July 31, 2019

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Diffusion and Implementation of Forensic Accounting in Countries of Business Opacity


The rising consciousness of monetary crimes is rising the demand for forensic accountants to assist detect unlawful monetary exercise by corporations, people, and organized crime rings. No matter how a lot fraud actions enhance, there should all the time be an anti-fraud scheme to defend towards it. To present availability of stability and safety from unlawful enterprise acts is the principle purpose why Forensic Accounting (FA) exists.

With the urgent want for Forensic Accounting as a device to battle fraud, this text research its applicability in nations of opaque enterprise practices, probes the accessible signifies that would assist in introducing it to the tradition, and spots the areas the place it’s radically wanted particularly in the nations of monetary cloudiness and opacity. The outcomes are based mostly on quantitative and qualitative research in Lebanon for being perceived as an opaque nation, sharing the identical traits that outline nations with fraudulent monetary behaviour affected by a excessive stage of monetary corruption akin to cash laundering, lack of transparency or ample monetary disclosures in addition to corruption on the stage of administration, supervisory boards and even governments themselves.

The outcomes of the research reveal that Forensic Accounting is perceived as a method to beat fraudulent behaviour. Most of the respondents both agreed or strongly agreed on the necessity to incorporate it in order to stop fraud and for detection functions as a major want. However, the respondents thought-about this to be new in Lebanon with a highest share of folks (56.36%) reporting that it wasn’t utilized by Lebanese corporations as a result of lack of consciousness, privateness points, the character and sort of companies (household companies and SMEs), lack of steerage in regards to the requirements (native or worldwide) that needs to be utilized and lack for correct laws. Yet respondents confirmed a constructive perspective in direction of the implementation in Lebanon as financially corrupted nation. Thus with such an encouraging notion amongst respondents, the problem stays in the introduction and diffusion of Forensic Accounting.

The outcomes of the research additionally supported the thought of setting a legislation that mandates all sectors to submit a Forensic Accounting report. The concept of setting a legislation that enforces corporations to file such a report was embraced by the bulk of respondents who additionally thought-about that the most effective means of introducing this technique in a rustic of opaque enterprise nation is thru the academic curriculum through the graduate applications. DIFA (Diploma in Investigative & Forensic Accounting) in addition to the CPA (Certified Public Accountant) have been beneficial because the certifications that needs to be granted in the corrupted nations as in the case of Lebanon.

Research Question and Hypotheses

The dialogue of the examine outcomes are based mostly on the analysis questions that investigated “To what extent is Forensic Accounting applicable? And how could it be introduced?” In order to reply these questions, there’s a have to determine if such a scheme is thought at any ranges and sectors or whether it is used or utilized as a process by financially corrupted corporations or governmental establishments.

The instructed hypotheses are analysed and evaluated in response to the findings.

Hypothesis 1: Countries with Opaque Business Practices Need Forensic Accounting as a Tool to Fight Fraud and Corruption.

This examine revealed that there’s an eagerness to have Forensic Accounting in financially fraudulent nations as a result of in depth corruptive acts which might be dedicated and nonetheless are with none statement and punishment as a result of the fraudster all the time will get away with it as a result of absence the ample and correct device to determine and uncover these acts. Hereby the pressing have to introduce it in nations with opaque enterprise practices and to create consciousness about this process in completely different fields and sectors primarily in the monetary fields and governmental sectors.

This anti-fraud scheme was considered an acceptable device to battle corruption because it has the authorized accessibility and strategies wanted to disclose fraud. An extra level is the constructive notion in direction of it and the excessive acceptance to implement it in financially opaque nations, with lots of encouragement to make use of it in establishments or corporations.

Hypothesis 2: Forensic Accounting is Not a Common Practice at Present.

The findings point out that Forensic Accounting is thought in the nations of enterprise opacity akin to Lebanon, by practitioner accountants, educators, and auditing & accounting companies. Despite that the survey and interviews’ outcomes proved that this apply is thought, it’s not generally used or practiced by audit companies since it’s not ceaselessly requested.

On the academic stage, there isn’t any emphasis on the topic in the academic programs. FA will not be given as a course or as half of a course in universities’ curriculum. Moreover, there are not any certifications specialised in this subject akin to DIFA, however there are different well-known accounting certifications, akin to CPA.

Therefore, what might be concluded is that there are not any auditors or accountants, who’re professional in this anti-fraud subject in the nations the place fraudulent enterprise practices prevail. These nations lack the talents that might be acquired from the academic background and from the expertise gained from working in this subject.

The governmental and authorized sectors endure from a complete absence of Forensic Accounting. That being the case, there isn’t any regulation that imposes its use in fixing monetary points or in evaluating monetary statements, and there isn’t any legislation that distinguishes the testimony of Forensic accountants from the testimony of every other audit. Forensic accountant in financially corrupted nations has no privilege on the credibility stage inside courts, he/she will not be used as an professional or reference inside courts.

Hypothesis 3: Different Means to Introduce Forensic Accounting in Countries with Opaque Business Practices

Respondents, because the outcomes present, have been very constructive concerning introducing Forensic Accounting in nations with opaque enterprise practices and they instructed some ways to be successfully executed in order to supply an excellent implementation of this new device.

The instructed means concerned many options and focused completely different sectors. It even focused the psychological issue, which was developed by cultural and social points, and which might play a serious position in making the change to battle corruption and fraud in the financially corrupted nations.

Results and Discussion

Main modifications needs to be carried out to introduce Forensic Accounting in nations with opaque enterprise practices. These modifications should goal 4 fundamental parts that may contribute in making a stable floor and constructive notion, the strategic plan contains:

I. Cultural & Sociological Changes:

“There Must Be a Change in the Culture of People in the Countries with Opaque Business Practices.”

The outcomes of the carried out in-depth interviews confirmed that many respondents drew consideration about the truth that the mentality of folks in the nations with opaque enterprise practices needs to be modified in order to extend the extent of acceptance and consequently enhance the dedication in making use of Forensic Accounting.

The individuals burdened on the significance to change the tradition of financially disrupted nations as a result of they consider that having somebody to look into their inside operations is a violation to their privateness. Besides, they do not belief somebody outdoors the corporate or establishment to return and scrutinize their financials.

Another downside that exists in the mentality of folks in the nations with opaque enterprise practices is that the staff, managers or enterprise homeowners really feel unfairly paid and are stolen all of the occasions by the federal government. For that purpose, they consider that they’ve the fitting to steal again having the permissible excuse to commit fraud.

These info that have been expressed by the interviewees are additionally appropriate with the findings of earlier researches indicating that the cultural and sociological components present a stable platform for fraudulent actions, which created an acceptance for the corruptive acts which might be thought-about as norms and justified practices in the societies of financially corrupted nations (Brownsberger, 1983; Adra, 2006; UN, 2001).

II. Changes in Educational Systems:

“Forensic Accounting Should Be Introduced in the Educational Sector.”

Almost all respondents conferred a excessive diploma of significance for introducing Forensic Accounting in the academic sector in financially corrupted nations. Almost all respondents believed that it needs to be taught in universities as a course or a graduate main or as case research in an audit associated course. Suggestions additionally included contemplating it as a specialty in academic establishments that grant CPA or every other certifications associated to auditing or accounting.

Respondents and interviewees additionally instructed introducing Forensic Accounting by workshops and seminars with the help of specialists and skillful forensic accountants.

They additionally confirmed an acceptance for the web academic applications since DIFA will not be accessible in most financially corrupted nations whereas it’s accessible in USA. Therefore on-line schooling might shorten the space to individuals who can not go away work and have an interest to be specialised in this subject.

The individuals additionally beneficial that staff and managers who’re answerable for the financials of the corporate needs to be educated and submitted to an intensive coaching to develop their expertise to allow them to detect fraudulent actions throughout the firm.

III. Changes in Governmental System:

“Forensic Accounting Should Be Introduced in the Governmental Sector.”

The National Integrity System Study, revealed by LTA in 2011, reveals that corruption governs all sectors and all branches of financially corrupted governments. But in order to reveal corruption and fraud there should be a device or a legislation that might assist to level out the place these actions are occurring and a authorized path to guarantee that this device is efficient.

Most of the individuals in the examine thought that it is very important introduce Forensic Accounting to governmental sector the place the latter ought to give extra consideration and care about this topic, though they did not give an significance to the governmental position in the introduction course of.

They additionally beneficial that the ministry of finance ought to launch an consciousness marketing campaign concerning the topic by media, street panels, and social media.

More significance is granted to the syndicate of accounting, whereby the individuals consider that coaching periods, workshops, and seminars needs to be set in order to coach skillful forensic accountants who might apply Forensic Accounting, when it’s requested. It is the position of the syndicate to unfold consciousness because it has the facility, the information, and the curiosity.

IV. Changes in Legal System:

“Forensic Accounting Should Be Introduced in the Legal Sectors.”

Respondents consider that Forensic Accounting needs to be launched in the authorized programs because the testimony of the forensic accountant is acknowledged in courts in different nations.

LTA (2011) highlighted on the significance to make sure that the present legal guidelines are sufficiently strong to prosecute even presidents and ministers when corruptive acts are revealed. There needs to be a legislation that acknowledge it’s a legislative device to battle corruption.

The individuals additionally emphasised on the necessity of having court docket specialists in this area in the authorized system because the fraudster is ready to get away along with his/her acts as a result of problem to disclose the manipulation that occurred, the associates, or the extent of involvement in the fraudulent actions. The interviewees additionally burdened on the significance of altering the legislation to make sure an actual punishment for the fraudster.

The necessity to trace monetary info and overcome opaque enterprise practices is changing into a urgent want. Financial crimes are prevailing in completely different sectors in a single nation and are dedicated by completely different events. Another necessary level demonstrated in this examine is that nations of opaque enterprise practices are inclined to share comparable traits that make them a magnet for fraudulent actions akin to cash laundering, tax avoidance/evasion and associated corrupt workings are the merchandise of some distant regimes and nations titles as tax havens.

Opaque enterprise nations are inclined to have secrecy legal guidelines, poor laws, synthetic taxes, lack of public accountability and poor company governance in nations akin to Luxembourg, Austria, Singapore, Switzerland and many others that in return facilitate financial uncertainty, instability, crime, flight of capital and harm to citizen-state contracts everywhere in the world of course to not point out the damaging the social well-fare of the nations. Fraud has its roots in completely different authorities and corporations primarily in managerial positions akin to CEOs.


Financial crimes and fraudulent habits will not be new and residents, although are conscious of the disadvantages of the such practices, are usually not nicely knowledgeable concerning the counter measures which may in any other case put an finish to those practices. This in flip highlights the significance of forensic accounting as a method to cease fraudulent practices. However, the adoption and implementation will not be a simple course of that may occur instantly. An understanding of the strategies can help forensic accountants in figuring out fraudulent habits. It is “the application of accounting knowledge and investigative skills to identify and resolve legal issues. It is the science of using accounting as a tool to identify and develop proof of money flow. These tools and techniques can be invaluable for fraud and forensic accounting investigators” (Houck et al., 2006). Houck (2006) additionally talked about two main elements, “litigation services that recognize the role of an accountant as an expert consultant, and investigative services that use a forensic accountant’s skills and may require possible courtroom testimony.” According to the definition developed by the AICPA’s Forensic and Litigation Services Committee, “forensic accounting may involve the application of special skills in accounting, auditing, finance, quantitative methods, the law, and research. It also requires investigative skills to collect, analyse, and evaluate financial evidence, as well as the ability to interpret and communicate findings.” In different phrases, it contains the completely different areas of litigation assist, investigation, and dispute decision and, subsequently, is the intersection between accounting, investigation, and the legislation.

Fraud detection is a technique and course of to resolve the different sorts of fraud from embezzlement to cash laundry, disposition, acquiring proof, writing report and testifying. Therefore, forensic accountants who can apply such a course of professionally and are in a position to detect, examine and thus stop fraud incidence are wanted.

However, the introduction and diffusion course of requires work on the macro stage through tradition and the federal government and legislations (the first facilitator) and on the micro stage through academic establishments and administration. It is the work of your entire group.

At first, the tradition should be altered to create a better stage of consciousness concerning Forensic Accounting. As the outcomes of the quantitative analysis proved, folks could be conscious of it nonetheless they’re unaware of the completely different practices, the required diplomas, and even the traits that make an individual an eligible forensic accountant. The qualitative analysis additionally assures the outcomes of the quantitative one concerning, however not restricted to the necessity of having a legislation that requires corporations to submit a Forensic Accounting report. Thus the necessity to change tradition implies buying new information, therefore a change in values, norms, and practices. This idea implies that if a change is made in cultures of financially corrupted and opaque enterprise practices, it would outcome in modifications in the folks’s practices, norms, and values, therefore their behaviors; on the finish, it would create an consciousness and information about fraud and easy methods to battle it and the instruments that might be used to inhibit it.

Governments must also strictly set up and management monetary practices and set a legislation that mandates the submission of an FA report. It is price mentioning, that in response to the outcomes of each quantitative and qualitative analysis, interviewees are inclined to view governments because the sector with the best share of fraud. Educational establishments can have an important affect in the adoption and implementation course of.

Interviewees considered forensic accounting schooling as being related and helpful to accounting college students, the enterprise group, the accounting occupation, and accounting applications. It will not be solely restricted to school applications, there may be additionally a specialised certificates that’s involved in this subject, which is the Diploma in Investigative & Forensic Accounting (DIFA) program. DIFA is designed to supply a broad vary of information and expertise to hold out monetary investigations. Employee and administration fraud, theft, embezzlement, and different monetary crimes are rising, subsequently accounting and auditing personnel should have coaching and expertise to acknowledge these crimes. In addition, high-visibility company scandals, akin to Enron and WorldCom, exhibit the necessity to higher put together entry-level accounting graduates and working towards CPAs in the areas of fraud prevention, deterrence, detection, investigation, and remediation (Houck et al., 2006).

Managements must also apply their very own inside controls and to have a well-implemented company governance to manage the falsified reporting. This, in addition to the talked about legislation that requires the submission of a report back to the federal government will certainly put an finish to any fraud dedicated. For occasion, terrorists of the September 11 assaults used the worldwide banking system to fund their actions, switch cash, and conceal their funds (Houck et al., 2006). This highlights the necessity to for investigators to grasp how monetary info can present clues as to future threats. Due to those fraudulent practices, public consciousness of fraud and forensic accounting got here to focus on the necessity for monetary professionals demonstrating the required coaching and expertise to sense and act at any necessary proof generated from monetary info.

The following summarizes the outcomes of the surveys completed revealing the age group of the Lebanese respondents, their work expertise, academic background, whether or not or not they heard about it and whether or not they take into account it as very important in Lebanon being a rustic of enterprise opacity. Also summarized is what respondents take into account as the easiest way to introduce and implement Forensic Accounting in Lebanon.

Most respondents have been Lebanese, aged between 18 and 30 years outdated, held a Master diploma and labored in Finance with 6 years of expertise and extra. Most respondents additionally heard and examine forensic accounting however did not know if Lebanese corporations use it, nonetheless, agreed on the significance of utilizing it in Lebanon benefiting all of the work fields, particularly monetary establishments. They additionally agreed about its constructive benefits in offering higher future, constructive affect on enterprise, and safer enterprise.

Moreover, most respondents supported the thought of having a legislation that requires all sectors to submit an FA report. It’s necessary to say that 75% of the respondents who did not encourage this motion labored in the sphere of finance.

Furthermore, academic applications have been thought-about as the easiest way to introduce Forensic Accounting (few have given a job to governmental efforts) believing in its capability to take care of its integrity, however not in all sectors. Respondents additionally agreed on the significance of the DIFA certification and that DIFA diploma needs to be included in Lebanese universities’ applications. Finally, most respondents thought the most effective means to amass FA is to outsource audit companies that carry out such providers.


[1] Adra, J. (2006). Discussions About Corruption in Lebanon, private communication.

[2] Brownsberger, W. N. (1983). Development and Governmental Corruption, the Journal of Modern African Studies, 21, 215-233.

[3] Houck, M., Kranacher, M., Morris, B., Riley Jr, R., Robertson, J., & Wells, J. (2006). Forensic accounting as an investigative device. CPA Journal. Aug2006, Vol. 76 Issue 8, p68-70. 3p,

[4] The Lebanese Transparency Association (2009). Campaign Finance Monitoring from monitoring to reform.

[5] UN (2001). Corruption Assessment Report on Lebanon. United Nations Center for International Crime Prevention.

Source by Nahed Taha

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