Therefore, more and more company of

Therefore, more and more company officers and
directors are under ethical and legal scrutiny. In fact, both these trends have the common goal of
addressing the investors’ concerns about the transparent financial reporting system. However, the failure
of the corporate communication structure has made the financial community realize that there is a great
need for skilled professionals that can identify, expose, and prevent structural weaknesses in three key
areas: poor corporate governance (CG), flawed internal controls, and fraudulent financial statements.
Forensic accounting skills, therefore, are becoming increasingly relied upon within a corporate reporting
system that emphasizes its accountability and responsibility to stakeholders.
In general, it can be claimed that the above accounting scandal occurred because of integrated factors,
such as, lack of auditor independence, weak law-enforcement, dishonest management, poor internalcontrol
and inability of CG mechanisms in monitoring top-management behaviors. The SOX 2002
imposes potentially serious penalties on firm executives with fines of up to $5 million and/or
imprisonment up to 20 years. At the same time, this legislation requires that these firms tighten their
internal controls over financial reporting (Barra, 2010). Unfortunately, it is also true that most frauds are
perpetrated by people in positions of trust in the accounting, finance, and IT functions (Carpenter et al.,
2011). Consequently, there should be alternative tools to detect the possibility of financial frauds.
Forensic accounting can be seen as one of such tools. An understanding of effective fraud and forensic
accounting techniques can assist forensic accountants (henceforth, FA’s) in identifying illegal activity and
discovering and preserving evidence (Bhasin, 2007). According to Christensen et al., (2005), “Some
regulators have apparently noticed the need for forensic accounting.” For example, the Sarbanes-Oxley
Act (SOX), the Statement on Auditing Standards-99 (SAS 99), and the Public Company Accounting
Oversight Board (PCAOB) have not removed the pressures on CFOs to manipulate accounting
statements. The PCAOB recommends that “an auditor should perform, at least, one walk-through for each
major class of transactions.” However, SAS 99 does not require the use of forensic specialists but does
recommend brainstorming, increased professional skepticism, and unpredictable audit tests. The PCAOB
has raised concerns about auditors’ fraud judgments and the quality of their brainstorming sessions
(Chariri, 2009; Brazel, 2010).