Ponzi Schemes, FBI Investigations and Cybercrimes: Welcome to Accounting Ethics
Forensic accounting experiences prepares future leaders
My career before joining UC Davis primarily focused on forensic accounting including work on some of the largest fraud schemes in the United States. These cases taught me that at the heart of most frauds is frequently a breakdown in ethics and governance.
I thought the best way to teach the Accounting Ethics course in the Master of Professional Accountancy program would be to make the class practice-focused highlighting real-world cases and experiences. I make the most of guest lecturers, building broader connections with practitioners, and connecting the curriculum to today’s accounting world.
What started as class devoted exclusively to accounting ethics five years ago when I first started teaching, has naturally evolved to include a significant forensic accounting component—and a course in accounting ethics is now a mandatory course for CPA Certification.
My course digs deep into fraud cases. Students investigate the environmental factors that may have contributed to a fraud, how the fraud was concealed, how the accountants justified their behavior, and whether outside forces contributed to the fraud.
Learning about the concepts behind the fraud risk triangle and the dark triad are fundamental for a sound accounting mindset, but applying those concepts to real-world cases takes accounting ethics to a much higher level.
To understand a fraud, accountants need to be able to conduct a meaningful fraud risk assessment, plan and perform a good interview, and develop a good understanding of the nature the various types of frauds.
By working through real-world cases, students appreciate the significance of business decision-making, governance and management, internal controls, financial reporting, external audits, external investigators and enforcement.
In one exercise, I have students team up in small groups to solve five accounting problems. It’s revealing to see the dramatically different results the student teams report.
The exercise of good professional judgment can result in different answers. None of the results may be wrong as the exercise of sound professional judgment will also demonstrate that accounting can be somewhat imprecise.
I also incorporate an analysis of a local Ponzi case. The class reviews the legal pleadings and hear from a former controller, an informant, the FBI agents who conducted the investigation, a federal prosecutor and a victim. In that process, students develop a greater understanding of how and why the fraud was “successful” and how sophisticated individuals were duped. The goal is to demonstrate the importance of professional skepticism, whether as an auditor or an accountant.
We also discuss a $3.4 billion Ponzi scheme, the largest municipal embezzlement in the history of the United States, and other breaking cases in the news as the quarter unfolds.
To round out additional exposure to the real world, I invite to class CPAs involved in fraud examinations, insurance claims managers, and cybercrime and forensic technology specialists.
I firmly believe the students benefit from the integration of accounting ethics and forensic accounting with a practice-focused, real-life approach. This prepares them to become future leaders in the accounting world as they get exposure to issues and concepts many other accounting graduates do not get in their curriculum.
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