance or state economy, is sentenced to life
imprisonment or minimum imprisonment of 4 (four) years and to a maximum of 20 (twenty)
years, and fined to a minimum of Rp200,000,000 (two hundred million Rupiah) and to a
maximum of Rp1,000,000,000 (one billion Rupiah). 359
This implies that the efforts to combat fraud in Indonesia are mainly focused on the
corruption perpetrated by public officials.
In reality, fraud comes in various sizes and shapes. The ACFE, for example, had
formulated a classification system known as the Fraud Tree. In this classification
system fraud is broadly categorized into corruption, asset misappropriation and
financial statement fraud (Association of Certified Fraud Examiners, 2012b, p. 7). The
Fraud Tree itself has been used by the ACFE in its biannual studies over the past few
years. Such classification is an important first step in combating fraud as understanding
a crime is a prerequisite to understanding about how to mitigate it.
Prevention, detection, and investigation and prosecution

In general, solving the fraud problems requires decision makers to consider a number
of major elements: prevention; detection; investigation; and prosecution. Prevention
should be designed so as to reduce the possibility of fraud to occur. A common
approach is by reducing the opportunity of potential fraud offender to perpetrate their
offences which is also known as the situational crime prevention method (Sutton et al.,
2008; Hayward, 2007).
Detection involves recognizing the symptoms of fraud from the existing red flags.
Such red flags can be in the forms of accounting anomalies, weak internal control,
operational anomalies, extravagant lifestyle and behavioral symptoms (Albrecht et al.,
2012, pp. 137-155). According to ACFEs latest biannual global study on fraud, tip is
the most common way a fraud is detected in the first place. This signifies the
importance of, among other things, a whistle blowing system in an organization as a
means for reporting fraud (Association of Certified Fraud Examiners, 2012b, p. 14).
Despite a organizations efforts to prevent fraud, in many cases fraud perpetrators
still manage to commit their crime which calls for fraud investigation. Although
financial auditing services may have been used in detecting material misstatements,
ordinary auditing skills are often deemed to be insufficient when dealing with fraud
related issues. This is where the so-called forensic accounting plays its role. As
defined by Smith and Crumbley (2009a, p. 62):
Forensic auditing is focused on the identification, interpretation, and communication of the
evidence of underlying strategic economic and reporting events. It not single-event based, like
a fraud examination, and a forensic audit is not used to render an audit opinion. As such,
forensic audits are easily adapted to a principles-based accounting environment with broad
guidelines applied to a variety of accounting investigations without using rule-based audit
approaches or more narrowly-focused fraud practices.
Major corporate scandals such as Enron, WorldCom, and Olympus, to name a few,
have raised concern about the effectiveness of traditional financial audit to provide
oversight of financial activities (Smith and Crumbley, Defining a Forensic
JMLC Audit, 2009a, p. 62). There have been differences in the definition of the fraud related
16,4 audit. The terms forensic audit, forensic accounting, fraud examination and
financial forensics to name a few are often used to describe processes that are similar
in some cases but are different in others. The Founder of the ACFE, Joseph T. Wells,
for example, argues that (Wells, 2005, p. 4):
Resolving allegations of fraud from tips, complaints, or accounting clues is the discipline of
360 fraud examination. It involves obtaining documentary evidence, interviewing witnesses and
potential suspects, writing investigative reports, testifying to findings, and assisting in the
general detection and prevention of fraud. Fraud examination has similarities to the field of
forensic accounting, but the two terms are not precisely the same. The latter is the use of any
accounting knowledge or skill for courtroom purposes. Forensic accounting can therefore
involve not only fraud, but also bankruptcy, business valuations and disputes, divorce, and a
host of other litigation support services. Conversely, although fraud examinations are typically
performed by accountants, they can also be conducted by professionals in other fields, such as
law enforcement officials, corporate security specialists, or private investigators.
Despite the differences in how process is being defined across literatures, essentially, every
fraud investigation is a process of finding the answers to a set of predetermined questions
based on facts and evidences and conducted using legally accepted methods. A forensic
accountant needs to be able recognize early indications of fraud from the red flags such as
excessive life styles, accounting anomalies, and unusually close relationship with vendors
and clearly determines what is it that he must investigate. In other words, he needs to be
able to formulate the so-called investigation questions to guide him throughout the course
of the investigation. Such questions will keep a forensic accountant from straying from
the goals of the investigation. Unlike the financial auditors, forensic accountants do not
have the luxury of an agreed upon technical standard and thus their ultimate tool in
performing their tasks is no other than their own logic. When presenting their findings in
the court or in front of the people who commissioned the investigation, for example,
a forensic accountant needs to be able to explain the entire course of his or her fraud
investigation in a logical way that will make sense even to laymen.
Human resource problems

The nature of the tasks forensic accountants perform is different from those of financial
auditors. Such tasks are often considered to be more difficult (i.e. without generally
accepted how-to standard) and often with more pressures than normal financial
auditing works. As stated by Dr Peter Hughes, a forensic accountant at Orange County
California, in a discussion with the researcher, a forensic accountant needs to be ready
for the pressures that come with the job (Hughes, 2012). Such pressures may come in the
forms of intimidation from the offenders in particular those who hold high positions
within their organizations (Hughes, 2012). Such pressures are among the reasons why
not every accountant can be a forensic accountant.
Ron Durkin, a Former FBI Special Agent now a Forensic Accountant at
ClifftonLarsonAllen LLP, in a discussion with the researcher argued that even in
countries such as the USA there is only a small number of forensic accountants available
compared to the existing demand. In Indonesia, with the current level of fraud, in
particular corruption, the need for more forensic accounting professionals is eminent.
For example, in 2011 a forensic audit was conducted on the Century Bank scandal but its
report was considered in particular by the members of the parliament to be insufficient
to solve the case due to the quality of the work performed by the fraud investigators Blueprint for
(Prabowo, 2011a). Moreover, in recent Corruption Perception Index report by the creating forensic
Transparency International, Indonesia only ranks 118th out of 176 which suggest that
more still need to be done to combat corruption in the country including improving the accountants
skills of the forensic accountants (Transparency International, 2012). To keep pace with
the existing demand, more forensic accountants are needed and forensic accounting
education is an option for the solution. 361
Recently, many Indonesian universities are attempting to fulfill this demand by at least
offering some forensic accounting courses as part of their accounting programs. However,
despite the growing interest in forensic accounting education in Indonesia, many seem to
have failed to recognize its unique problem-based nature which sets it apart from the
rest of the accounting disciplines. This leads to the difficulty in designing an appropriate
curriculum for forensic accounting education in the country which may lead to failure in
fulfilling the demand for skilled professionals in the field. This suggests the need for more
studies such as on how to design an appropriate curriculum for forensic accounting
education in Indonesia to ensure that the skills taught at universities are what the
profession actually needs. As mentioned above, forensic accounting has been developed to
address the problems in particular related to fraud in the society. Principally, it seeks to
reduce if not eliminate various forms of fraud. Such problems will greatly rely on the
circumstance of the environment (e.g. country, state, city, etc.) in which forensic
accounting practice exists. In other words, different environment will create different
fraud problems and thus may require different forensic accounting approaches to solve.
General accounting disciplines, on the other hand, are historically speaking rule-based
sciences whose practical application is mostly based on the so-called accounting
standard. This makes education easier to conduct as everyone has similar if not the same
idea of the kind of skills and knowledge required to be a competent accountant. So simply
put, the biggest challenge in forensic accounting education is how to integrate a
problem-based discipline into a rule-based environment.
Reverse engineering a forensic accountant

Most if not all accountants gain their first accounting knowledge during college.
Essentially, during this time, they learn about how to practice accounting according to the
existing standard. According to the International Accounting Education Standards Board
(IAESB), accounting educations primary goal is to produce competent professional
accountants able to contribute to their profession as well as to the society (McPeak et al.,
2012, p. 744). This way, universities may serve as the suppliers of accounting
professionals. An accounting programs curriculum is commonly developed according to
the professional standard applied to a particular country (McPeak et al., 2012, pp. 748-749).
In practice, according to this studys literature review and in-depth interviews with a
number of forensic accountants in Indonesia and the USA, three important ingredients
are needed to create a forensic accountant: mentality, method, and experience. The first
factor, mentality, is possibly the most difficult to cultivate. Mentality concerns ones way
of thinking in performing forensic accounting tasks. This is built upon fundamental
elements such as the ability to differentiate the right from the wrong, courage to stand up
for what is right, ability to withstand the pressures from the works, and puzzle solving
mindset. Second, a forensic accountant needs to understand various methods used
in fraud investigation. Such knowledge can be acquired through education and training
JMLC conducted by universities or other institutions. A forensic accountant also needs to have
16,4 sufficient experience in fraud investigation in which he or she will have a chance to
utilize the knowledge previously acquired through education and training.
Ability to differentiate the right from the wrong

To build an understanding of the right and wrong paradigm, one may start from
362 understanding the foundation of morality which is often used as a standard to judge the
righteousness of an action. In reality, however, such standard can be differently
constructed across societies which also mean that an action may be right from the
perspective of one existing morality system but wrong from another (Tannsjo, 2007, p. 130).
Literatures have long been debating about what causes such variations of morality
standards. Many believe that culture plays an essential role in shaping the morality
standard which also means that each culture has its own set of values which influence
moral decision making and may include from laws and regulations to the notions of
pride, honor, and justice (Tucker, 2009, p. 21). There are, however, those who believe
that at least parts of our moral system have been coded into our genes since we were
born (Hales, 2009, p. 234; Tucker, 2009, p. 23). There are also others who believe that
there is a grammar like mechanism which guides humans in their moral decisions.
Hauser (2006), for example, argues that:
[. . .] our moral faculty is equipped with a universal moral grammar, a toolkit for building
specific moral systems. Once we have acquired our cultures specific moral norms a process
that is more like growing a limb than sitting in Sunday school and learning about vices and
virtues we judge whether actions are permissible, obligatory, or forbidden, without
conscious reasoning and without explicit access to the underlying principles.
A forensic accountant does not need to be drowned in the seemingly endless debates on
why moral standards are what they are and what causes the variations as he or she only
needs to know which moral system is accepted in a particular area. In practice,
understanding of moral standard is not going to be enough to be used in a fraud
investigation to decide whether an act is fraud or not. According to Miftah Muttaqin,
a senior investigator at the Indonesian Corruption Eradication Commission (KPK), in a
discussion with the researcher, a forensic accountant needs be able to recognize the
boundaries between fraudulent and non-fraudulent acts in a particular environment
through an understanding of the existing regulatory framework (e.g. criminal codes,
business law, and professional code of conducts) within which he or she works (Muttaqin,
2013). Such framework usually sets the baseline definition for fraudulent acts.
As Cressey (1950) proposed in what is known today as the Fraud Triangle the
third factor that may cause an otherwise hones person to commit fraud is the so-called
rationalization. As evidenced in many fraud related corporate failures, for example,
organizational culture became a determining factor behind the decision to commit
fraud. Excuses such as I am helping my organization, everyone is doing it, nobody
gets hurt, to name a few, are commonly used to justify such a decision. Of course, not
all excuses for corporate failures are part of fraud rationalization. A competent forensic
accountant needs to be able to identify which of them are legitimate and which are
fraud rationalizations. The understanding of the moral system as well as the existing
legal and regulatory framework will help a forensic accountant in identifying fraud red
flags by assessing the rationalizations thereof to construct investigation hypotheses to
be tested later on.
Ability to withstand pressure from the works Blueprint for
Courage to stand up for what is right. In addition to being a meticulous task, fraud creating forensic
investigation can also be a risky work. Forensic accountants perform their tasks in
adversarial environments where they are up against people who often feel threatened by accountants
their mere presence, let alone their work. This is particularly true especially when a
forensic accountant is part of an organization where he or she performs his or her tasks
(i.e. internal fraud investigation). Within an internal fraud investigation, for example, 363
a forensic accountant may have to investigate his or her own colleagues for fraud which
can create conflicts of interests. Dr Peter Hughes[3], the Director of Internal Audit for the
Orange County, in a discussion with the researcher argued that people in internal fraud
investigation related professions are often those who are courageous enough to face their
own co-workers and possibly the entire organization in order to expose fraud (Hughes,
2012). Therefore, to perform his or her task effectively a forensic accountant needs to be
someone who has courage to stand up for what is right. For this, Dr Hughes believes that
having a strong sense of morality is important in building a forensic accountants strong
character (Hughes, 2012). A good forensic accountant will not be able to sleep well at
night knowing there is fraud in his or her organization (Hughes, 2012).
Loneliness, intimidation and not being liked. It is generally known that unlike
financial auditors, forensic accountants perform their tasks in adversarial
environments. Such nature of works comes with many potential serious problems
(Wells, 2009, p. 56). The Founder of the ACFE, Joseph T. Wells, was of the opinion that
a forensic accountant in his or her works will likely to encounter uncooperative
individuals or even the likes of liars, cheaters and thieves (Wells, 2009, p. 56). As the
fraud investigation progresses, the pressure from, for example, intimidation will likely
become higher by the day. One of the most stressful times in a fraud investigation a
forensic accountant is during the expert witnessing in the court. For example, As
Joseph T. Wells shared in his biography book (Wells, 2011, p. 234):
SOFEs lawyers portrayed me as unscrupulous and dishonest. It took a lot of restraint to
avoid getting up and shouting at them, but I remained outwardly calm. The judges
instructions to the jury were complicated and long. They were required to render a verdict on
roughly a dozen questions related to trademark infringement. The courtroom was nearly
empty during the jurys deliberations just me, one of my lawyers and several people from
SOFE at the opposite table. It was deathly quiet until I erupted in laughter. Without saying a
word, I sat there and laughed. My attorney and the SOFE people perhaps thought Id lost my
mind. The truth, though, is that this kind of behavior goes to the heart of my personality.
When under pressure, I dont throw tantrums or sulk; I laugh.
According to Dr Peter Hughes in a discussion with the researcher, particularly for an
internal fraud investigator in an organization, pressures and intimidation from
co-workers can be part of daily routines (Hughes, 2012). Furthermore, as said by
Dr Hughes, such intimidation may have an impact for the investigators career in his or
her organization (Hughes, 2012). Dr Hughes believed that due to the nature of the job, the
life of a fraud investigator can be a lonely one and thus some people believe it is just not
the path for them (Hughes, 2012). External forensic accountants may also face enormous
pressures from their investigative works. In Indonesia, for example, according to Najib
Wahito, the Head of Wealth Report Examination Unit of the Indonesia Corruption
Eradication Commission, in a discussion with the researcher, forensic accountants who
work for the Indonesian Corruption Eradication Commission (KPK) often have to face
JMLC intimidations from people in high positions in the government due to the fraud case they
16,4 are working on that involve public officials (Wahito, 2013). Even for forensic
accountants in private sectors, pressures often come from the adversarial environment
of their investigations. A focus group discussion with forensic accountants from the
Fraud Investigation and Dispute Services Unit of Ernst & Young Jakarta revealed that
unwillingness to provide the required documents, indirect intervention from high profile
364 people within the organization, and the disappearance of evidences are examples of
work pressure sources in investigation works (Siantury et al., 2012). Only those with
strong moral compass may choose to live such a challenging life of fraud investigator.
Dr Hughes was of the opinion that such people strongly believe that no matter how small
what they do may seem like, they believe it will contribute into creating a better world or
at least a better organization (Hughes, 2012).
Puzzle solving mindset. By nature, fraud can be very complicated as well as
concealed. Fraud investigation is like searching for missing pieces of a puzzle and
piecing it all together to form a complete picture. Essentially, the work of fraud
investigator is not so much different from that of a researcher trying to find answers to
his or her research questions. In the course of the investigation, a fraud examiner
generally follows the steps such as problem identification (from preliminary data),
predication, hypothesis formulation, hypothesis testing, acceptance or refinement of
hypothesis and conclusion drawing (Wells, 2008, pp. 5-7). Before searching for the
missing pieces of a puzzle, an investigator need to know based on the existing data
what the puzzle is all about. Finding the pieces of the puzzle is an analogy to finding
facts and evidences of fraud. When all the pieces have been found, a fraud investigator
need to be able to see the connections between them and be able to put them back
together so that a clear picture of the case will emerge.
Although for some it may look simple, evidences suggest that not all accountants have
what it takes to be forensic accountants. Ron Durkin, a Former FBI Special Agent now a
Forensic Accountant at CliftonLarsonAllen LLP in a discussion with the researcher was of
the opinion that a good forensic accountant needs to know the proper procedures,
techniques and tools (including technology) to conduct fraud investigations (Durkin, 2012).
Additionally, according to Ron, the so-called investigative mentality is also an important
ingredient in creating a competent forensic accountant (Durkin, 2012). Jennifer Ziegler,
a Forensic Accountant and a Partner at Hemming Morse LLP in a discussion with the
researcher shared the same believe (Ziegler, 2012). According to Jennifer, many
accountants are good at doing financial audit works but not all of them are doing well when
it comes to fraud audit. This is because not all accountants posses investigative mentality
to uncover stories behind the numbers. For those who do, generally they will find more
satisfaction in their fraud investigation works compared to that of financial audit.
For example, Singway Young, a Forensic Accountant at CliftonLarsonAllen LLP, in a
discussion with the researcher, stated that he enjoyed his investigative work due to, among
other things, the challenges in solving fraud cases (Young, 2012). Singway also said that he
enjoyed the process of learning new things in his investigative works (Young, 2012).
As defined by Bologna and Lindquist (1987):
Forensic and investigative accounting is the application of financial skills and an
investigative mentality to unresolved issues, conducted within the context of the rules of
evidence. As a discipline, it encompasses financial expertise, fraud knowledge, and a strong
knowledge and understanding of business reality and the workings of the legal system.
According to Singleton and Singleton (2010, p. 24): Blueprint for
Along with their accounting knowledge, forensic accountants develop an investigative creating forensic
mentality that allows them to go beyond the bounds set out in either GAAP or GAAS. The accountants
following three tenets in forensic accounting are driven by the necessity to prove intent in
court in order to prove there was a fraud. The investigative mentality develops in the search
for best evidence, for competent and sufficient evidence, for forensic evidence.
Further, Singleton and Singleton (2010, p. 24) were of the opinion that such a mentality is
365
developed primarily through experience from which forensic accountants gain familiarity
with the real challenges in their profession. As ones experiences grow, he will gradually
develop such a mind-set that sees fraud as they are (Singleton and Singleton, 2010, p. 29).
He will come to know that under the right circumstance fraud could be perpetrated by
anyone, anywhere, and anytime (Singleton and Singleton, 2010, p. 29).
Method
In terms of methodology, despite their similarities, fraud investigation and financial
audit are essentially different in nature. As described by Arens et al. (2012, p. 4):
Auditing is the accumulation and evaluation of evidence about information to determine and
report on the degree of correspondence between the information and established criteria.
Auditing should be done by a competent, independent person.
A key term in the above definition is the established criteria which suggests that the
whole process is of a rule-based nature. Further, regarding the established criteria,
Arens et al. (2012, p. 4) explained:
The criteria for evaluating information also vary depending on the information being audited. In
the audit of historical financial statements by CPA firms, the criteria may be US generally
accepted accounting principles (GAAP) or Inter-national Financial Reporting Standards (IFRS).
This means that in an audit of Boeings financial statements, the CPA firm will determine
whether Boeings financial statements have been prepared in accordance with GAAP. For an
audit of internal control over financial reporting, the criteria will be a recognized framework for
establishing internal control, such as Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (widely known as COSO).
These implied that a financial auditor need to first recognize what criteria (e.g. GAAP,
IFRS) is applicable to a particular auditee. In using such criteria to assess the financial
statements degree of correspondence to the criteria, financial auditors are also guided
by the existing auditing standard (e.g. GAAS, IAS) which provides the how-to
framework to assist them in achieving the intended work quality. On the contrary, the
previous definition on forensic accounting from Bologna and Linquist expresses more
flexibility in how the process is being performed. They did not mention that such a
process should adhere to a specific rule or standard. A focus group discussion with
forensic accountants from the Fraud Investigation and Dispute Services Unit of Ernst
& Young Jakarta revealed that financial auditors may use the same audit checklists for
all kinds of financial audit engagements whereas forensic accountants often have to
utilize different work procedure for different audit work (Siantury et al., 2012).
There are good reasons for the absence of the universal agreed upon how-to rules in
forensic accounting. First, in practice, fraud investigation is more of a problem-based
rather than a rule-based process. According to Miftah Muttaqin, a senior investigator
JMLC at the Indonesian Corruption Eradication Commission (KPK), in a discussion with the
16,4 researcher, despite the similarities, there are more than a few differences across fraud cases
which require fraud investigators to apply different approaches, methods, and technology
(Muttaqin, 2013). As suggested by the puzzle solving analogy discussed above, a fraud
investigation is basically similar in many ways to a research in which the researcher first
clearly identifies the research problems before seeking for data and information to be used
366 to formulate the answers. In a fraud investigation, the end product of the process is a
completed picture of the fraud puzzle. Professor Richard Riley[4] from the West Virginia
University, in a discussion with the researcher explained that the main purpose of any
fraud examination anywhere in the world is to build a strong case of the alleged fraud,
grounded in the evidence (Riley, 2012).
To be able to properly work through all steps of investigation, a forensic accountant
must be equipped with at least basic skills of: fraud detection, evidences, investigation
methods, and investigation report. In terms of fraud detection, a forensic accountant must
have sensitivity to spot event the slightest sign of any potential fraud in an organization.
Sensitivity to fraud is important for a forensic accountant. Evidence suggests that
there are many ways fraud can be detected in the first place. The ACFEs latest global
fraud survey, the 2012 Report to the Nations, for example, suggests that there are at least
12 ways fraud can be detected: tip, management review, internal audit, by accident,
account reconciliation, document examination, and external audit, notified by the police,
surveillance/monitoring, confession, IT controls and other sources (Association of
Certified Fraud Examiners, 2012b, p. 14). Additionally, red flags can also be associated
with factors seemingly unrelated to fraud (Albrecht et al., 2012, p. 78). Although
according to AFCEs study tip is the most common way fraud is detected in the first
place, there have been many cases where individuals who knew or suspected that fraud
had taken place were not reporting it due to factors such as that they are not entirely sure
about it and thus they do not want to wrongfully accuse others or the lack of means to
report it (Albrecht et al., 2012, p. 78). Fear of the consequences from reporting fraud is
also a factor why some frauds were never reported (Albrecht et al., 2012, p. 78). A good
forensic accountant possesses the ability to recognize available sources of fraud red
flags and uses his or her resources to gather relevant information.
A forensic accountant must realize that his or her resources are anything but unlimited.
This requires him or her to be able to carefully plan his or her investigation so as to
maximize the limited resources. In the planning stage, a forensic accountant needs to
determine the focus of his or her investigation based on early fraud indications. He or she
will then need to formulate the investigation questions and hypotheses (Wells, 2008,
pp. 5-8). To test his or her hypotheses, a forensic accountant may use the what-if scenario
for which evidence will be gathered to prove or disprove the proposition (Wells, 2008, p. 6).
To be able to properly construct the what-if scenario, a forensic accountant needs be
familiar with how an organization works including its business activities (banking,
insurance, manufacturing, etc.). He or she must gain, for example, sufficient
understanding on the types of transactions in the organization and how they relate to
one another to be able to decide which facts and evidences need to be gathered in relation to
the what-if scenario.
Fraud knows no boundaries as it may originate from various areas of organization such
as marketing, accounting, finance, production, just to name a few. For this, unlike the
conventional financial audit, in many cases fraud investigations are interdisciplinary
by nature. It means it often takes more than just accounting skills to find the stories behind Blueprint for
the numbers and uncover the fraud. The skills required to solve fraud cases may include creating forensic
accounting, information technology, business, marketing, finance, sociology, criminology,
etc. To construct a good what-if scenario for insurance fraud, for example, a forensic accountants
accountant needs to be familiar with at least how insurance business works. Najib Wahito,
the Head of Wealth Report Examination Unit of the Indonesia Corruption Eradication
Commission (KPK), in a discussion with the researcher stated that in searching for any 367
fraud red flags in wealth reports from public officials or public official candidates,
knowledge about public administration (e.g. vehicle registration system and land system)
is essential (Wahito, 2013). Knowledge on vehicle registration system, for example, can be
used to check whether the declared vehicle in a given asset declaration report is really what
it is said it is (i.e. types, models, value) (Wahito, 2013). Any inaccuracies in the report may
indicate the possibility of fraud (Wahito, 2013).
Surely there is no single forensic accountant in the world capable of mastering all the
required expertise in fraud investigation. An investigation team consisting of
multidisciplinary experts may solve this problem. Additionally, a forensic accountant
may also need to gain familiarity with skills and expertise beyond accounting through
training and education. For example, Ryan Merryman, a Forensic Accountant and a
Senior Manager at CliftonLarsonAllen LLP, in a discussion with the researcher, argued
that mastery of information technology is important for extracting and analyzing
transaction data (Merryman, 2012). He emphasized the importance of data mining
technology in fraud investigation (Merryman, 2012). This is mainly due to the fact that the
number of transaction a forensic accountant needs to work with can be overwhelming due
to which manual analysis will be time consuming and ineffective (Merryman, 2012).
Finding evidences to support facts in testing the investigation hypothesis is at the
core of any fraud investigation. In order to properly do so, a forensic accountant needs
to be able to identify the available sources of evidences as well as the means to obtain
them. He needs to be familiar with the three common ways evidences can be gathered:
document review; interview and observation (Wells, 2008, pp. 6-8).
In terms of document analysis, as mentioned above, different fraud case may
require different methods to solve which also suggests that there may also be different
kinds of documents to be analyzed. In practice, fraud evidences can be gathered from
paper, computers, and other written or printed sources (Albrecht et al., 2012, p. 80). For
this, a forensic accountant needs to be skillful in examining relevant documents such
as financial statements, books, records, and supporting documents (Wells, 2008, p. 6).
Methods to analyze information in the documents include financial statement analysis,
net worth analysis, data mining, just to name a few (Albrecht et al., 2012, p. 80).
Basically, a forensic accountant needs to be able to look through all the information
within the documents and find the missing puzzle pieces.
Investigative interview is where a forensic accountants communication skill is
mostly used in gathering evidences and in some cases eliciting voluntary confessions
from individuals (i.e. witnesses and suspects). As a good communicator, a forensic
accountant knows how to push for evidence and confessions as well as how to
structure questions and interviews (Albrecht et al., 2012, p. 16). Communication skill is
a necessary skill for a forensic accountant without which performing fraud
investigation effectively will be difficult to do (Albrecht et al., 2012, p. 16; Singleton
and Singleton, 2010, p. 240).
JMLC Part of a forensic accountants communication skill is the ability to spot lies during
16,4 investigative interview. An investigators ability to spot lies has always been thought as
instrumental in particular to elicit confession from the suspects. In the world of law
enforcement, law enforcers have been commonly perceived as the best lie spotters.
Nevertheless, studies show that it is not always the case (Kassin et al., 2005; Narchet et al.,
2011; Meissner and Kassin, 2002; Aamodt and Custer, 2006). A study by Kassin et al.
368 (2005), for example, revealed that students are more capable in distinguishing between
true and false confessions compared to police officers. This is believed to have been
caused by the existence of preconception (i.e. from training and previous investigation
experience) in investigators minds that had clouded their judgments (Kassin et al.,
2005). Similarly, a forensic accountant must avoid preconception before commencing his
or her investigation to ensure its success. As Singleton and Singleton (2010, p. 18) put it:
As with any other pursuit, a healthy mind in a healthy body is a solid foundation. Beyond
that, one should have generous proportions of common sense, inquisitiveness, skepticism,
and an ability to avoid the natural tendency to prejudice that is, to be fair and independent.
In addition, because forensic work ultimately can lead to court appearances, good posture,
grooming, vocal projection, and stamina can all be valuable attributes.
To elicit the truth from the interviewees, it is essential that a forensic accountant
knows how to read both verbal and non-verbal cues (Wells, 2001; Albrecht et al., 2012;
Wells, 2008, 2009). In an investigative interview, a forensic accountant needs to pay his
or her attention to verbal signs such as wordings, expressions, and responses to
questions as well as nonverbal ones such as various body movements and postures
(Albrecht et al., 2012, p. 295).
To complement evidences from document analysis and investigative interviews, by
relying on senses (i.e. hearing and seeing) a forensic accountant may observe behavior,
look for displays of wealth, or observe some specific offences (Wells, 2008, p. 7;
Albrecht et al., 2012, p. 214). Such observations can utilize means such as video
surveillance or undercover operations to watch and record the physical facts, acts, and
movements that suspected as part of a fraud (Albrecht et al., 2012, p. 214). In conducting
surveillance, a forensic accountant must know the ethical and legal aspects thereof
(Wells, 2009). He must carefully choose the most appropriate means of observation that
is both effective and legally accepted. Failure to do so may cause legal issues especially
during expert witnessing in the court.
Part of the final works in fraud investigation is fraud report generally in the form of
formal written report covering information on the investigation engagement
(Wells, 2008, p. 386). As an outcome of a fraud investigation, investigation report
must be carefully written in which all facts, despite which side they favor (prosecutor or
defendant), must be completely and accurately presented within the report (Wells, 2009,
p. 58). Although the report is analogous to a completed puzzle in which a forensic
accountant explains the who, what, where, when, how and why of the fraud
in question as well as recommendations to future prevention, he must refrain from
expressing legal opinions such as those related to the suspects guilt and the legal actions
thereof (Albrecht et al., 2012, p. 309). Finally, when needed, a forensic accountant will
present his or her findings in his report in the court which requires him or her to be
familiar with the existing legal framework. Since a forensic accountant is generally not a
lawyer, he or she may consult with his or her lawyers about the expert witnessing
process to avoid, among other things, legal problems.
Experience Blueprint for
One may spend four years in college to study financial accounting and financial audit, creating forensic
but due to its problem-based nature, it may take a life time to master forensic
accounting. This is so since fraud is anything but static as it evolves over time. A forensic accountants
accountant needs to continuously update his or her knowledge of current fraud issues.
Therefore, despite all the education and trainings a forensic accountant had undergone,
experience will always be the best teacher. According to Merriam-Webster (online) 369
dictionary, experience is pertaining to (Merriam-Webster, 2013):
.
direct observation of or participation in events as a basis of knowledge;
.
the fact or state of having been affected by or gained knowledge through direct
observation or participation;
.
practical knowledge, skill, or practice derived from direct observation of or
participation in events or in a particular activity;

.
the conscious events that make up an individual life;
. the events that make up the conscious past of a community or nation or
humankind generally;
.
something personally encountered, undergone, or lived through; and
.
the act or process of directly perceiving events or reality.
The two essential elements in ones experience are event and involvement. A forensic
accountants involvement in fraud investigation will build and strengthen his or her fraud
knowledge as well as his or her investigative mentality. Ron Durkin, a Former FBI Special
Agent now a Forensic Accountant at ClifftonLarsonAllen LLP, in a discussion with the
researcher argued that his previous training and experience as a special FBI agent had
shaped his skills in fraud investigation (Durkin, 2012). Similarly, Najib Wahito, the Head
of Wealth Report Examination Unit of the Indonesian Corruption Eradication
Commission (KPK), in a discussion with the researcher also stated that his skills in
fraud red flags identification has been honed by years of experience in his previous works
at the Financial and Development Supervisory Agency (BPKP). As his or her experience
develops, a forensic accountant will become more knowledgeable in various fraud
investigation processes including investigative interview, investigative report writing,
and expert testimony (Singleton and Singleton, 2010, p. 12).
The blueprint of a forensic accountant

From the literature review and in-depth interviews conducted for this study, using a
Computer Assisted Qualitative Data Analysis Software (CAQDAS), NVivo, to organize
qualitative data and to identify patterns within it, a framework is developed to serve as a
reference in developing human resources in the area of forensic accounting. The NVivo
software was used primarily to organize and highlight patterns and connections in
qualitative data as well as to identify the central themes within the data. Prior to the
in-depth interviews, a preliminary model was developed based on the existing studies
and literature on forensic accounting and forensic accountants based on which nodes
representing the ideas about forensic accountants were created. After the interviews
were conducted, the nodes were revised based on practitioners opinions regarding what
constitute a forensic accountant. From this new model, every opinion regarding
JMLC the attributes of a forensic accountant is coded in at least one node. The model is dubbed
16,4 the Forensic Accountant Blueprint which will be used in further studies (Figure 1).
The above model represents the basic attributes a forensic accountant needs to
posses to be able to perform his or her works effectively. Each of the above nodes is a
reference for education institutions or other institutions in conducting forensic
accounting education and trainings.
370
(Re) creating forensic accountants through education
Historically speaking, forensic accounting has been practiced for generations.
Crumbley[5] and Rezaee (2004, p. 464), for example, argued that:
The scribes of ancient Egypt who inventoried the pharaohs grain, gold, and other assets were
the predecessors to todays accountant. Asset control and fraud prevention and detection
were the accountants main duty until the turn of the 20th century. Then as accrual basis
accounting became common, reporting issues became a top priority.
Despite its long standing existence, it was only recently (compared to financial
accounting) that it formally entered the academic sphere. Many universities all around
the globe are now introducing forensic accounting either as a subject or even as a
Figure 1.
An NVivo model
of the forensic
accountant blueprint
dedicated program. In Australia, for example, the University of Wollongongs Master Blueprint for
of Forensic Accounting[6] has been recognized as Australias first dedicated Master creating forensic
program for forensic accounting which is also known as one of the first in the world.
In the USA, the West Virginia University is well known for its Graduate Certificate in accountants
Forensic Accounting and Fraud Investigation program which not only equips its
students with concepts and theories of fraud investigation but also introduces them to
real world experience through role play activities where they may assume roles such as 371
law enforcers and forensic accountants (West Virginia University, 2013). Professor
Richard Riley, the Program Coordinator, in a discussion with the researcher explained
that in providing the real world experience to students, collaboration with
professionals is a major key in ensuring its success (Riley, 2012).
The growing number of forensic accounting education initiatives represents a
thought that forensic accountants can be created through education. Referring to the
above blueprint, ideally a forensic accounting education initiative should be able to

arm its students with skills and knowledge, at least at an entry level, to cope with the
tasks and challenges in the forensic accounting profession. Due to its problem based
nature, conducting a forensic accounting education can be a difficult task. A study by
Rezaee and Burton (1997, p. 485) conclude that common obstacles in conducting
forensic accounting education include:
. lack of financial resources;
.
lack of administration interest and support;
.
lack of flexibility in curriculum content;
.
lack of instructional materials including textbooks;
.
lack of faculty interest; and
.
lack of authoritative standards and guidelines as somewhat severe obstacles.
The lack of authoritative standards and guidelines is a consequence of forensic

accountings dynamic nature. It is what makes it unique and sets it apart from the
conventional financial auditing.
Nevertheless, for academics, the absence of an authoritative standard is a problem in
itself. Universities develop their accounting curriculums primarily based on the existing
accounting standard to ensure that upon completion of the degree students will possess
the right skills to perform accounting works. Without an authoritative reference,
curriculum development will be difficult. Unlike the conventional accounting education
programs, forensic accounting programs generally do not have an agreed-upon
pedagogical approach in curriculum development (Smith and Crumbley, 2009b, p. 2).
Therefore, due to the lack of universally accepted how-to standard, universities often use
different approaches in their forensic accounting programs (Smith and Crumbley, 2009b,
p. 1). For example, the Fraud Examination and Forensic Accounting graduate certificate
program at the Seneca College Canada in its curriculum offers subjects of
Fraud Investigative Basics, Fraud and the Business Environment, Money Laundering
and Asset Tracing, Legal Aspects of Fraud, Criminology and Ethics, and Business
Valuation and Quantification of Damages in the first semester and Fraud Investigation
Advanced, Fraud Prevention and Detection: Internal Auditing, Computer Forensics and
Data Mining, Litigation Support, Financial Statement Fraud, and Serving as an Expert
Witness/Communication in the second (Seneca College, 2013). In comparison,
JMLC The University of Wollongongs Master of Forensic Accounting program offers:
16,4 Introductory Forensic Accounting, Forensic and Litigation Framework, Fraud and
Failure, Investigative Processes, Advanced Investigative Techniques, Independent
Accounting Expert Reports, Evidence & the Forensic Accountant, and Compliance,
Assurance and Governance (University of Wollongong, 2010).
To cope with the lack of authoritative standards, collaboration between academics and
372 practitioners can be a viable solution. According to Professor Richard Riley in a discussion
with the researcher, such collaboration is essential as practitioners are those who know
exactly about what skills are needed to perform their works (Riley, 2012). In 2007,
commissioned by the US Department of Justice, the Accounting Department of the West
Virginia University published a model curriculum, Education and Training in Fraud and
Forensic Accounting: A Guide for Educational Institutions, Stakeholder Organizations,
Faculty, and Students (Smith and Crumbley, 2009a, p. 4). The guideline essentially
provides an outline of a model curriculum for fraud and forensic accounting program as
well as its argument and course descriptions (Smith and Crumbley, 2009a, p. 4).
The guideline was formulated by the Technical Working Group (TWG) consisting
of over 40 practitioners and academics in which Professor Riley was a principal
investigator. As stated in the guideline (West Virginia University, 2007):
Technical Working Group on Education in Fraud and Forensic Accounting (TWG) is a
diverse group of content area experts: professionals working across the broad spectrum of
activities that constitute fraud prevention, deterrence, detection, investigation, and
remediation (hereinafter fraud) and forensic accounting. Members of the TWG represent
corporate and industry stakeholders, professional services providers, law enforcement, the
legal community, government and regulatory stakeholders, professional organizations, and
academics specializing in fraud and forensic accounting. These individuals have voluntarily
contributed their time, ideas, and insights because of their special interest in developing
stronger fraud and forensic accounting education and training.
Although the guideline is not a standard per se, according to Professor Riley in a
discussion with the researcher, its credibility lies in the fact that it was put together by
people most of whom were well-known forensic accounting practitioners (Riley, 2012).
An important key in the formation of this group is commitment which was built through
communication and networking (Riley, 2012). The participation of practitioners from
different areas of expertise with different perspectives is a valuable contribution to the
guideline as forensic accounting itself is anything but static and uniform. Therefore, it is
always beneficial to gather as much perspective as possible to draw a more complete
picture of what forensic accounting really is. The guideline issued by West Virginia
University proposes that criminology, fraud (prevention, deterrence, detection,
investigation, and remediation), and forensic and litigation advisory services are three
content areas considered to be essential for fraud and forensic accounting curricula
(West Virginia University, 2007, p. 2).
The knowledge and skills proposed by the guideline to be taught at a forensic
accounting program are classified into three categories: prerequisite knowledge, exposure
material/course and in-depth course material. Prerequisite knowledge includes basic
accounting and auditing concepts as well as business communication skills and ethics. The
exposure material/course covers fraud specific issues such as definition of fraud, definition
of forensic accounting, roles of auditors, fraud professionals, and forensic accountants, the
who, why, and how of fraud (e.g. Fraud Triangle and Fraud Elements Triangle),
prevention, detection, investigation, and remediation of fraud, and introduction to forensic Blueprint for
and litigation advisory engagement. More advanced contents. In-depth course material creating forensic
generally covers the topics of fraud and forensic accounting more deeply such as
criminology, legal, regulatory, and professional environment, and ethical issues, various accountants
fraud schemes, fraud and forensic accounting in digital environment, and forensic and
litigation advisory services.
A key to a successful forensic accounting program is to match supply with demand. In 373
other words, it should prepare students for the demands of the profession. In financial
accounting/auditing program, the expectations are relatively static unless there is a major
change in the profession. In conventional financial accounting/auditing programs,
understanding of accounting/auditing standards has always been among the accounting
professions major expectations from accounting graduates. For example, recently many
universities in Indonesia revised their accounting curriculums in response to the
emergence of the International Financial Reporting Standards (IFRS). On the contrary,

what to be expected from a forensic accountant may vary across organizations or even
fraud cases. Miftah Muttaqin, an investigator at the Indonesia Corruption Eradication
Commission (KPK), in a discussion with the researcher, stated that based on his
experience, every corruption case may require different skill set to solve (Muttaqin, 2013).
This often requires investigators to continuously learn new skills in order to perform their
duties (Muttaqin, 2013).
It is noteworthy that a forensic accounting programs material needs to be continuously
updated to keep it responsive to current issues and challenges. Additionally, just as with
external collaboration, internal collaboration between academics from different
disciplines is also important in managing a forensic accounting program. Each subject
must be taught by at least a lecture or a multidisciplinary team with the right competencies
(e.g. accounting, digital forensics, banking, criminal law, etc.).
According to Professor Richard Riley in a discussion with the researcher, to provide
students with a degree of experience in problem solving activities, case study exercise
should be part of the curriculum (Riley, 2012). Through case study exercise, students
mindset will be gradually transformed from being rule-based to being
problem-based from which investigative mindset can be cultivated. This is so since,
possibly due to the pedagogical approach in accounting education, many accounting
students will graduate with a mindset that sees every audit like work to be formally
standardizable which is not true for fraud audit. According to Miftah Muttaqin, as one of
the senior investigators at the KPK, he argued that in some cases new investigators
(i.e. fresh graduates) from accounting background struggle to fit in a less standardized
work environment in which every corruption case may require them to think outside
the box and decide without authoritative how-to standard on how to perform the
investigation (Muttaqin, 2013). Miftah believed that such mindset can be changed
through education and training as well as work experience (Muttaqin, 2013).
Conclusion
The seemingly endless waves of fraud have created a high demand of forensic
accounting skills world widely. In order to fulfill the increasing demand of forensic
accounting services, in particular fraud investigation, more forensic accountants are
needed. To produce more forensic accountants, it is important to first understand what
constitute a forensic accountant. From the study conducted in Indonesia and the USA,
JMLC three fundamental elements are required to create a forensic accountant: mentality,
16,4 method and experience. Mentality covers aspects such as: sense of right and
wrong, ability to withstand pressures, and puzzle solving mindset. Method represents
necessary skills and knowledge for performing ones duties which includes: fraud
detection, systematic process of fraud investigation, principles of evidences, and
investigation report and presentation. Related to both mentality and method, experience
374 is an essential means for a forensic accountant to hone his or her skills and knowledge as
well as strengthening ones mentality through direct involvement in fraud investigation
activities. Higher education institutions are at strategic position to facilitate the
cultivation of these attributes through education. Nevertheless, due to the nature of the
discipline, such a process must be thoroughly designed to be responsive to current issues
and challenges.
Notes
1. For more details on Cresseys research method for his PhD, see Cressey (1950, pp. 27-55).
2. Despite the absence of national fraud statistics, fraudulent procurement appears to be the most
common type of fraud in both public and private sectors. This was confirmed by Miftah
Muttaqin, a senior investigator at the Indonesian Corruption Eradication Commission (KPK),
during a discussion with the researcher. Similarly, in a focus group discussion with a number
of forensic accountants from Fraud Investigation and Dispute Services Unit of Ernst & Young
Jakarta, it was also revealed that procurement fraud is considered the most common type of
fraud in private sectors (Siantury et al., 2012). The researcher would like to thank
Mr Alexander Siantury (Senior Manager), Ms Donna Salaki (Manager), Mr Pokki
Pangaribuan (Manager), Ms Dwi Novi Kusumawati (Manager), and Ms Sulinaty Aripin
(Manager) from Ernst & Young Jakarta for their participation and contribution in the focus
group discussion.
3. Dr Peter Hughes is a recipient of the 2010 Outstanding CPA in Government Award for his
outstanding achievement as, among other things, a fraud investigator (Guillame, 2010;
American Institute of CPAs, 2013). The award honors CPAs serving in federal, state, and
local government who have made extraordinary contribution in promoting efficiency and
effectiveness within government institutions as well as enhancing the CPA profession
(Guillame, 2010; American Institute of CPAs, 2013). One of Dr Hughes major achievements
was his investigation on a $250 million worth of contract in which it was revealed that the
Orange County failed to meet its contractual obligation as a result of which the countys
board of supervisors blocked the contract and saved taxpayers money (Guillame, 2010).
4. Richard A. (Dick) Riley, Jr, is the Louis F. Tanner Distinguished Professor of Public
Accounting at West Virginia University. He is also the Director of Research for the Institute
for Fraud Prevention. Dr Riley has been recognized nationally for his contributions in
forensic accounting and fraud examination: The ACFE 2008 Educator of the Year; 2012
ACFE Hubbard Outstanding Achievement Award (shared with Jack Dorminey, Scott
Fleming and Mary-Jo Kranacher); 2009 American Accounting Association Innovations in
Accounting Education Award; The 2013 Max Block Award * from the CPA Journal; the 2013
American Accounting Association FIA Section Outstanding Research Manuscript *. In 2013,
the West Virginia University Foundation recognized him for his outstanding teaching, the
highest recognition for teaching at WVU. At West Virginia University, he not only teaches
traditional accounting classes but also works in the classroom in the areas of forensic
accounting/fraud examination (FAFE), performance measurement and entrepreneurship.
The researcher would like to personally thank Professor Riley for the opportunity to have a
discussion on various issues in forensic accounting education.
5. The researcher would like thank Professor D. Larry Crumbley for the valuable discussion Blueprint for
regarding issues in forensic accounting during our meeting in Kuala Lumpur, Malaysia.
creating forensic
6. The researcher himself was one of the first graduands of the University of Wollongongs
Master of Forensic Accounting programme. accountants
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About the author

Hendi Yogi Prabowo is the Director of the Centre for Forensic Accounting Studies at the Islamic
University of Indonesia. He obtained his Masters and PhD in forensic accounting from the University
of Wollongong Australia. Hendi Yogi Prabowo can be contacted at: hendi_prabowo@yahoo.com
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Better, faster, smarter: developing a blueprint for creating forensic accountants

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The fraud problems

Certified Fraud Examiners, 2012b, p. 4).

Prevention, detection, and investigation and prosecution

Human resource problems

Reverse engineering a forensic accountant

Ability to differentiate the right from the wrong

participation in events or in a particular activity;

The blueprint of a forensic accountant

above blueprint, ideally a forensic accounting education initiative should be able to

The lack of authoritative standards and guidelines is a consequence of forensic

emergence of the International Financial Reporting Standards (IFRS). On the contrary,

pages/peterhughescpa.aspx (accessed January 10, 2013).

January 18, 2013).

About the author

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