Accounting Ethics – The Importance of Ethical Practices in Business and Personal Finance

What is ethical accounting? The idea of accounting ethics deals with the moral and values-based judgments and decisions an accountant or accounting agency confront daily in their practice. Due to the nature of their work as communicators of financial information to business managers, shareholders, and the general public, as well bookkeeping and auditing of business entities, accountants and accounting agencies are held to the highest standards of transparency and morality in regards to their research and the information they convey. Accounting can be used as a way to study how and why a business may succeed or fail, but above all it is a public service; those who practice it must make judgments and decisions that can sometimes supersede the interests of their clients in favor of the interests of the public at large.

Failure to apply ethical standards to accounting creates the opportunity for manipulation of facts and information that, if used to mislead, could cause a person to invest under false pretenses, or a business to represent its finances fraudulently to its shareholders. It is of the utmost importance that the public be able to trust accountants and accounting, because their financial future, and that of their family or business, could be at stake.

Why is it important that accountants and accounting firms be ethical?

Over the years there have been several large accounting scandals in the United States, and in the world at large, which caused private investors and public shareholders to lose billions of dollars, and giant businesses and accounting firms to fold, because of falsified or incorrect information given out about the companies in which the money was invested. The Enron scandal is perhaps the most recent and glaring example of unethical accounting causing widespread negative effects, including the loss of $25 billion in shareholder assets, the closure of the Arthur Anderson auditing firm, and the subsequent loss of 85000 jobs when the unethical practices were reported and the company dissolved.

Ethical accounting is not only important to private businesses or individuals for reliable information about their respective financial states, but has a responsibility to the public to provide transparent evaluations of publicly held business entities. Ethical accounting can help eliminate the serious problems raised when incomplete or incorrect information about business or individual is disseminated, saving money and jobs and helping to increase stability in financial markets.

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Benefits of Enforcing Accountability and Audits in Nonprofit Organizations

Many prospective donors are very skeptical about making donations, fearing that their money will not be used properly. A nonprofit or church audit is a process that provides reasonable assurance that good stewardship is being used in handling and accounting for donor’s money and other assets of the nonprofit organization.

The audit can be performed by external Accounting firms (or by an outside Certified Public Accountant). It can also be done internally-in which case the books are reviewed by selected non-related officers, or by prominent people in the nonprofit organization who understand financial and business management. These internal individuals should not be related in any way to the Financial Officers, thus avoiding a conflict of interest.

You may be pondering the idea of having an audit done in your nonprofit organization. You may be thinking of the cost, or the time involved. Listed below are some of the many benefits why you should have an audit done-the list is not exhaustive:

(1) A Charitable organization must comply with all applicable federal laws and regulations, applicable laws and regulations of the states and the local jurisdictions in which it is based or operates. An audit should ensure there is compliance.

(2) An organization conducting charitable programs outside the United States must also abide by applicable international laws, regulations and conventions that are legally binding on the United States.

(3) It will help to protect the officers of the corporation who are in charge of financial responsibility, from unnecessary charges of carelessness or misappropriation in handling funds.

(4) It sends a favorable message, and builds the trust and confidence of the financial supporters of the organization, who have a vested interest in how their money is being spent.

(5) It encourages good habits of fiscal responsibility to ensure that new employees will more likely continue to follow accountability principles already in place.

(6) It will assure that contributions made to the organization with stipulations as to how the funds should be used, are consistently used in accordance with the donor’s instructions, conveying to donors the assurance that their contributions are being used as intended.

(7) The auditors will be looking for an audit trail–It provides very important checks and balances for sums received and expended.

In general, most nonprofit or church audits are internal, consisting of selected auditing procedures performed by individuals inside the organization rather than by an outside CPA. This approach is useful in reducing the cost of internal control measures and audits.

These internal audits can be continuous, thus ensuring daily compliance. The internal auditors will most likely develop an audit program and an audit schedule that will be checked off. Most CPAs are knowledgeable in this area and should be consulted for initial set up and training assistance.

Those nonprofit organizations-including small churches-who do not conduct audits or have a set of written principles, should consider doing this as a necessity. From a practical standpoint I recall being the Secretary/Treasurer of a small church that did not conduct audits. However we ensure that there were adequate internal measures in place to ensure accountability.

The scope of this article is not to set out detailed internal control measures, consequently the list below is a partial representation of the control measures necessary:

• Do expenditure budgets, obtain members and board approval to ensure planning and cost control.
• Depositing all receipt intact; no removal for church expenses.
• At least two responsible individuals count and sign off on cash receipt.
• The church accounting done by persons that do not handle cash.
• Two signers needed for all checks.
• Check requisitions mandatory, itemizing items to be purchased.
• Expenditure cost justified and for a church purpose
• No commingling of church funds with personal funds.
• Periodical meetings with members to explain the finances.
• Invite active participation at meetings
• Sending out annual statements to all contributors.

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Five Reasons to Study Forensic Accounting

Forensic accounting is the practice of utilizing accounting auditing and investigative skills to assist in legal matters to obtain an accurate result to establish the accountability for administrative proceeding. You may be wondering, why study forensic accounting?

Well, here are the five reasons:

  • Our current economic crisis has left many companies to face serious financial issues that may lead to bankruptcy. Hence, these companies have been forced to stoop down to the lowest level to save their company by committing frauds and swindles. This makes such a job an important one that increases in demand each year.
  • Internal audit in the company could not throw light on the different fact and other hidden aspects of the corporate fraud. They are hardly in a position to initiate proper action at proper time due to their lack of forensic accounting skills.
  • Forensic accounting is a new and very exciting study. This change the perspective of the world on accounting study, which has been a theoretically dull field in itself.
  • If you are ambitious, fast, observant, creative and diligent, Forensic accounting is definitely a dream job and a great investment. Using computer technology, creative thinking, and careful inspection of financial records; the hidden proof of the crimes can be discovered.
  • You will always be equipped with the latest computer software and gadgets. Forensic accounting heavily relies on computer software and generalized audit software to aid in the detection and investigation of fraud and white-collar crimes. Also, investigative tools such as data mining, link analysis software and case management software and the use of the Internet are the essential skills as well.

In conclusion, forensic accounting has been stereotyped as a boring and uninteresting job which has been proved to be wrong. There are many reasons which show to be benefits when it comes to studying forensic accounting. Not only will you be rewarded with a stable job, you would also look forward to going to work everyday

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The History of Modern Accounting

While systems that may have been precursors to basic modern accounting probably have existed since the beginning of commerce, accounting as we know it began with the Italian Renaissance and developed in earnest during the Industrial Revolution. In fact, while scholars theorize that accounting may have been the original reason for the development of written language, little is known about accounting history before the Renaissance, although archaeology and related sciences are uncovering evidence of systems that far predate that period of time.

The religious and secular possessions of city states had to be recorded to allow for any sort of organization, which is why the theory of writing having been developed for accounting purposes arose. However, when we refer to modern accounting history, we start with the double entry bookkeeping procedures that characterized the accounting procedures of Italian Renaissance merchants, and gave them the organization and clarity they needed to rise to the top of the world of trade at the time. By 1494, accounting procedures had been codified by Friar Luca Bartolomeo de Pacioli (Paciolo), who is therefore regarded as the father of modern accounting.

Accounting established itself even further during the Industrial Revolution, and the accounting history of this period is fascinating indeed, as the pioneer of accounting during the Industrial Revolution was none other than the potter Josiah Wedgwood, whose family firm still dominates the market for luxury fine china and crystal. Wedgwood, as attuned to the bottom line as he was to the quality of his wares, demanded that proper records be kept so that he was able to easily detect and remedy minor inefficiencies and cost overages as well as to quickly deal with such potential calamities as the embezzlement he once discovered when reviewing the meticulous financial records for which his enterprise became renowned. Wedgwood is as much a part of accounting history as he is of production history because of the efficiency of his cost accounting methods, which were adopted by other successful industrialists of his time.

The railroads also depended on proper accounting techniques so that they could fulfill their role as the transport lifeline of the Industrial Revolution. Given the avaricious nature of some of the railroad barons of the United States during the expansion of railroads there, it can probably be assumed that the history of accounting scandals began with the methods used by these robber barons to outwit investors, customers and the onset of regulatory pressures alike.

By the beginning of the 19th century, “accomptants”, the predecessors of today’s skilled and trained outside accountants, began to appear in London, and a similar profession would arise in the Americas as well due to industrial development there. Often, bankruptcy was the reason that firms turned to these pioneers of independent accounting history.

And in 1845, when William Deloite opened his London accountancy firm, the modern outside accounting and auditing profession were clearly a part of British business procedure, which at the time led the world in terms of advancement and transparency. His firm, like that of Wedgwood, lives on, and today Deloitte is the trademark of the international giant Deloitte (Deloitte Touche Tohmatsu) that evolved from the first major firm in accounting history.

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Business Architecture – Will Audit-Only Make It?

Arthur Levitt, former chairman of the SEC led a commission to examine the state of auditing and the accountants firms. One of the main topics in this investigation is the feasibility of the Audit-Only accountant firm.

In the European Union a similar discussion on transparency in accounting firms is going where a proposal is issued to reflect the “total audit fees as a percentage of total revenues” on accountancy websites (1).

The demand for more transparency comes from the side of investors whereas the companies and corporations themselves are against it.

As a case for business architecture, I would welcome the change where the large accountancy corporations split-up their business model: the audit-only will be separated from the consultancy business.

Steps in this direction have been taken previously when Accenture was split-up from Athur Anderson in 2001 in period where the same issue was at stake: the independency of the accountant (and subsequently the quality of the audit).

For both the consultant as for the auditor as for companies themselves this independence would be an improvement. Today it is hard to find a really independent consultant which leads to an inefficient situation. The problem with auditing or similarly the rating offices have been evident. One could wonder whether the current business model (without the split between auditing and consulting) – will ever be profitable for the economy as a whole. The investment market should be leading here: there, only more transparency will increase the benefits of the investment market which will in the end benefit the whole financial system.

For the accountant professional the split shouldn’t be a problem: accountancy experience (gained in the audit-only firm) can later be monetizes in consulting services… the only problem is: the same company will not benefit from it. For the accountant professionals there is no real change, only for the firm itself.

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Doing Business in Hungary: Rules of Accounting

Legal requirements

Rules relating to the reporting and bookkeeping obligations of business organisations

In Hungary, the accountancy requirements and the auditing activities are regulated by the Accountancy Act based on the accounting principles of the EU.

The Accountancy Act defines the reporting and bookkeeping obligations that come under its scope, the principles to be followed when

compiling reports and keeping accounting records, the related regulations, as well as the requirements connected to publishing and disclosing reports, and auditing.

Provisions relating to sole traders and others who are subject to the simplified enterprise tax

The accounting and reporting obligations of sole traders are governed by the Personal Income Tax Act. However, a separate law applies to entrepreneurs and businesses that are registered for payment of simplified enterprise tax.

Provisions relating to accounting and bookkeeping services

Accounting and bookkeeping services may only be provided by a person entitled to perform accounting and bookkeeping services and who is listed in the register held by the Ministry for National Economy.

Rules relating to mandatory audits

Mandatory audits are governed by the Act on the Hungarian Chamber of Auditors, the Activities of Auditors and the Public Supervision of Auditors.

Administrative procedures


Basically, companies must support their reports with double-entry accounting records. In a small number of cases (e.g. foundations, associations, sole traders, etc.), single-entry – turnover approach – accounting records may also be kept.

Sole traders may apply the rules for single-entry accounting records. The scope of the records they must keep is governed by Annex V to the Personal Income Act.

Enterprises and companies that are registered for payment of simplified enterprise tax (SET) can basically be categorised in two large groups:

  • those who come under the Accountancy Act,
  • and those who do not.

Doubly-entry is compulsory for a part of the enterprises in accordance with the Accountancy Act, while it is only optional for others.

Economic organisations without legal personality (limited partnerships, general partnerships), private companies with unlimited liability, as well as sales agencies of foreigners in Hungary may keep simplified books (only entry records).

Accounting records and document storage

Keeping accounting records

Companies are obliged to keep the report for the fiscal year, as well as the supporting inventory, assessment, ledger extract, journal ledger or other records in legible form for at least 8 years.

The statement of accounts that supports the accounts directly and indirectly must be kept for at least 8 years in legible form and in such a manner that it can be retrieved using the accounting record’s reference. Accounting records must be stored securely at the company’s headquarters/premises, or at another place reported to the tax authority.

Documents not originally prepared in electronic format may also be stored in electronic format, while documents originally prepared in electronic format must be stored in electronic format.


In order to close the accounts for the fiscal year, prepare the report and support the items in the balance sheet, an inventory must be compiled that contains, in an itemised, verifiable way, the funds and resources that the company has on the balance sheet day.

Annual reports

The Hungarian Accounting Act distinguishes four types of reports regarding the company:

  • Annual report
  • A simplified annual report, which the company may prepare using double-entry accounting records if, in two consecutive fiscal years, any two of the following three volume indicators do not exceed the minimum values on the balance sheet day:
    • the grand total of the balance sheet is 500 million Forints;
    • annual net sales revenue is 1000 million forints;
    • the average number of employees over the fiscal year was 50 people.
  • Consolidated annual report
  • Simplified report

As a result of efforts made to reduce the administrative burden, micro-entities have the choice to make their own micro-entities’ simplified annual report in a so-called specific way if any two of the next three figures indicating their sizes do not exceed the following limit-values in two consecutive financial years on the accounting day:

  • the grand total of the balance sheet is 100million forints,
  • annual net sales revenue is 200 million forints,
  • the average number of employees over the financial year was 10 people.

The micro-entities’ simplified annual report is constituted only by the balance sheet and the profit and loss statement, and does not contain either notes nor business report.

A sole trader is obliged to fulfil his record-keeping obligations in accordance with the provisions of the Personal Income Act.

SET companies that are subject to the Accounting Act must also prepare annual reports in accordance with the provisions of the Accounting Act. Any SET enterprise keeping simplified records, including only incomes (an economic organisation without legal personality and a private enterprise with unlimited liability not falling under the effect of the Accountancy Act) does not have to make a report.

Publishing annual reports

All companies keeping double-entry accounting records must publish their annual reports. Companies that are listed in the Companies Register are also subject to a filing obligation. Hungarian branch offices of foreign companies having their registered office in the European Union must file and publish the foreign company’s report in Hungarian. The published annual report must present a reliable and true picture of the company’s financial and income position as well as any changes thereto. Figures given in the reports are public, and can be viewed personally at the Company Information Service of the Ministry of Public Administration and Justice, or electronically at its portal.

Companies may only fulfil their filing and publishing obligations electronically. In order to do this, it is necessary for the person submitting the report to register for the Client Gateway.

Submission deadline

For annual or simplified annual reports, the last day of the fifth month after the accounting day of the given financial year. For consolidated reports, the last day of the sixth month after the accounting day of the given financial year.


Companies do not need to undergo a mandatory audit if their average annual net sales revenue in the two fiscal years prior to the current fiscal year did not exceed net two hundred million forints, and the average number of employees over the two fiscal years prior to the current fiscal year did not exceed fifty people.

The Hungarian Chamber of Auditors is responsible for licensing auditing activities.

Further details are available at this Hungarian accountant site.

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FAR Overhead Rate Calculation and FAR 31 Audits for Government Contracts

Which FAR obligations are put forward by government agencies in the contract?

In their contract Government can impose varied obligations as per established by FAR. Thus these agencies can be either demanding contract bids or can even insist upon the firm’s overhead rate in accordance with FAR. In addition, it can be the company’s schedule for audited overhead or parallel footnotes; which they will look out for.

What are the pre-requirements for FAR Overhead Rate Calculation?

Accounting software:

While numerous firms find government contracts desirable; what they oversee is the information they are obligated to produce during FAR audits. They even miss out on having a proper report of the contract and the cost that is involved. It is thus essential for a firm to own a submissive system to manage the accounting per se. It can be time-consuming and quite a struggle in the beginning but proves beneficial for a firm in long run. For a smooth accounting, the concerned accounting firm can cater to the services of software execution.

Job Costing System:

Job Costing System is enforced while working on a government contract so as to avoid the double billing which prevails in many cases. While auditing, it is required by the accounting system to acknowledge only the allowable government billing. To calculate that; recognizing the definite cost of employees is essential which is calculated according to the pay rate of each worker. While calculating this you can’t count the cost of working hours as per your hourly rate. Salaried employee’s hourly rate is thus calculated on the basis of the time put forth by him in the project. You can even have an overview on whether Job Costing System is functioning rightly because the job costing is reunited with the direct cost of general ledger only.

Identifying Direct and Indirect Costs:

For FAR Overhead Rate Calculation the firms are required to have befitting knowledge of the firm’s expenses. These expenses are to be differentiated as general overhead expenses and the once that are existing due to the government contracts.

Discarding Unallowable Costs:

FAR Overhead Rate Calculation demands a review of the expenses so as to divide the unallowable and allowable expenses and time to avoid unnecessary billing of the expenses.

Thus for Architectural/Engineering firms, Government contracts stand as befitting opportunity if they properly perceive the complexities that come along with it as per the directions of several Government entities. The complexities being the need of a CPA firm to handle the firm’s Overhead Rate Calculation and to have the audit in accordance with FAR..

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Importance of Forensic Accounting in Countries of Business Opacity: A Means to End Fraud


When hearing about Enron, Conrad Black, Kimberly Rogers or WorldCom, one will definitely think about theft, bribery and fraud. The key word here is “fraud”; where many studies have been conducted about this subject. What is fraud and how is it detected and dealt with, and how is it possible to be protected from it? Such questions and their answers are key terms in the domain of forensic accounting, since fraud has played a major role in the existence of accounting, hence forensic accounting. Understanding fraud is necessary for those who want to understand what Forensic Accounting is, how it has come into the system, how it exactly deals with the issues we face, and to what degree it has helped in certain issues of fraud, or even in strengthening the accounting system in general (Economist Intelligence Unit, 2007).

Research has been conducted on fraud and has been given different definitions, all which come in line with one another. Other researches were done to highlight the job of internal controls in minimizing the chance of theft or misappropriation. However, little research was done on forensic accounting diffusion and proper implementation.

Fraud activities have been manipulating, stealing, and destroying many businesses and industries. To face such harmful trends, fraud examination has been created; and great efforts have been exerted to detect, investigate, and prevent similar acts from encountering. These preventions have shed lights on a new concept and practice known as “Forensic Accounting (FA)”, which has become a common notion to fight against fraud and similar unethical acts. No matter how much fraud activities increase, there must always be an anti-fraud scheme to shield against it. To provide availability of balance and protection is the main reason why FA existed.

Nonetheless, the legal, supervisory, and regulatory systems of financially corrupted countries create significant opportunities and tools for the laundering and protection of the proceeds of crime, and allow criminals who make use of those systems to significantly increase their chances to evade effective investigation or punishment. A country’s commitment to bank secrecy and the absence of certain key supervisory and enforcement mechanisms aimed at preventing and detecting money-laundering increase the possibility that transactions involving the country’s entities and accounts will be used for illegal purposes.

Since one of the most powerful tools used today is forensic accounting, it is advantageous to study its possible implementation in countries with business opacity, and to probe the essential methods needed to establish the implementation of this procedure in different sectors and at many levels. Therefore, in order to achieve these objectives, there is a need to investigate the following research question: “What are the conditions of possibility for implementing FA in a country characterized by an opaque financial sector?” More specifically, this research has two objectives:

1. To identify the best way to highlight the importance of using forensic accounting activity in order to clear the roads of the future of business activities; by learning from past mistakes such as Enron and WorldCom and by using other cases of financial fraud similar to the international ones.

2. To identify the way to diffuse and implement forensic accounting as a vital tool that, when used professionally, can greatly help fight against fraud activity.

Moreover, the gap is that forensic accounting is not known in many countries. FA is not so much spread in the world, it is only known in USA and some developed nations. The study is contributed in finding the best way to implement FA especially with the existing gap, with the objective of covering it mainly because it is so hard to implement forensic accounting especially that it is not diffused worldwide. The objective is to arrive at an answer to the research question and to show how forensic accounting can be implemented in the countries characterized by an opaque financial sector; the overall aim is to achieve this goal.

Literature Review

Different research has been conducted to define fraud including the types of fraud such as that of Gilbert (1997, p. 124) who defined “fraud” as: “an act using deceit such as intentional distortion of the truth of misrepresentation or concealment of a material fact to gain an unfair advantage over another in order to secure something of value or deprive another of a right. Fraud is grounds for setting aside a transaction at the option of the party prejudiced by it or for recovery of damages.”

Farrell & Healy (2000) revealed about fraud that is increasing worldwide and is becoming more costly to businesses every year as fraudsters use intricate methods to commit and cover their criminal acts. Consequences of fraud can vary from public morality corrosion, weakened faith in the organization, to loss in market valuation and confidence of stakeholders.

With the various definitions attributed to fraud, other research done highlighted the importance of having internal control that would limit the continuous fraudulent behaviors. External audits are also undertaken to ensure that internally instituted fraud control mechanisms are adequate in scope, effective in application and complied with. However, it is quite unfortunate to note that the complexity of the human brain and its dynamic method of reasoning have tremendously diversified present-day scams away from the hitherto known modes of fraudulent activities that now render true corporate governance ideals almost unworkable.

It is thus worth mentioning that in an attempt to prevent fraud, the Auditing Standard Board (ASB) in 2002 issued the Statements of Auditing Standard 99 (SAS 99) which introduced a “Fraud Triangle”. Fraud Triangle indicates that the probability of committing fraud is high in situations when managements or other employees have incentive or are under financial pressure, the conditions that provide opportunities for management or employees to commit fraud exists, or the ethical values or characteristics that cause management or employees to rationalize the fraudulent act exists (Maranjan, 2010).

Fraud can be detected and investigated to prevent the possible damages the activity can cause. So what advice would a forensic accountant give to a company suffering from fraud activity? A professional can list four things that can be done to mitigate the occurrence of fraud and they include fraud prevention, fraud detection, fraud investigation and follow-up legal action or resolution. The anti-fraud program of any company should focus on all four.

The past two decades have witnessed significant changes in the business environment including globalization, technological advances and now with reported high-profile financial scandals, ways to improve public trust and investor confidence in financial reports. Emerging regulatory, social, economic, ethical, and legal challenges facing the world of businesses contribute to an increasing demand for FA that encourages accounting.

A study done in October 2003 assures that the demand for an interest in FA will continue to increase in the future and more accounting programs are being planned to provide FA education, The business community and the accounting profession are deeply concerned with reported financial and accounting scandals. However, few to none research were conducted to study the proper diffusion and implementation of forensic accounting in the countries of opaque business practices.

Research Framework

Many factors in a country’s business mechanism contribute to the fraudulent behavior in the financial sectors. For instance, being considered as a tax haven country with banking secrecy regulations, money laundry activities and low corporate governance, fraudulent activities become easy to commit. All of this results in a national wide corruption triggering the need to introduce FA. However, due to the opaque financial nature of the country and prior to the introduction of FA, major changes has to be done to prepare the country for the diffusion and implementation of FA on both the macro and micro levels discussed earlier.

The causes for corruption of which several exist in most corrupted countries as it was previously noted, are attributed to the absence of dysfunctional key anti-corruption institutions, the lack of awareness on corruption, its causes, consequences and the weak legal framework and the absence of proper legal implementation mechanisms. Adding to these are the confessional and feudal mentalities, inefficiency of supervisory bodies, low salaries of public sector employees, political influences on the judiciary, the absence of civic education, foreign interference in domestic affairs, selective or lenient enforcement of the law, and the inefficient media. In other words, the factors contributing to the fraudulent business practices can be categorized under four notion; culture, education, management and government and legislation. Whether it is the lack of awareness regarding FA (culture and education) and the advantages it can bring, corrupt practices of management and the inefficiency of supervisory board or absence of a law that enforces FA (government and legislation), the four categories should be tackled to put an end to the continuous fraudulent acts.

For instance, the lack of whistle-blower protection laws prevented citizens from reporting on political corruption in the legislature or other sections of government. In the private and public sectors, the lack of an access to information law, a whistle-blowers’ protection law, conflict of interest law and other disclosure and transparency mechanisms is a major obstacle to integrity.

Results and Discussion

The literature review explained the different meaning of fraud, forensic accounting, and the characteristics of an opaque business country and how can FA help in limiting fraudulent behavior that is making it easy for money launderers to continue their illegitimate practices. Furthermore, FA can serve as a liberator for countries with opaque business practices such Luxembourg, Austria, Lebanon and many others, putting an end to all the business corruption taking place at the different sectors of the country, be it government or any other private or public sector. However, to reap the best results of FA, a proper diffusion and implementation process must take place that requires the work of the parties in a country, be it government itself, people’s view and awareness of FA on the cultural basis, the companies that must require from its employees to be aware of FA and to employ forensic accountants as well and universities and other academic institutions that bear on its ability to teach FA.

Countries with opaque business practices tend to share similar characteristics that justify the prevalence of fraudulent activities. As it was mentioned earlier, the factors that contribute to the fraudulent behavior in the financial sector can be categorized under four categories; culture, government and legislation (macro-level), management, and education (micro-level).

The importance of adopting forensic accounting is thus highlighted, however, the process of introduction is not an on the spot process. On the contrary, it requires time and effort in terms of shifting cultural awareness to realize the importance of FA. That being said, the government as a primary facilitator and the educational systems should take part in creating awareness and shifting cultural mentality towards FA. Managements must also educate employees on FA and to adopt it as part of its system.

A. Forensic Accounting in Culture

Koh et al., (2009) conducted a study to examine the acceptance level of the public in Malaysia regarding forensic accounting. The study revealed that problems arise from the fact that FA service is still new to most of the businesses and even to the public in Malaysia. This leads to confusion among the public and some may even be unaware of the existence of the system. Therefore, the importance of the service is disregarded (goes unnoticed).

Two variables affect the acceptance levels of the public for the practice of forensic accounting as the main tool in investigating a company’s account to detect fraud. The variables include the public’s understanding level on forensic accounting functions and the perception regarding the implementation of forensic accounting in the investigation. The understanding level of the public and the functioning of forensic accounting will determine whether the public in Malaysia will accept it as the main tool in investigating a company’s account in case of fraud. The perception of the public on the implementation of forensic accounting in the investigation of a company’s financial statement also determines the acceptance level of forensic accounting in the country.

This study shows the importance of two basic components that should be available to create a ground for forensic accounting implementation; these elements are awareness and knowledge of forensic accounting as an anti-fraud tool and the perception of implementing forensic accounting, whereby these two elements are considered as major factors for the level of acceptance of such tool.

In other words, if a change is made in cultures of financially corrupted and opaque business practices, it will result in changes in the people’s practices, norms, and values, hence their behaviors; at the end, it will create an awareness and knowledge about fraud and how to fight it and the tools that could be used to inhibit it. In addition, this process similarly applies to forensic accounting.

B. Forensic Accounting in Education:

Although there is a growing demand for fraud and forensic accounting globally, much of its advancement and adoption in the accounting curriculum in the universities are taking place in the developed economies. The adoption of forensic accounting into the universities accounting curriculum has a huge potential to enhance students’ skills and competencies and could be used as a veritable resource from which fraud could be mitigated.

Many cases reveal that those who commit fraud are not necessarily geniuses or have a creative mind. They are typical accountants who copy fraud schemes from the past. Therefore, the importance of the programs for fraud prevention/detection education and training is emphasized, and the question is raised about whether the business school at universities offers enough programs to educate accounting and auditing professionals for fraud prevention/detection.

Forensic Accounting is not only restricted to university programs, there is also a specialized certificate that is concerned with forensic accounting, which is the Diploma in Investigative & Forensic Accounting (DIFA) program. DIFA is designed to provide a broad range of knowledge and skills to carry out financial investigations. This range includes accounting, audit, income tax knowledge, fraud knowledge, knowledge of law and rules of evidence, an investigative mentality and critical skepticism, understanding of psychology and motivation, and strong communication skills.

The DIFA program focuses on knowledge and skills that can be best taught and examined in person: such as handling a face-to-face meeting with a client, interviewing skills, and testifying in court as an expert witness.

In conclusion, the base of forensic accounting is a knowledge in accounting, auditing, internal controls, risk assessment and fraud detection, a basic understanding of the legal environment since the legal environment is essential in order to support the litigation, acknowledging their competence, obtaining a diploma specialized in forensic accounting which could be given by educational institutions that grant certifications such as DIFA. These formal certificates can deepen the students’ knowledge and sharpen their skills in forensic accounting.

C. Forensic Accounting in Management:

Poor corporate governance will lead a certain individual or a group of people with the same interest to act upon it to commit fraudulent activities in the company. This can be reinforced by the fact that top-level management should follow the policies of the firm, which will help the company to perform better.

Even if a company applies good internal control systems, the management will still be the major factor influencing the implementation. Companies should look towards new approaches rather than follow the traditional approach, as forensic accounting may be the next best alternative in resolving problems.

Loebbecke and Willingham (1998) conclude that the probability of material financial misstatements due to fraud is a function of three factors. The factors include the degree to which those in authority in an entity have reason to commit management fraud, the degree to which conditions allow managerial fraud to be committed, and the extent to which those in authority have comply to ethical values that would facilitate fraud commitment. These three factors show that the management could simply commit fraudulent activities since the public including shareholders are unaware of the countermeasure to be taken to prevent financial crimes. It argues that there should be a set of guidelines created for the public and management to ensure that actions should be taken when financial fraudulent activities occur.

The main problem or issue is the constant misunderstanding of the role and responsibility of the auditor as the public expects auditors to detect financial asset misstatement or even fraudulent activities from the financial statements. This has been the long perception of what an auditor’s responsibilities are. Therefore, this perception should be regenerated and corrected. Auditors with forensic accounting background would be allotted as forensic accountants specifically to investigate the company’s financial statement. These people would be responsible for detecting financial misstatements. With the proper education given to the public, this perception of auditors could be enhanced.

D. Forensic Accounting in Government and Legislation:

Forensic accounting has played a major role in the improvement of detection, investigation, and representation of all cases at hand in law courts in judicial formalities.If companies wish to utilize information regarding a fraudulent activity in a court law, they may acquire the skills of forensic accountant because they can handle investigations in a way that is completely acceptable in a court of law.

Forensic accounting is the specialty practice area of accountancy that describes engagements resulting from actual or anticipated disputes or litigation. “Forensic” means “suitable for use in a court of law,” and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants often have to give expert evidence at the eventual trial.

Forensic accounting should be part of criminal investigation, for the matters relating to financial implications where the report of forensic accountants must be considered as evidence and proof to be presented in court trials.

Countries that established forensic accounting in their legal system, have forensic accountants who work with law enforcement and the district attorney’s office. Just as with other types of evidence, the prosecution obtains search warrants to locate financial information and compel knowledgeable people to conduct or hold interviews about the situation in question.

Forensic accountants can also provide litigation support. Attorneys engage the services of forensic accountants to review existing documentation and testimony and explain their financial significance. A forensic accountant can tell the attorney about the additional information needed to prove the case and questions to ask the witnesses. The forensic accountant may also review damaged reports and state whether the report was put together accurately and supports the case.

Government agencies like the FBI, the Internal Revenue Service, and the Bureau of Alcohol, Tobacco and Firearms have forensic accountants to investigate everything from money laundering and identity-theft-related fraud to arson for profit and tax evasion. Law firms often use forensic accountants to help divorcees uncover their exes’ hidden assets.


This article deals with the importance of having an investigative system that would limit the frequent financial frauds and business opacity taking place worldwide. In this context, forensic accounting has been presented as a tool to inhibit the prevailing frauds, money laundry and theft. However, to the reap better results forensic accounting must be properly diffused and implemented with a great emphasis on enhancing public (cultural) awareness, attributing a major role to managements, education and governments/legislation.

For instance, the public may be unaware of the significance of forensic accounting and may lack the needed knowledge for implementing it in investigative matters. Thus, the need to incorporate forensic accounting in the culture of financially corrupted countries in order to create awareness of forensic accounting as an anti-fraud tool and the means of implementing it in the investigation of financial statements. This step can be handled by government and legislation as primary facilitators.

Furthermore, the importance of adopting forensic accounting in the universities’ accounting curriculum is highlighted especially that the demand for it is increasing gradually. Such adoption has a huge potential to enhance students’ skills and competencies and could be used as a veritable resource from which fraud could be mitigated. Fresh graduates can as well attain a diploma in Investigative & Forensic Accounting (DIFA) program that provides a broad range of knowledge and skills to carry out financial investigations.

As for managements, there is a need to develop a proper corporate governance and internal control systems in which those of high authority are held liable and responsible for any fraudulent and unethical misbehavior.

In sum, it is somehow a long process to start incorporating forensic accounting in academic curricula. A first step that needs to be established is creating awareness on ethical issues. As it was discussed, cultural shifts towards the importance of FA is must be maintained, governments, legislation, educational systems as well as managements should share their part in the diffusion and implementation of forensic accounting.


Farrell, B. R., & Healy, P. (2000). White Collar Crime: A Profile of the Perpetrator and an Evaluation of the Responsibilities for its Prevention and Detection.

Gilbert (1997), Law Dictionary, Harcourt Brace Legal and Professional Publications.

Kohl A. N., Arokiasamy L., Ah Suat C.L. (2009). Forensic Accounting: Public Acceptance towards Occurrence of Fraud Detection

Loebbecke, J.K, Eining, M.M. Willingham, J.J. (1989). Auditor’s experience with material Irregularities.

Maranjan, S. (2010). The surprising plaque killing retailer profits.

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Essentials of Endpoint Device Backup

The risk of data loss can keep any IT manager up at night. Disappearing data can cause major expense and even serious damage to the credibility of a government agency and significantly affect the productivity of ­individual employees and workgroups.

In the healthcare industry, violations of the Health Insurance Portability and Accountability Act (HIPAA), an act that protects the privacy of patient information, can range from $1,000 to $50,000 per incident. Publicly traded companies are subject to Sarbanes-Oxley compliance that promotes integrity in their accounting and auditing practices. And, of course, there’s the matter of protecting intellectual property, customer data, and sensitive communications, which are often created and stored on endpoint devices-and valuable to the organization.

IT administrators face considerable challenges protecting and securing valuable corporate data for today’s mobile workforce, with users accessing and creating data from a wide variety of locations and networks. Protect your company’s critical information against breach and leakage by choosing an endpoint backup solution that features enterprise-grade security with the strongest encryption, access control, cloud and private cloud security features, and data loss prevention capabilities.


Because endpoint devices frequently connect to unprotected networks, endpoint backup solutions should encrypt data in transit and in store to prevent unauthorized viewing of sensitive corporate data. Data in transit should be protected with encryption like 256-bit SSL, which allows users to securely access corporate data without the use of a VPN. Data in store should be protected with encryption like 256-bit AES, which has been established by the National Institute of Standards and Technology (NIST) and adopted by government, financial institutions, and other organizations that require the highest level of security.

Access, restores and versioning:

To accommodate today’s anywhere, anytime work style, choose backup software that allows data access on multiple devices-regardless of operating system-and gives users the option of self-service restores. Support for unlimited file versioning is critical so data can be restored from any point in time, in cases of user error or file corruption.

Make Backups Automatic and Transparent

Backup solutions should be automatic and transparent at best, or at the very least trivially easy, ideally with no user interaction required. Users need to be trained on how to restore information, unless IT handles this function on behalf of users.


Particularly where bandwidth is an issue, make sure the backup solution you choose can support a globally distributed network without taxing existing systems. One of the biggest barriers to end-user adoption is a backup product that slows them down.

Ease of administration:

IT has enough on its plate. Look for a system with minimal, consistent administration across all platforms. One administrator should be able to manage thousands of users in a single management console. Roles and permissions should be easy to assign and change.

Authentication and management

An enterprise-grade backup solution should provide integration with corporate directory services such as Active Directory or OpenLDAP. As companies move toward cloud identity management tools, Single Sign-On support (SSO) should also be available.

Multiple deployment options: Many organizations have discrete data classifications (i.e., sensitive, not sensitive, low, medium, high security, etc.) as well as rules governing where data classes can be stored. In organizations that are globally dispersed, these requirements may change from region to region. Look for a solution that can be deployed to meet your needs; not one that requires you to fit data into the deployment the vendor is selling.

Private cloud security:

For private cloud deployment, select a solution with server architecture that protects your network from intrusion by allowing you to block your inbound firewall ports from unsecure inbound connections. This can be done by placing an edge server in a subnetwork with limited connectivity (demilitarized zone), while the cloud master and storage nodes remain behind the corporate firewall. Incoming backup and restore requests from outside the corporate network are forwarded by the edge server to the cloud master over a secure connection. Authentication and storage of data therefore occur behind the corporate firewall without opening any inbound ports.

Data loss prevention

34% of data breaches occur as the result of a lost or stolen device. Protect data on laptops, smartphones, and tablets from breach and leaks with an endpoint backup solution that includes data loss prevention capabilities. Endpoint backup solutions should encrypt files on devices by leveraging endpoint operating systems’ built-in encryption technology, such as Microsoft Encrypting File System. Administrators should be able to easily configure which files and folders are backed up to ensure that sensitive corporate data is protected without requiring full-disk encryption. Endpoint backup solutions should include geo-location and remote wipe capabilities. Administrators should be able to pinpoint the exact location of an endpoint device at any point in time and initiate a remote decommission on a lost or stolen device, as well as configure an auto-delete policy to wipe data if a device has not connected to the backup server for a specified number of days.

Audit Trails

With the proliferation of data on laptops and mobile devices, organizations need to maintain visibility and control of how regulated data is being accessed, shared, and distributed in order to ensure compliance. However, only 19% of IT professionals say their organizations actually know how much regulated data is on endpoint devices like laptops, smartphones, and tablets. If your organization deals with regulated data, audit trails are an essential feature for meeting compliance needs, as they allow stakeholders to see how, when and where data is being accessed, shared, stored and deleted. Audit trails provide IT with insights into data activity so that administrators can be on top of data risks. When audit trails are combined with global policies that let administrators set privileges around data access and sharing, regulated organizations can ensure compliance of endpoint data.

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How QuickBooks In The Cloud Is Making Preparation Of Audits Easy For CPAs

There are still lots of auditors who are not versed in the constant change that is taking place in the marketplace. The recent financial conversions also make it quite hard for auditors to assemble precise results for the large numbers. It’s obvious that each financial year carries its own flaws; being confident for making future of profession through a must for auditors in order to rely on big numbers of businesses.

Fortunately, with the advancement of the technology, finance is also converted into Fin-tech on a broad level. Thus ensuring perfect judgment for auditing practices that are making by auditors. The professional of auditing is very linked with CPAs as they are the real persons who handle all the scenes. It is very vital for CPAs to known with all the changes that are taking place in the finance sector so to convey a precise audit.

The Real Change Beginner: QuickBooks In The Cloud

Where many auditors are still relying on their pristine acts of getting good audit results, many CPAs take the lead of advanced cloud technology instead. The idea of being integrating traditional QuickBooks software with cloud services is to offer more reliability and flexibility to CPAs. As using such cloud-based integration, auditors can have the ease of getting client’s updated data without any ambiguity and thus leads to precise audit with 100% correctness assured.

For CPAs, it is more important to value their presence in the business & financial world. As previously examined, there are many auditors who lose the faith in the recent integration of their client’s businesses with cloud technology at the time of audit comes near. Results in the not completely authentic reports!

So both auditors & CPAs have to practice these three points prior to start their next audit so to make the process of audit easy.

Carry Advantage Of Technology To Ensure Client’s Satisfaction

When all over the world is benefiting themselves with the advancement of the technology then why you are hesitating to join the crowd? Around thousands of companies are selling their products using the technique of data analytics which is emerging nowadays on a vast level. The technique helps businesses to find right consumers to sell their products effortlessly. Similarly, if we say that in order to get simplified client’s data for audit purpose you don’t need to trawl through numerous of files then, will you accept the technique?

Cloud-based QuickBooks helps CPAs to get updated copy of client’s data over cloud network instantly which ensures them that the big numbers are real and free from risks. When client deals with numbers of transactions, it is quite hard for an accountant to notice all. In such instances, automated data is more reliable than spreadsheets which accounts make previously by consuming hours in it.

Stay Keen-eyed To Client’s Automation Activities

The advancement in technologies already revolutionized the whole process of auditing & accounting. More machines are servicing client’s needs, more the need of accountant decreasing- That’s the real dilemma where major of auditor lacks and results in making their work environment more challenging. Instead of thinking their vanishing time is soon, auditors need to be keen-eyed while checking client’s data. The advancement of automated data is only to lessen their hours-long work so that they can do what businesses actually need them for!

Cloud technology is making things very easy for accountants; real-time changes & updates in client’s data help accountants to file the right report at the time of audit which saves both, client business & accountant dignity from being guilty.

Be Tuned For Recent Updates On Financial World

As the financial world is not untouched by the advancements, so it is important for auditors to stay updated with the new Fin-tech. The accounting software when integrated with the cloud, not only offers you ease of working but also keeps you updated with newest changes in the marketplace.

If we agree to great saying- Learning never ends, it goes till you are alive! Then auditors needs to acknowledge each new update. The same can also be gained by joining thousands of communities where bloggers are dictating on daily basis.

The third-party services are evolving in the marketplace vastly and businesses are also relying on them for their data security. CPAs can offer scaled support to businesses by allowing data automation in their workplace and can negate the risk of an incorrect audit!

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