Al mudhaffar public accountants

International Journal of Finance and Accounting 2015, 4(2): 109-118 DOI: 10.5923/j.ijfa.20150402.01

Certified Accountants' Perceptions of Forensic Accounting Education: The Case of Bahrain

Sayel Ramadhan

Department of Accounting, College of Business Administration, University of Bahrain, Kingdom of Bahrain

Abstract The main purpose of this study is to report the perceptions of certified accountants regarding the awareness, demand, benefits, relevance and contents of forensic accounting education in a developing country, Bahrain. A certified accountant is one who holds any professional qualification in accounting and is employed by an auditing firm in Bahrain. A questionnaire survey was used to collect the data and a total of 80 certified accountants completed and returned the questionnaire. Using descriptive statistics and factor analysis, the results show that all respondents are familiar with forensic accounting and they expect demand on forensic accounting to increase in the future. The most important benefits of forensic accounting are: strengthen the credibility of financial reporting, promote responsible corporate governance and prepare students to engage in fraud examination. Twenty six topics derived from relevant literature were proposed to be included in a forensic accounting course. The respondents perceive all topics as important and the topics that received the highest rating are: bribery and corruption investigation, corporate governance and analytical review procedures. The study recommends that colleges and universities in Bahrain should incorporate forensic accounting in their accounting programs. The preparers of accounting programs should recognise the value of practitioners' inputs when developing the contents of forensic accounting because their views can improve the relevance of programs and foster graduates' marketability.

Keywords Forensic accounting education, Accounting curriculum, Accountants', Perceptions, Bahrain

1. Introduction Corporate crises and failures early in the twenty first

century (e.g. Enron and WorldCom in the USA and HIH Insurance, Ansett and Pan Pharmaceuticals in Australia) have undermined investors' confidence in financial reporting and raised serious concerns over the effectiveness of financial reporting, accounting standards and accountability. These concerns made forensic accounting an attractive career opportunity in recent years and increased the demand for forensic accounting practices as a means to combat fraud and misappropriation of financial statements and, as a result, restore confidence in financial reports.

This suggests a need to incorporate forensic accounting education in the accounting curriculum at university level. Research has shown that a number of universities are already offering forensic accounting courses while some are even introducing full academic programs in the area (see Efiong, 2012; Smith and Crumbley, 2009; Kleyman, 2006 and Vogt 2003). Although values of courses and tracks in forensic accounting are fairly well established in the US and UK, but in Bahrain and the Gulf region this area is not getting

* Corresponding author: salramadan@uob.edu.bh (Sayel Ramadhan) Published online at http://journal.sapub.org/ijfa Copyright © 2015 Scientific & Academic Publishing. All Rights Reserved

sufficient attention. In the Kingdom of Bahrain, there is a very limited number of accounting programs that offer forensic accounting courses. The University of Bahrain covers forensic accounting as one of the topics of "Current Issues in Accounting" course at the undergraduate level.

The main purpose of this study is to examine the perceptions of certified accountants working in auditing firms in Bahrain regarding the demand, benefits and contents of forensic accounting education. An emerging stream of education research considers the need for revised content and structure, e.g, teaching interviewing skills in forensic accounting (Seda and Kramer, 2009 and Porter and Crumbley, 2012). Some may argue that the contents of an accounting program should be based on academicians' perceptions of what is the best interest of students, and not by practitioners' demands. However, it is important that accounting programs generally recognize the value of practitioners' input when designing program contents, because their views and suggestions can improve the relevance of programs and foster graduates' marketability. It also reduces employers' criticism about accounting programs being out of touch with reality (see, Rezaee et al., 2006). Moreover, accounting practice innovations generally precede innovations in accounting scholarship (Hopwood, 2007). As such, perceptions of academicians and users of forensic accounting services are not covered in this research.

The motivation for the study stems from the fact that

110 Sayel Ramadhan: Certified Accountants' Perceptions of Forensic Accounting Education: The Case of Bahrain

forensic accounting education in developing countries has not received adequate coverage in accounting curriculum as demanded by investors, practicing accountants and the business community who are deeply concerned with reported financial and accounting scandals. This study extends survey research on the importance of forensic accounting to Bahrain. The results should be relevant and of interest to higher education institutions and academicians in Bahrain in that they will help them to decide whether to offer courses/programs in forensic accounting. There is also evidence as to what topics would be appropriate in such courses and programs.

The remainder of the paper is divided into four sections. The next section reviews previous research on forensic accounting education. The third section explains the survey procedure and methodology. The fourth section analyses the results, and the final section discusses the conclusions, implications of the study, identifies its limitations and suggests ideas for future research.

2. Background and Literature Review Maurice Peloubet is credited with developing the term

forensic accounting in his 1946 essay "Forensic Accounting: Its place in Today's Economy". Formalized procedures of forensic accounting were not put in place until the 1980s when major academic studies in the field were published (Rezaee et al. 1996). Forensic accounting is defined as an "accounting specialization in which investigative and analytical skills are applied for the purpose of resolving financial issues in a manner that meets standards required by courts of law" (Hopwood, et al. 2012 and Bolgna and Lindquist (1995). The word fraud is absent from the definition. Hopwood et al. (2012) define fraud examination as an investigation undertaken to determine the facts of a suspected fraud. Thus, the two terms are not synonymous and not interchangeable. This is also emphasized by the AICPA and Covaleski, (2003) which delineate the following practice areas that fall under the relatively new certified in financial forensic (CFF) credential and what is generally considered “fraud examination” (i.e., item 6 below) is only one of seven practice areas within the forensic accounting umbrella:

1. Bankruptcy, insolvency and re-organization 2. Computer forensic analysis 3. Economic damages calculation 4. Family law 5. Financial statement misrepresentations 6. Fraud prevention, detection and response 7. Business valuation Crumbley et al. (2011) state that forensic accounting

concerns an issue that co-joins accounting and law. It is conducted within the context of the rules of evidence, and includes all activities designed to prepare a lawyer to try a case, including interviewing involved parties, document review, draws conclusions and provides an accounting

analysis that is suitable to the court which will form the basis for discussion, debate and ultimately resolution of disputes that involve claims (Kranacher et al. 2008 and 2011; Lexbe, 2010; American Institute of Certified Public Accountants-AICPA, 2004 and Bolgna and Lindquist, 1995). Thus, forensic accounting is not only about investigating fraud or fraud examination. Forensic accountants serve as expert witnesses. They do not testify as to whether fraud has occurred. This is the court's decision and the expert witness presents evidence (Gray, 2008).

A forensic accountant is viewed as a combination of an auditor and private investigator. He should possess the knowledge and expertise to interpret financial statements or to work under circumstances where financial information has been destroyed or tampered with, necessitating the creation of information to determine if appropriate actions have taken place. The potential significance of forensic accounting is described by Neal Batson, the former United States Department of Justice Examiner who was assigned to investigate the Enron Corporation scandal. He stated that, "There has been no other time in the legal and accounting professions when it has been more important for the two to work together". This indicates that forensic accounting and fraud examination are important areas and will likely continue to be important.

Previous research on forensic accounting practices, certifications, education and research indicate that it is a rapidly growing accounting discipline. Research provides evidence that forensic accounting education has evolved from being limited, to continuing professional education sessions for practicing accountants, to a current state of being offered as a credit course by many universities (Razaee 2002; Crumbley 2001; Peterson and Reider 1999, 2001; Rezaee et al. 1996; Rezaee and Burton 1997). Buckhoff and Schrader (2000) found that forensic accounting is very popular and students rating it 9.14 on a ten-point satisfaction scale in the US. Peterson and Reider (2001) and Ramazani and Rafiei (2010) reviewed course syllabi of universities offering forensic accounting courses and analyzed the level of the course contents, learning objectives and course requirements and course coverage. They found that accounting educators agree that there is a need for universities to provide forensic accounting education.

Rezaee et al. (1996) examined course syllabi to determine the curriculum coverage of forensic accounting and fraud investigation. They suggested that the accounting curriculum provides a knowledge acquisition base in forensic accounting as part of curriculum changes in response to the mandated (AICPA) 150-hour accounting program. Rezaee and Burton (1997) concluded that the demand for forensic accounting education and practice will continue to increase and that forensic accounting education should be integrated into accounting curricula as a separate course or as a module in auditing or other accounting courses. In addition, they found that academics preferred to integrate forensic accounting topics in the existing accounting courses, whereas the certified fraud examiners preferred offering it as

International Journal of Finance and Accounting 2015, 4(2): 109-118 111

a separate course. Kleyman (2006) reviewed examples of some universities

and the forensic accounting education they offer. He noticed that California State University has been teaching forensic accounting course as part of its regular accounting program and the result has been quite impressive. Rezaee et al. (2006) examined the opinions of academics and practitioners regarding the importance, relevance, and delivery of forensic accounting education. Their results indicated that the demand for and interest in forensic accounting will continue to increase. They also found that the number of universities planning to include forensic accounting education in their program is increasing. Both academics and practitioners viewed forensic accounting as relevant and beneficial to accounting students, accounting programs, the accounting profession and the business community. They also considered the (49) proposed topics of a forensic accounting course as important for integration into the accounting curriculum. DiGabriele (2008) found that universities and colleges are currently considering adding forensic accounting to their curriculum. His results provide needed guidance to educators for the development of forensic accounting curriculum by identifying relevant skills to accompany a program of study.

Evan Zadeh and Ramazani (2012) found that accountants are not familiar with the services offered by forensic accounting. They relate this to poor training provided by firms’ financial managers who have limited knowledge of forensic accounting. Efiong, (2012) examined the degree of awareness of forensic accounting among accounting undergraduates in Nigeria and found a very low level of awareness of forensic accounting among respondents.

Buckhoff and Schrader (2000, 135) state that “adding a forensic accounting course to the accounting curriculum can greatly benefit the three major stakeholders in accounting education: academic institutions that are considering integrating forensic accounting into the accounting curriculum, accounting students and employers of accounting graduates. Professional accounting institutions, auditing firms, clients, regulatory agencies and the business community are also concerned with forensic accounting. Kleyman (2006) argues that enrollment in a forensic accounting course can show students a different side of such a renowned discipline as accounting. In addition, forensic accounting provides the practitioner with profound knowledge of both accounting and law which will enable him/her not only to investigate accounting issues, but also collect evidence, provide litigation support, as well as testify in court (Efiong, 2012). Rezaee (2002) found that students believe that forensic accounting is a sound career option but should be promoted in universities because it is not getting the proper attention. Finally, Rezaee et al. (2006) found that both practitioners and academicians perceive the following benefits of forensic accounting: strengthen the credibility of financial reporting; promote responsible corporate governance; make students more desirable in the market place; satisfy society's demand for forensic accounting;

prepare students to engage in fraud investigation, litigation support and expert witnessing.

In summary, the academic literature identifies forensic accounting courses and contents in the accounting curriculum. The literature have also empirically identified that accounting academics will educate future students who will become competent forensic accountants. This study adds the necessary contribution to the literature that identifies practitioners' views regarding forensic accounting education. It also sheds light on the increasing importance of forensic accounting in business and academic community.

3. Methodology 3.1. Population and Sample

Table 1. Number of professional accountants in auditing firms

No. Name of auditing firm No.of certified accountants Percent of total

1. KPMG Fakhro 120 26.7

2. Ernst & Young 80 17.8

3. Deloitte & Touche Bahrain 20 4.5

4. Abdulaal Gulf Audit 39 8.7

5. Al Mezan Bureau 5 1.2

6. Al-Mudhaffar Public Accountants 8 1.8

7. Horwath Bahrain 4 .9

8. HLB R. Yassa & Co (N & Co) Chartered Accountants 10 2.3

9. Nabeel Al Saie - Public Accountants 7 1.6

10. BDO Jawad Habib 35 7.8

11. Moore Stephens International Ltd 1 .002

12. PKF Bahrain 20 4.5

13. Assure Consulting WLL 10 2.2

14. Grant Thornton 40 9.0

15. PricewaterhouseCoopers 20 4.5

16. Raafat Yassa & Co Chartered Accountant 5 1.2

17. Saba & Co 12 2.7

18. Talal Abu-Ghazaleh & Co 10 2.3

19. El Sayed El Ayouty & Co 3 .006

20. Elyaa Audit & Consulting 1 .002

Total 450 100

The study specifically examines certified accountants perceptions regarding forensic accounting education. For the purposes of the study, a certified accountant is an accountant who holds a professional qualification in accounting and works with one of the auditing firms in Bahrain. It is assumed that certified accountants are more likely to be familiar with forensic accounting than an accounting graduate without a professional qualification. There are 20

112 Sayel Ramadhan: Certified Accountants' Perceptions of Forensic Accounting Education: The Case of Bahrain

auditing firms in Bahrain and each firm was contacted by the researcher to get the correct information about the total number of certified accountants. There is also Accounting & Auditing Organization for Islamic Financial Institutions. This institution is excluded because it is not involved in providing audit services to clients. They issue international auditing standards for Islamic financial institutions.

Table 1 shows that the total number of certified accountants working in the (19) auditing firms in Bahrain (490). This number represents the population of the study. A random sample of (100) accountants was selected.

3.2. The Survey Instrument

A questionnaire survey was used to gather data. The questionnaire consists of two sections: section 1 provides information about the future demand on forensic accounting and its perceived benefits. Section 2 covers the relative importance of topics related to a forensic accounting course. A list of (26) topics relating to the two main areas of forensic accounting, litigation support and expert witnessing, were included in the questionnaire. The selection of topics was based on previous research, content analysis of course syllabi at some US universities and obtained from accounting programs (e.g. California State University-Northbridge, West Virginia University, The University of Texas at Austin, The University of Nebraska at Lincoln, The University of Denver, Brigham Young University and others), interviews with practitioners in the field, knowledgeable accounting faculty in Bahrain, and the researcher's experience in teaching "Current Issues in Accounting" course at the University of Bahrain (UOB). This course includes a topic entitled "Forensic accounting". Some topics related to fraud were excluded because fraud is covered in two auditing courses offered at the undergraduate accounting program. So, the list of topics was not all-inclusive. The proposed topics are measured on a five-point Likert scale rated from 1=not important to 5=extremely important. Respondents were asked to add any other topics they feel relevant.

The questionnaires were distributed by hand to the entire population. Eighty accountants completed and delivered the questionnaire by hand to the researcher; a response rate of 40%. This high response rate was because copies of the questionnaires were administered using face to face approach through the researcher himself. Table 2 shows the professional qualification each respondent holds. These qualifications are: Association of Chartered Certified Accountants (ACCA), Institute of Certified Accountants (ICA), American Institute of Certified Public Accountants (AICPA), Certified Financial Accountant (CFA), Chartered Institute of Management Accountants (CIMA), Institute of Certified Forensic Examiners (ICFE). The table shows that the respondents are with a sufficient background that enables them to comment on forensic accounting education. A notable point is that only two accountants are Certified Fraud Examiners (CFE). Although having more CFE's to the

sample is feasible, but the number is very small because there is lack of knowledge on this issue and forensic accounting is relatively a new area in Bahrain.