Chapter: 1

Introductory Analysis
1.1 Statement of the Study
Accounting has been assisting every commercial activity ever since the beginning of
trade, as simplified as it was at that time. Due to the need to efficiently and accurately
translate the economic reality into figures, accounting has been continuously
improving. “What the use of finger prints was to the 19th century and DNA analysis
was to the 20th, forensic accounting will be to the 21st century,” said Gordon Brown,
former Chancellor of the Exchequer. The number of fraudulent activities and dubious
financial activities has been increasing all over the world. Consequently, businesses
are exposed to new risks of fraudulent activities. In such a context, the market for
forensic accounting continues to grow especially in the backdrop of the recent rash of
corporate scandals, corporate collapses, and business failures. In fact these have
prompted business houses to hire forensic accountants to discover through
investigation, various types of wrongdoing in one hand and prevent such occurrence
on the other. Forensic accounting has established itself as dynamic and strategic tool
in combating corruption, crime and frauds through investigations and resolving
allegations of frauds and embezzlements. It is fact that recently corporate world is
taking more measures to combat fraud and launching new antifraud initiatives and
programs by appointing forensic accountant in response to the Sarbanes – Oxley Act
of 2002 than to prior years specially because of the occurrence of strong shocking
corporate scandals such as Enron (2001), Sunbeams (2001), Dynegy (2002),
WorldCom (2002), Adelphia (2002), etc. My approach is specifically centered on the
forensic accounting implications. So to know deeply about the concept forensic
accounting I have chosen the topic “The Effect of Forensic Accounting as a Tool
for Fraud Detection and Prevention” as my project report.
1.2 Significance of the Study
The report is built upon a theoretical approach and presents the state of the art for the
forensic accounting paradigm. Therefore, this study is mostly based on the knowledge
derived from how forensic accounting is supporting the accounting profession. Based
upon the most recent studies and practitioners’ technical reports, this report will
reveal the current scenario of forensic accounting in Bangladesh and how much it is
being introduced and recognized to the professional accountants, Multinational
Corporation as well as local organizations and used as a fraud detection tool.

1.3 Origin of the Study

This report titled "The Effect of Forensic Accounting as a Tool for Fraud
Prevention in Bangladesh" is prepared to fulfill the requirement of the project work
of the MBA (Masters of Business Administration) degree. It is mandatory
requirement of the program that require a student to work in a particular topic. I have
prepared this report for the fulfillment of my project work under the supervision of
Chowdhury Tabassum Shakila.

1.4 Objectives of the Study

1.4.1 General Objective:

The main thrust of this study has concentrated on the issues relevant to the current
status of the application of forensic accounting in Bangladesh and how efficiently
it works as a fraud detection tool.

1.4.2 Specific Objectives:

However, the specific objectives of this study are as follows:

 To explore in-depth knowledge about a new paradigm for accounting

through forensic accounting.
 To evaluate the role of forensic accounting for deterring fraud in
Bangladesh.
 To recommend some steps to develop forensic accounting practice in
Bangladesh.
1.5 Methodology of the Study
The research methods that have used to complete this report are described in this part.
There are two types of sources for collecting data- primary sources and secondary
sources. I have tried to make the report more informative and for this here I have been
collected data from different sources.

1.5.1 Primary Sources of Data:

As there is no scope for survey or face to face interactions with people, there
is no Primary Source of data that can be used in this report.

1.5.2 Secondary Data Sources:

 Journals
 Different articles regarding forensic accounting
 Internet

1.6 Limitations of the Study

 Time period for completing the project report is relatively short.
 There is little or no scope for making survey.
 Primary data are not available.
 Unavailability of information source is another barrier for completing the
report.
Besides the above limitations, I had tried with all of my efforts to know and find
out the response pattern of the subjects and consultation of relevant record and
document. Data have reached a fairly acceptable degree of accuracy.
 Chapter: 2
Conceptual Framework of
Forensic Accounting
2.1 Concept of Forensic Accounting

Forensic accounting is the use of accounting skills to investigate fraud or

embezzlement and to analyse financial information for use in legal proceedings.
Where traditional accounting deals in the assessment of a business’ funds and
properly conveying that information to investors and management, a forensic
accountant is called upon to investigate the flow of funds through a business to
evaluate the path it takes and determine whether illegal transactions have occurred.

A forensic accountant investigates a wide range of different crimes that relate to

fraud, such as corporate, health care, mass marketing, hedge fund, and securities
fraud. They also investigate other crimes such as contract disagreements, money
laundering, and embezzlement.

While the duties of a forensic accountant mainly leads them to investigating and
analysing, they are also commonly called on as an expert witness during a trial, due to
the combination of experience and knowledge required to enter the field.

There are also instances in which the skills forensic accountants employ are used in
more personal matters. The dissolution of a marriage, for instance, is an event during
which a forensic accountant will review the financial situation of both parties as well
as their spending to further the settlement process or to assist attorneys with accurate
information to use in court. Forensic attorneys are able to trace assets through the
various investments and accounts as well as identify any hidden income or assets.

2.2 Evolution of Forensic Accounting

Forensic accounting has been termed the fastest growing area of accounting today
(Wallace, 1991). Despite the recent spotlight, forensic accounting is not new. Its roots
have been traced as far back as the early 1800's to Glasgow, Scotland that,
notwithstanding forensic accounting as a profession remained relatively unknown
until the plethora of high-profile corporate scandals and stricter reporting and internal
control regulations which brought to light its importance to the business world
(Wallace, 1991). Recent history indicates that Maurice E. Peloubet is credited with
developing the term Forensic Accounting in his 1946 essay "Forensic Accounting”.
Although the term may not have been used before the 1940s, a strong argument can
be made that the first high-profile forensic accountant was Frank J. Wilson, the man
who spearheaded the campaign to convict Alphonse “Scarface” Capone of tax evasion
in 1931 (Joshi, 2003). By this time, Forensic Accounting had proven its worth during
World War II; however formalized procedures were not in place until the 1980's when
major academic works were published. During the classical O.J. Simpson trial,
forensic accountants evaluated his assets impacting the damages awarded in the civil
suit. Forensic Accounting has been pivotal in the corporate scandals of companies
such as Enron, Tyco and WorldCom.

Crumbley (2001) noted that the professional history of forensic accounting may be
traced back to 1992 when the American College of Forensic Examiners was
established with the American Board of Forensic Accounts starting in 1997. The
Journal of Forensic Accounting, Auditing, Fraud and Taxation began publication in
2000. In 2002 the Sarbanes-Oxley Act established the Public Companies Accounting
Oversight Board (PCAOB), which was charged with developing auditing standards,
conducting investigations and ensuring corporate compliance. As a result of the
Sarbanes-Oxley Act, there has been continuing emphasis on forensic accounting.
Forensic accounting is the new branch in accounting which has the sole aim of
unearthing fraudulent activities within and outside an organization so far as the third
party’s action is in any way reflective on the activities of that organization (Crumbley,
2003). As a discipline, it encompasses financial expertise, fraud knowledge, and a
sound knowledge and understanding of business reality and the working of the legal
system. Zysman (2004) points out that the development of forensic accounting has
been primarily achieved through on-the-job training as well as experience with
investigating officers and legal counsel.

2.3 Importance of Forensic Accounting

The discipline is beginning to see many avenues for additional proficiencies that go
beyond accounting and finances. The need for skill sets more accustomed with the
legal process and computer technology are highly sought after and play a crucial role
in determining the outcome of courtroom events. Forensic accounting is in its current
state due to a few factors — one of them being the rise of a new generation of hopeful
entrepreneurs and business professionals. Every year, about 500,000 new businesses
start up, many of which have partial or major online components.

With the newborn reliance on technology, the role of the forensic accountant has
expanded into the digital world. Information stored online, regardless of the strength
of passwords and other security features, is always at some level of risk and the
modern forensic accountant has evolved their skills to include various methods of
investigation that apply to the ever-changing digital world.

They can be commonly seen sifting through enormous email accounts and other
digital services for the hint of fraudulent activity, just as easily as they are found
sorting boxes of files, folders, and forms.

2.4 Comparison between Forensic Accounting, Traditional

Auditing and Accounting
According to Okoye and Akenbor (2009), it has been established that one of the
challenges facing the development of forensic accounting in developing economies, is
the fact that most companies, educational institutions and individuals myopically
believe that forensic accounting is not different from auditing, hence they give very
little or no attention to it. This is evidenced from the fact that forensic accounting is
considered as a component part of audit courses rather than being a standalone course
in tertiary institutions of developing economies. Though these two accounting
disciplines are similar, yet a sharp line of demarcation can be drawn in terms of their
objectives and requirements.

Grippo and Ibex (2003) Mazni and Mohd (2008); and Carey (2008) revealed that
forensic accounting is different from auditing and is as presented in the table below:

Traditional Auditing and Accounting Forensic Accounting

Traditional Audit and Accounting is Forensic Accounting is done in response to

Mandatory an event

Auditors should possess “professional Forensic accountants should possess

skepticism”. “Investigative mentality”
Measures compliance with reporting Deals with Financial investigation
standards

Obtain reasonable assurance that financial Findings used as evidence in court or to

statements are free of material resolve disputes
misstatement

An auditor basically focuses on material A forensic accountant may focus more on

transactions. seemingly immaterial transactions.

Audit is mainly concentrated on Financial The coverage of forensic accounting is

statements and its related items wider than audit dealing with both
financial & non-financial issues

2.5 Financial Fraud

The concept of financial fraud is itself chaotic; however, scholars vary significantly in
their expressions about fraud. Bello (2001) and quoting Russel (1978) remarks that
the term crime is generic and is used in various ways. Crime assumes so many
different degrees and forms that courts are compelled to context themselves with only
few general rules for its discovery and defeat. It is better not to define the term lest
men should find ways of committing frauds, which might evade such definitions.
Okafor (2004) also reported that financial fraud is a generic term and embraces all the
multifarious means which human ingenuity can devise, which are resorted to by one
individual to get advantage over another in false representation. No definite and
invariable rule can be laid down as a general proposition in defining crime as it
includes surprise, trick, cunning and unfair ways by which another is cheated.
The accounting fraud is executed by making falsified financial accounting statements
where the numbers are manipulated by overstating assets, spurious entries related to
sales and profit, misappropriation in taxes, or understating liabilities, debts, expenses
or losses. The accounting fraud is also defined by accounting professionals as
deliberate and improper manipulation of the recording of data in financial statements
in order to achieve an operating profit of the company and appear better than it
actually is. Economically, financial fraud is becoming an increasingly serious
problem and effective detecting accounting fraud has always been an important but
complex task for accounting professionals. The internal auditing of financial matters
in the companies has become an increasingly demanding activity and there are much
evidence that book cooking, accounting practices are worldwide applied for doing
financial frauds.

2.6 Forensic Accounting and Financial Fraud

The integration of accounting, auditing and investigative skills results in the special
field known as forensic accounting (Crumbley, 2008). Forensic accountants have
been described as experienced auditors, accountants and investigators of legal and
financial documents that are hired to look into possible suspicions of fraudulent
activity within a company; or are hired by a company who may just want to prevent
fraudulent activities from occurring (McKittrick, 2009). Manning (2005) notes that
the services of forensic accounting are utilized in areas such as accounting, antitrust,
damages, analysis, valuation, and general consulting. Forensic accountants have also
been used in divorces, bankruptcy, insurance claims, personal injury claims,
fraudulent claims, construction, royalty audits, and tracking terrorism by investigating
financial records.
According to the Centre for Forensic Studies (2010) report, the increasing need for
forensic and investigative accounting in the banking sector results from the nature of
modern-day banking involves large volume of complex data, which makes it difficult
to monitor those transactions by applying manual audit processes. This in turn makes
the control utility of auditing ineffectual. Virtually all the weaknesses and challenges
identified in the banking industry and criminal investigations and prosecutions arising
from them, are issues for forensic accounting.
Though financial fraud has witnessed highly publicized cases especially in the
banking system, Enyi (2009) undertook a study to offer suggestions using real case
problem on how to apply forensic accounting in investigating variances and suspected
fraudulent activities in manufacturing processes and thus suggest that the application
of forensic accounting applies to all scenes where fraud is a possibility.
Okoye and Akenbor (2009) commenting on the application of forensic accounting in
developing economies like Bangladesh, notes that forensic accounting is faced with
so many bottlenecks. Crumbly (2001); Grippo and Ibex (2003) revealed the following
challenges confronting the application of forensic accounting:
 (i) A significant challenge that faces a forensic accountant is the task of
gathering information that is admissible in a court of law.
(ii) The admissibility, of evidence in compliance with the laws of evidence is
crucial to successful prosecutions of criminal and civil claims.
(iii) Globalization of the economy and the fact that a fraudster can be based
anywhere in the world has led to the problem of inter-jurisdiction.
(iv) The law is not always up to date with the latest advancements in
technology. Therefore, lawyers and forensic accountants have to rely on
outdated acts, laws that are of general nature, or on acts that have not yet
proven their effectiveness in prosecuting fraudsters.
(v) Forensic investigations often wind up as evidence in legal proceedings,
including full-fledged trails.
(vi) Forensic accounting is, seen as an expensive service that only big
companies can afford it to detect any irregularities or fraud in their
companies. Besides, it will be quite costly if the issues were brought to
court and where it involves expert witnessing. Thus, most companies
prefer to settle the issue outside the court to avoid the expensive cost and
the risk of bad publicity on their corporate image.
(vii) Forensic accounting is a new trend particularly in developing economies.
Hence, accountants with adequate technical know-how on forensic issues
are hardly available.

2.7 Corporate Crime Mitigation

Braithwaite, as sighted in Enofe, Ekpulu, and Ajala, (2015) defined corporate crime
as the conduct of a corporation, or of employees acting on behalf of a corporation,
which is proscribed and punishable by law. Corporate crime intersects and is usually
confused with white-collar crime, organized crime and state-corporate crime (Enofe et
al., 2015). Edwin Sutherland was the first to coin the term white-collar crime, and he
defined it as the crime committed by a person of respectability and high status in the
course of his occupation (Sutherland, 1940). Corporate crime is often committed by
skilled perpetrators and more often by a conspiring group who are usually ahead of
the law enforcement authorities. These characteristics make corporate crime a serious
threat and difficult to prevent, deter and combat not only at the domestic level but also
at the global level (Sudti, 2008). The world has become a global village as
progression in information, communication, and technologies have been made, thus
making the commission of corporate crime more sophisticated and complicated
(Sudti, 2008).

Corporate crime is difficult to be detected and identified and is not as evident as the
conventional crime (Enofe et al., 2015). It is of essence therefore for legal action and
other administrative measures to be taken to prevent, defeat and reduce the occurrence
and the impact of this crime (Sudti-autasilp, 2008). This kind of crime involves a
complex web of deception and conspiracy that most times mask the actual cause of
the fraud (Enofe et al., 2015). Forensic accounting tools, accounting and computer
forensic are the investigators best weapon in detecting and mitigating corporate crime
(Hansen, 2009).

Detection and therefore mitigation of corporate crime or white-collar crime are made
possible by the application of investigative tools by the forensic accountant (Baird &
Zelin, 2009). Examples of types of corporate crimes committed by corporate
individuals and institutional management include but not limited to; securities-related
crimes, consumer fraud, tax fraud, insider trading, insurance fraud, bribery,
corruption, political fraud, bankruptcy etc. (Enofe et al., 2015).

2.8 Effect of Forensic Accounting Services on Corporate

Crime Mitigation
Different researchers have different opinions on the effectiveness of forensic
accounting in corporate crime mitigation. Fiia (2013), in his examination of forensic
accounting as a tool for corporate crimes detection and prevention, thereof, found that
the use of forensic accounting significantly reduces the occurrence of fraud cases in
the public sector and, therefore, can help in detecting and preventing fraud cases in
the public sector organization. Another study showed that the use of forensic
accounting by different companies in Nigeria was not effective in curbing these
crimes (Okunbor and Obaretin, 2010). Islam, Rahman, and Hossan (2011), in their
study established that forensic accounting as a corporate crime detection tool had
relevance as it appeared to be one of the strategic tools for dealing with such crimes.
Boritz, Kotchetova, and Robinson, (2008) in another study, probed forensic
accountants and auditors to establish the advantages of involving fraud specialist in
the processes of developing an audit plan that would effectively identify fraud. They
found out that this would lead to better results than merely consulting with them.

In addition, Koh, Arokiasamy, and Suat (2009), in their study, examined forensic
accounting in the aspect of public acceptance towards fraud detection and they
accentuated that the important subject was that forensic accounting is conducted to
improve the understanding in detecting and reducing accounting crimes. They thought
that audit firm as one of the tools to investigate a company “s financial statements for
fraudulent activities as requested by certain parties has practiced it They emphasized
that the forensic accounting activities such as investigative accounting and litigation
support would enrich the managerial performance. Stoel, Havelka, and Merhout
(2012), in their study, emphasized the increasing importance of information
technologies in accounting, auditing and also dealt with the data mining technique
that the forensic accountant can benefit from when faced with the corporate crimes.
This is because technology is being used for vicious purposes and struggle with this
kind of crimes. Singleton and Aaron (2010), in their study, highlighted forensic
accounting and fraud auditing, and they concentrated on topics such as responsibility
of the auditors, red tags, and fraud detection, protection from fraud and control,
forensic accounting with the dimension of expert testimony in protection from
corporate crimes.

With the drastic increase in public demand for honesty, fairness, and transparency,
there has recently been an increased need for forensic accountants (Ramaswamy,
2011). The author emphasized the difference between forensic accountants skill set
with that of auditors or financial accountants. It was also pointed out that there is a
need for universities to prepare education programs in order to train qualified forensic
accountants to meet the potential future needs. From these studies, it can be deduced
that there is a dire need to embrace forensic accounting to aid in detecting and
therefore mitigating corporate crimes that are increasing by the day in financial
institutes.
2.9 Common Accounting Fraud Areas

Usually in any typical fraud investigation, the forensic accountant and his team would
encounter similar factual scenarios or frauds, which are not peculiar to any
organisation. The more common types are illustrated in the following table:

Accounting Items Possible Fraud Scenarios

Revenue Recognition a) Premature recognition of sales
b) Phantom sales
c) Improperly valued transactions

Reserves a) Bad faith estimates

b) One time charges

Inventory a) Over-valuation
b) Non-existent inventory

Expenses a) Delayed expense recognition

b) Improper capitalisation of expenses

Others a) Related party transactions

b) Acquisition accounting

2.10 Challenges of Forensic Accounting Application

With an upsurge in financial accounting fraud in the current economic scenario

experienced, financial accounting fraud detection (FAFD) has become an emerging
topic of great importance for academic, research and industries. The failure of internal
auditing system of the organization in identifying the accounting frauds has led to use
of specialized procedures to detect financial accounting fraud, collective known as
forensic accounting (Sharma and Panigrahi 2012). Though financial fraud in
developing economy has witnessed highly publicized cases especially in the banking
system, Enyi (2009) undertook a study to offer suggestions using real case problem
on how to apply forensic accounting in investigating variances and suspected
fraudulent activities in manufacturing processes and thus suggest that the application
of forensic accounting applies to all scenes where fraud is a possibility.

Degboro and Olofinsola (2007) noted that an important challenge to the application of
forensic accounting in financial fraud control in developing countries is that the law is
not always up to date with the latest advancements in technology. Also, forensic
accounting is, seen as an expensive service that only big companies can afford it to
detect any irregularities or fraud in their companies. Besides, it will be quite costly if
the issues were brought to court and where it involves expert witnessing. Thus, most
companies prefer to settle the issue outside the court to avoid the expensive cost and
the risk of bad publicity on their corporate image. In addition, forensic accounting is a
new trend particularly in developing economies. Hence, accountants with adequate
technical know-how on forensic issues are hardly available.

2.11 Rationale for Forensic Accounting

The forensic examination of the corporate failures have once again highlighted the
importance of accounting information, and specifically, for accounting information
that is true and fair to allow various stakeholders to make informed decisions in
regards to dealing with companies. Nowhere is this more evident than in real life as
evidenced by the prompt knee-jerk reaction and response of legislators and corporate
regulators in tightening corporate governance, accounting rules and industry practices.
These have included a variety of measures to prevent or minimize corporate collapses
from re-occurring via the enactment of the Sarbanes-Oxley Act of the United States,
and the Corporate Law Economic Reform Program Act (‘CLERP 9’) in Australia.
These statutes have imposed greater duties upon a range of persons involved in
corporate governance and capital markets, and may have an impact upon the liability
faced by these stakeholders. The corporate collapses have also inevitably lead to a
series of law suits against the advisors to these companies including auditors,
investment bankers and capital market research analysts who perform an oversight or
quasi-oversight function of these companies. These law suits are likely to be brought
not only to by the liquidator as part of claw back proceedings but also by third parties
who may have suffered economic harm due to reliance on statements made by these
professional service providers. Further to this, the large amounts of money, which
 were lost, by various investors, creditors and stakeholders may result in extraordinary
unprecedented civil liability for these advisors. Therefore, it is timely to examine the
development of auditors’ civil liability to third parties. It has been recognized that
there is a need for true and fair financial information, and as such, a balance must be
struck between making those responsible for inaccurate and potentially negligent
advice liable for economic damage, with the need for keeping such professionals in
business by not forcing them to abandon their chosen profession because of
unaffordable liability. Professional liability is an especially important issue for the
accounting profession where market power has now.

2.12 Knowledge and Functions of Forensic Accountant

Special
Knowledge area Functions

Accounting and a. To check proper evidences and documents to find out fraud
Finance and theft.
b. Economic loss calculation
c. Business and asset valuation
d. Application of Accounting standards, principles, guidelines
e. Application of Auditing standards, techniques
Law a. For providing litigation support to the clients, forensic
accountants need to have knowledge of different laws such
as company law, civil law, criminal law, cyber law etc.
b. Should know the right court for proper judgments.
Investigative skill a. To understand the psychology of criminals
b. To explore the types of frauds and theft
Communication a. To know different local and international languages for
skill interrogation purposes
b. To prepare investigation report
c. To file case in a formal court
2.13 Typical approach to a Forensic Accounting Assignment
The task of each forensic accounting is unique and different from each other
according to nature and status. Accordingly, the actual approach adopted and the
procedures performed will be specific to it. However, many Forensic Accounting
assignments will include the following steps in general:

 Meet with the client: The first step in this typical approach to go through an
assignment is to meet with the relevant objects. It is helpful to meet with the
client to obtain an understanding of the important facts, players and issues at
hand.
 Perform a conflict check: Now in this step the concerned forensic accountant
critically observes the whole matters. Then a conflict check should be carried
out as soon as the relevant parties are established.
 Perform an initial investigation: It is often useful to carry out a preliminary
investigation prior to the development of a detailed plan of action. This will
allow subsequent planning to be based upon a more complete understanding of
the issues.
 Develop an action plan: This plan will take into account the knowledge
gained by meeting with the client and carrying out the initial investigation and
will set out the objectives to be achieved and the methodology to be utilized to
accomplish them.
 Obtain the relevant evidence: Depending on the nature of the case this may
involve locating documents, economic information, assets, a person or
company, another expert or proof of the occurrence of an event.
 Perform the analysis: The actual analysis performed will be dependent upon
the nature of the assignment and may involve:
 Calculating economic damages;
 Summarizing a large number of transactions;
 Performing a tracing of assets;
 Performing present value calculations utilizing appropriate discount
rates;
 Performing a regression or sensitivity analysis;
 Utilizing a computerized application such as a spread sheet, data base
or computer model; and
  Utilizing charts and graphics to explain the analysis.
 Prepare the report: Often a report will be prepared which may include
sections on the nature of the assignment, scope of the investigation, approach
utilized, limitations of scope and findings and/or opinions. The report will
include schedules and graphics necessary to properly support and explain the
findings.

2.14 List of Advantages of Forensic Accounting

✔ Fraud Identification and Prevention

Fraud is quite common in big organizations where the number of daily financial
transactions is huge. In such an environment, an employee can easily undertake
fraudulent activities without being caught. Forensic accounting helps in analyzing
whether the company's accounting policies are followed or not, and whether all the
transactions are clearly stated in the books of accounts. Any deviation observed in the
books of accounts can help in identifying fraud, and necessary measures can be taken
to prevent it in the future.

✔ Making Sound Investment Decisions

As forensic accounting helps in analyzing the financial standing and weaknesses of a

business, it provides a path for investors to make thoughtful investment decisions. A
company dealing with fraud is definitely not a good option for investment. Therefore,
the reports of forensic accountants act as a guide for potential investors of a company.
Many organizations also apply for loans from various financial institutions. By
performing an analysis, such institutions can come to a decision on whether they
would like to fund a company or not.

✔ Formulation of Economic Policies

Various cases of fraud that becomes evident after forensic analysis act as a reference
for the government to formulate improved economic policies that would be able to
curb such fraudulent activities in the future. By doing so, the government can
strengthen the economy and prevent such illegal activities in the country.

✔ Rewarding Career Opportunity

As a career, forensic accounting is extremely rewarding, as it not only involves

regular accounting activities, but also involves identification, analysis, and reporting
of the findings during an audit. The acceptance of reports generated by a forensic
accountant by the court of law, gives them an upper hand as compared to other
accountants. Good forensic accountants are in high demand and can easily draw a
starting salary between $30,000 and $60,000 per annum.

2.15 List of Disadvantages of Forensic Accounting

✘ Confidentiality Issue

Since the scrutiny of a company's financial records are done by an external forensic
accountant the chances of leakage of confidential matter is always there. It is true that
their code of ethics clearly mentions that forensic accountants and other members
involved in the scrutiny must not engage in disclosing confidential data to outsiders,
but the possibility of disclosure cannot be nullified.

✘ Increased Chances of Threats and Negative Publicity

If the analysis of a company's financial statements points out the involvement of a

particular person in fraudulent activities, there is a significant chance that the person
will try to threaten the company to safeguard him from the trial. Also, any trial that
confirms a fraud happening in the company comes under public eye and gains
negative publicity, which directly affects the reputation and investor relations of the
company.

✘ Costs a Lot of Money

Forensic accounting can be an expensive affair because the procedures which

accountants use involve high-end accounting software. If study results have to be
presented in a trial, the overall expenditure goes up even further, because the fees of
forensic accountants is quite high. This can be a matter of concern for the
organization.

✘ Losing Employee Trust

It is quite obvious for employees to feel offended when they come to know that their
job is under scrutiny by a third person. If no fraud is identified, employees are left
with the feeling that the employer does not have faith in them. Lost trust can be
difficult to regain in such cases.

✘ Limited Use of Services

Federal regulations limit the use of services from a single accounting firm. Suppose a
company has tied up with one firm for auditing, it cannot ask the firm to provide other
services to it. Therefore, a company has to reach out to several firms for carrying out
its accounting tasks.

Despite the disadvantages associated with forensic accounting, it is, and will continue
to be an important part in the world of business. This is because it helps organizations
and individuals to figure out whether their financial accounts are accurate or
fabricated to hide illegal activities going on within the organization.
 Chapter: 3
Literature Review

3.1 Literature Review

Historically, there has been confusion between the accounting profession and the
public over who bears responsibility for detecting fraudulent financial statements. For
years, the accounting profession has maintained that it is not responsible for detecting
fraud during the course of a financial statement audit. However, the courts
increasingly have been holding accounting firms responsible for failing to detect
financial statement fraud. Currently, the Big Five accounting firms are facing an
unprecedented $30 billion in total legal claims arising from audit and consulting
malpractice lawsuits (MacDonald, 1998). Forensic accountants work in two primary
areas, investigative accounting and litigation support. Investigative accounting
encompasses not just the numbers and documents of a company, but the business
environment as well (Moncliff, 2005).

There is a difference called ‘Perception Gap’ between the public and the auditing
profession concerning the duty of an auditor regarding the fraud and errors detection.
Therefore the auditor duty can be seen as the independent examination and expression
of opinion over the financial statements produced by the entities. It must be done by
an appointed auditor in compliance with the relevant statutory obligation (Millichamp
and Talor, 2008). The traditional role played by the external auditors is that they will
just certify whether or not the financial statements of the concerned clients show a
true and fair view of the state of affairs of the organization. But they are not liable to
detect fraud if they work with proper diligence and good faith. This means that
external auditors are basically working with numbers. They will not go beyond the
number. In such a situation, forensic accountants do not merely look at the numbers
but rather looks behind the numbers. Forensic accounting may be one of the most
effective and efficient way to reduce and prevent accounting fraud (Koh, Arokiasamy
& Suat 2009). Forensic professional accountants while conducting their examinations
must look for signs of fraud whereas all other accountants (financial accountant, cost
and management accountant, and even chartered accountant) in this arena do not do
so. In doing so, forensic accountants may examine internal databases and court
records. Because people committing fraud have hidden the evidence of their crimes,
forensic accountants must look beyond the numbers and anticipate criminal actions
(Bobby Waldrup, Kim Capriotti and Seth C. Anderson, 2009). The majority of the
lawsuits brought against accounting firms involved either bankrupt or financially
distressed (Buckhoff and Schrader, 2001).
Many different organizations consult forensic accountants. Corporations hire forensic
accountants to investigate allegations of fraud on the part of their employees,
suppliers, or customers. Attorneys consult forensic accountants to obtain estimates of
losses, damages, and assets related to specific legal cases in many areas of the law,
including Product Liability, shareholder disputes, and breaches of contract. In
criminal investigations, forensic accountants analyze complex financial transactions
such as those in Stock Market manipulations and price fixing schemes. They also help
governments achieve compliance with various forms of regulation (Jack, and
Lindquist, 1985). The occupational fraud committed by employees usually involves
the theft of assets and embezzlement and the involvement of employees in kickback
schemes or conversion of corporate assets for personnel use, the forensic accountant
on intervene and observe the suspected examination of assets, invigilation, inspection
or documents and interview of those involved to control such practices experience
and these types of engagement enables the forensic accountant to offer suggestions as
to internal controls that owners could implement to reduce the likelihood of fraud
(Owojori & Asaolu 2009).

"While Forensic Accountants ("FAs") usually do not provide opinions, the work
performed and reports issued will often provide answers to the how, where, what,
why and who. The FAs have and are continuing to evolve in terms of utilizing
technology to assist in engagements to identify anomalies and inconsistencies. It is
important to remember that it is not the Forensic Accountants that determine fraud,
but instead the court" (David Malamed, 2011).
Forensic accounting, forensic accountancy or financial forensics is the specialty
practice area of accountancy that describes engagements that result 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 also referred to as forensic auditors or
investigative auditors, often have to give expert evidence at the eventual trial
(Crumbley, Heitger and Smith 2005). Several instances of corporate scandals and
failure in resent past have put the professional accounting bodies into a new
perception that goes beyond statutory audit and in some ways even the trend of
corporate governance (Owojori, A.A and T. O. Asaolu 2009). Litigation support work
within the area of forensic accounting is challenging in many aspects, and is an
interesting alternative to the other more visible areas of the accounting profession
such as auditing, tax, and management accounting. In addition to analyzing the
financial considerations of a lawsuit, preparing a damages report, and testifying as an
expert witness, another service the forensic accountant can provide is an important
area as well helping to prepare deposition questions for posing to the other side’s
expert (Fenton and Isaacs, 2012).

Forensic accounting has come into limelight due to rapid increase in financial frauds
and white-collar crimes. The opportunities for the forensic accountants are growing
fast; they are being engaged in public practice and are being employed by insurance
companies, banks, police forces, government agencies, etc. (Bhasin, 2007). Many
wonder if, but not all agree that the failure of Sonali Bank, Ruposhi Bangla Branch to
prevent the fraudulent misappropriation of Tk.3, 607 corers by Hallmark Group (Tk.2,
668 corers) and others is the biggest scandal in the banking industry. In recent times,
several such frauds - (a) misappropriation of Tk.622 corers by one Nurunnabi in
Chittagong in 2007 through a false local letter of credit, (b) embezzlement of Tk.596
corers withdrawn without cheque from Oriental Bank in 2006 (alleged Hawa Bhaban
connection), and (c) transfer of Tk.300 corers by forgery from five banks by one Om
Prokash in 2002 -- were not as heinous as bank defrauding. Perhaps more damaging
has been the transfer in their personal accounts of more than Tk.4, 500 corers by the
powers that be from the mother account of the infamous Destiny Group before the
eyes of the banking authorities several months into the first sighting of the alleged
fraudulent and illegal deposit taking from the members of the public (Mohammed
Farashuddin, Daily Star, September 09, 2012).

The forensic accounting investigator's concern is, at a much more granular level, with
the detailed development of factual information—derived from both documentary
evidence and testimonial evidence—about the who, what, when, where, how, and
why of a suspected or known impropriety. The forensic accounting investigators can
be compared to the detectives called in to investigate a crime. (Gerson, Brolly and
Skalak, 2015).
In 2008, Institute of Chartered Accountants of Bangladesh (ICAB) organized a
seminar on "Forensic Accounting – A Dynamic Tool for Combating Corruption in
Bangladesh". While speaking in the seminar as Chief Guest Professor Muzaffar
Ahmad said, “Corruption poses to destroy the moral of our society and is the number
one problem of the country. The threat of corruption in Bangladesh has increased
manifold in different segments of government offices and the private sector as well, in
wider and alarming scale. To salvage the country from such a deplorable state of
affairs, the role of a forensic accountant is extremely important commented. There is
an unholy alliance among the corrupt elements of the country, which can be
dismantled at least partially, if not fully with the help and assistance of the forensic
accountants” (Financial Express, 2008).
 Chapter: 4
Forensic Accounting in
Bangladesh

4.1 Forensic Accounting In Bangladesh

The recent trend of events in the fast changing world of globalization and
advancement in information technology has necessitated the accounting profession to
be more charismatic and innovative. This study investigates the effectiveness of
forensic accounting in financial fraud control, improving financial reporting quality
and internal controls of the different sectors in Bangladesh. No real work regarding
forensic accounting has been done in Bangladesh. As in Bangladesh where the
unethical aspects of creative accounting are rampant, the practice of forensic
accounting (i.e., investigative accounting done by forensic accounting consultants to
solve problems in courts) needs to be introduced and recognized. Forensic
accounting’s “Financial Statement Alert” scrutinizes public companies’ questionable
accounting practices, advises investors to examine carefully shareholder letters and
management’s discussion and analysis of financials, and to try to read between the
lines by looking at four basic areas: extent of a company’s earnings from operations,
as opposed to onetime occurrences, warning signs in the financial statements (e.g.,
shrinking profit margins, or fast growing inventories or receivables, or insufficient
cash generation, etc.), changing accounting methods to more favorable one, or using
accounting methods different from the ones the competitors use, and assets or
liabilities on (or off) the balance sheet that might affect future earnings. This study
reveals the present application of forensic accounting practicing in Sonali Bank Ltd.,
Agrani Bank Ltd. and BASIC Bank Ltd. of Bangladesh. In most recent these banks
faced a lot of critical problems regarding fraud and corruption. Bangladesh faces great
challenges in stopping corruption in many sectors. After 1/11, 2007 caretaker
government was strict to ban corruption. In this situation, the corporate entity in
Bangladesh is in a position to expect more proactive functioning from the accounting
people, which is not being met by the traditional auditors. To combat and control
financial crimes the professional accountants need to be enriched with investigative
skills and capabilities.
Though forensic accounting is now practiced in Bangladesh but the practice of it is
very low compared to the developed nations like USA, Canada or Australia.
However, in order to combat the fraud and corruptions inflicting this country’s
economy, we need effective tools to measure, detect and prevent the aforesaid
nuisances. To effectively implement Forensic Accounting, it can be recommended
that references or syllabus of university courses could include this particular field, as
it is still unknown for many people.
4.2 Characterization of financial crimes occurring in
Bangladesh
In this study, there was an attempt to characterize the financial crimes occurring
repeatedly in Bangladesh. To serve the purpose this report uncovered the news of
financial sandals for 2015 (July and August, 2015) that had been disclosed in the most
circulated national daily 'ProthomAlo' and the 'daily star'. 34 misdeeds appeared in the
news source at that time. These occurrences had been studied and scrutinized properly
to come up with an idea of the nature of financial crimes in Bangladesh. Below a table
is presented that shows this picture-

Table-2 frequency, volume and features of financial crime occurred in July and
August 2015
Frequency Sectors Estimated
Types of crime of involved Nature Monetary
occurrenc value
e
Land Dispute 2 Private-1 Land documentation fraud, 115 corer
Public-1 bribery in land registration and
services
Tax evasion 2 Private-2 Illegal import of tasting salt by 465 corer
false declaration, Illegal import
of mobile phone set
Cheque forgery 2 Public-1 Illegal withdrawal of money Value
from bank unknown
Fund 5 Public-3 Embezzlement by private and 1.30 corer
embezzlement Private-2 govt. officials, improper
documentation
Money 2 Private-2 Exercising political power 10 corer
laundering
 Share price 3 Private-3 False price sensitive information Value
inflation due to unknown
false
information
Bribery 2 Public-2 Nepotism in govt. employment Value
unknown
Financial fraud 2 Private-2 Cricket match fixing / Multilevel Value
marketing unknown
Terrorism 2 Private-2 Encouraging terrorism by illegal Value
finance or financing, mobile banking unknown
transaction for transactions for illegal purposes 1.08 corer
illegal purpose
Loan misdeeds 1 Public-1 Illegal relation with bank 400 corer
officers and import loan
transferred to export loan and
rescheduled
Other financial 12 Public-5 Organized theft, supply of poor 5 corer
crimes Private-7 material at regular price,
withdrawing stipend in the name
of students, collecting higher
ticket fare by flight agencies,
etc.
Source: Data survey from newspaper Statements

It is clear from the table that, occurrences of fund embezzlement were the highest in
number. And in respect of the volume, tax evasion (465 corer) occupied the top place.
All these financial crimes happened in both public and private sectors. As per this
statement, about 60% (21 out of 34) financial misdeeds happened in private sectors
and 40% in public sectors. It is also noteworthy that, the report only presented the
published news reports and we can assume that there are many such incidents that are
occurring but are not being revealed in public.
4.3 Examples of few recent scandals that imply necessity of
forensic accounting in Bangladesh
Many previous literatures support the importance of forensic accounting for
developed countries perspective. However, various recent scandals of Bangladeshi
corporations-private or public are accelerating the importance of forensic accounting.
Some of those are presented below.

4.3.1 Destiny 2000 Ltd.

There are specific allegations against Destiny Multi Purpose Cooperative Society for
openly operating as a bank, without any permission of license issued by the
Bangladesh Government; the company is selling non-existing trees to the innocent
people by offering them high profit. Destiny 2000 Ltd has already collected an
amount equivalent to US $ 7 billion (nearly 50 thousand Corers Taka) from the public
by selling fictitious shares of their so- called plantation projects in Bangladesh. The
promoters of Destiny 2000 Limited are continuing to illegally transfer millions of
dollars to various countries in the world, using private channels via China.

4.3.2 Unipay2u
Unipay2u has already disappeared robbing few hundred millions of Taka from the
innocent people by alluring them with high profit promises.

4.3.3 Jubok
A large cooperative society named Jubok, which also started illegal banking, was shut
down on 2011 by the government and legal proceedings are now undergoing against
the promoters of Jubok for their illegal activities.

4.3.4 Dolancer
An outsourcing company Dolancer is also apparently involved in fraud by charging
people 100 dollars to be a member and falsely showing in the description that the
company is 20 years old, while the company was incorporated on 25 February 2011.

4.3.5 Hallmark- Sonali Bank Loan Scandal

In May 2012, a report from the Bangladesh Bank revealed that the Ruposhi Bangla
Hotel Branch of the state-owned Sonali Bank, Bangladesh's largest commercial bank,
illegally distributed Tk 36.48 billion (US$460 million) in loans between 2010 and
2012. The largest share, of Tk 26.86 billion (US$340 million), went to the now
infamous Hallmark Group. While the focus has understandably been on Hallmark,
other companies also participated in the fraud, including:

 T and Brothers, Tk 6.10 billlion

 Paragon Group, Tk 1.47 billion
 Nakshi Knit, Tk 660 million
 DN Sports, Tk 330 million
 Khanjahan Ali, Tk 50 million

This is considered to be the country's largest banking scandal. It dwarfs previous

fraud cases, such as a Tk 6.2 billion Letter of Credit fraud in Chittagong in 2007, a
Tk. 5.96 billion fraudulent withdrawal from Oriental Bank in 2006, and a Tk. 3
billion-forgery scandal in 2002.

4.3.6 Stock market crash (1996)

On December 26, 1996, the SEC constituted an Enquiry Committee to investigate into
the irregularities of Stock Market activities during July 1996 to November 1996. On
March 27, 1997, the Enquiry Committee, headed by the Vice Chancellor of
Jahangirnagar University, submitted the report identifying a number of companies and
some of the country's biggest brokers who were apparently involved in market
rigging. Based on the report, on April 2, 1997, the chief metropolitan magistrate court
issued arrest warrants against 32 people in 7 brokerage firms and 8 listed companies.
The SEC also filed 15 share-scam cases in the High Court Division of the Supreme
Court of Bangladesh. The High Court, however, granted anticipatory bails to the
accused along with nine others on April 6, 1997. Since then the government officials
at SEC were unable to say anything about the status of the cases.

4.3.7 Stock market debacle (2011)

At the end of the 2011, the stock market of Bangladesh had fallen down to the bottom
line from a booming position. The approximate loss was 20 thousand crores taka and
the number of sufferers were about 20 lacs investors (Alam and Chowdhury, 2011).

4.3.8 Bank scandals

A survey of consumers carried out by TIB in 2008 provides corroborating evidence
for the types of corruption in bank suggested by the diagnostic reports. Of 620
households in the TIB survey of corruption in Bangladesh, 53 had taken out a bank
loan and 30 of them used bribery or influence to secure the loan. Non-cash bribes to
bankers have included entertainment and gifts, all expense paid vacations for the
family, payment of club bills, high paying positions in the borrower's firm for the
bankers or their family members, allotment of plots in housing development projects,
houses or apartments, shares of the borrower's corporation, and offer of admission in
schools or universities along with scholarships. A continuation of small gift giving
may be necessary for relationship maintenance and these may include color
televisions, refrigerators, jewelry, and dinner parties. In general the acceptance of the
gift implies the acceptance of the deal and it creates expectation on the part of the
giver and an obligation on the part of the taker. There are several distinct areas of
corruption in the banking industry in Bangladesh. These may include dictation loans,
fictitious loans, inside loans to government officials, diversion of interest payments,
captive government deposits in government banks, use of bribery to facilitate loans,
use of bribery to or influence to subvert the loan approval process, labor union
intervention in loans, procurement and recruitment, sale of a forgivable loan, use of
bribery or influence to re-schedule loans, use of influence to waive regulatory
restrictions, use of influence or political power to forestall action on defaulted loan,
bribe demanded by bank officials to release funds, bribery of external auditors by
bank managers, bribery to manipulate technical loopholes in bank regulation etc.
(Munshi,TIB,1999). In Bangladesh, no research has yet to undertake to know the
applicability of forensic accounting. This motivates the researchers to investigate the
essentials of forensic accounting.

4.4 Use of financial institutions in financial crimes

A financial institution involved in a financial crime can play one of the three roles:

 A perpetrator
 A victim
 A vehicle of crime, knowingly or unknowingly.
Of these, the most common is a financial institution becoming a victim of fraud and
its being used as an instrument/vehicle for money laundering. Financial institutions
that include both banks and non-bank financial institutions may not always be used
for financial crimes. This is more so in Bangladesh since our informal economy is
very large and it is a predominantly cash transaction based (not leaving any records).

However, the financial institutions cannot shy away from their responsibilities. They
are one of the conduits used in financial crimes. They do not do-

 Adequate KYC (know your customer) due diligence in accepting a customer,

 Be reasonably satisfied about the legitimacy/ legality of the source and use of
funds,
 Conduct continuous review of customer's transactions.
In case of trade (especially import and export), banks deal in documents only. They
are required to check invoice prices against the market or why the letters of credit
(LCs) for the same goods has large variation in unit price.

4.5 Economic effects of financial crimes

Bad money can gradually drive away the good money. A market dominated by ill
practices result in difficulty for the genuine business entities. A company evading tax
has a lower product cost through which it can drive away the genuine businessperson
who has higher product cost. At an individual level, proceeds of this crime bring extra
money to the hands of the undeserved. People with larger amounts in hand go for
property acquisition and spending and/or savings overseas. These have multiple
negative economic consequences. Some of the people become entrepreneurs and raise
the entry barriers, crowding out the true entrepreneurs who would otherwise have
created real value to the economy.

There are other negative macroeconomic consequences. For example, it could

compromise bank soundness with potentially large fiscal liabilities, lessen the ability
to attract foreign investment, and increase the volatility of money flows and exchange
rates. In this era of technological developments in almost all aspects and very high
capital mobility, financial crime makes national tax collection and law enforcement
more difficult. Financial system abuse, financial crime, and money laundering may
also distort the allocation of resources and the distribution of wealth and can be costly
to detect and eradicate.
4.6 Fighting financial crimes

Bangladesh Penal Code, Foreign Exchange Regulations Act, 1947 (FERA), Income
Tax Ordinance, 1984, Money Laundering Prevention Act, 2012 (MLPA) and Anti-
Corruption Commission (ACC) Act, 2004 are laws to prevent such crimes. While
there is always room for improvement in the legal framework, the blame cannot be
put squarely on that. It's the implementation of the laws that leaves a lot to be said.

We do have a Financial Intelligence Unit (FIU) that has been functioning for over five
years though how effective they are is not known in the absence of any publicly
available information on their activities or efficacy. They collect Cash Transaction
Reports from all banks each month. Banks have been filing Suspicious Transaction
Reports for the last ten years to them. It is not clear what they have been doing with
such huge amount of customer's data. It is not clear whether these data are adequately
protected. It seems that BFIU may have serious capacity issues in terms of requisite
expertise in data mining, analysis and forensic accounting. They are also severely
constrained by lack of timely access and cooperation from law enforcement agencies
and judiciary. The Egmont Group, the international forum of FIUs, does not recognize
the existing FIU under Bangladesh Bank. Hence foreign FIU are not interested to sign
information-sharing agreements with them though they have been empowered to do
so.

4.7 IMPORTANCE OF FORENSIC ACCOUNTING IN

BANGLADESH
Bangladesh is a country, which has a well-constituted Securities and Exchange
Commission (SEC) and well structured stock exchanges. Despite all measures still
there are financial scams and financial losses due to company’s practicing creative
accounting techniques and able to take advantages of the loopholes of International
Accounting Standards (IAS’s) and Generally Accepted Accounting Principles
(GAAP’s). So, its better if the Institute of Chartered Accountants in Bangladesh has a
forensic cell and as external audit is mandatory to make such forensic audit also
mandatory for the publically listed companies so that financial scams may be
minimized and have a healthy financial and sound environment of investment and
accounting practices.

The threat of corruption in Bangladesh has increased manifold in different segments

of government offices and the private sector as well, in wider and alarming scale. At
the moment the corrupt elements are a bit cautious due to the recent campaign against
corruption, but it seems the germ of corruption has not been uprooted altogether and
there is no sign that the nation will be free from this. Corruption is so dangerously
spreading through the various strata of the society and our national life that even the
judiciary is also no exception from the pollution of this vice. The socio-economic,
commercial and industrial institutions are all contaminated with the germs of
corruption. To salvage the country from such a deplorable state of affairs, the role of a
Forensic Accountant is extremely important. There is an unholy alliance among the
corrupt elements of the country, which can be dismantled at least partially, if not fully
with the help and assistance of the Forensic Accountants. the Institute of Chartered
Accountants of Bangladesh (ICAB) can play a very vital role by providing formal
training to the professional accountants who ultimately would act as Forensic
Accountants. Forensic Accounting is in fact a kind of postmortem, which reveals the
inherent cause of an event that takes place with the intention of committing
corruption, fraud, embezzlements and other scandals of moral turpitude and
implications. The dimension of corruption in Bangladesh is well known to all of us. It
is very extensive. The germ of corruption is so dangerously infectious in the various
strata of the society and our national life that, many perceive it even the judiciary is
not immune there from. To salvage the country from such a deplorable state of affairs,
the use of the knowledge of Forensic Accounting is a must and engagement of CAs as
Forensic Accountants is necessary and a demand of the time.
 Chapter: 5
Findings, Recommendations,
and Conclusions
5.1 Findings
After conducting the report through various analysis and evacuations, many findings
have been found. It includes both positive and negative things.
 The relevance of forensic accounting is growing worldwide as rising crimes,
corruption, malfunctioning of regulators, security scams and many up-coming
issues of this kind all are openly indicating the increasing demand for forensic
accountants.
 The causes of corruption in Bangladesh are mostly as a result of obsession
with materialism, compulsion for a shortcut to affluence, glorification and
approbation of ill-gotten wealth by the general public. These reasons, among
others, account for the persistence of corruption in Bangladesh.
 The forensic accountant plays an important role in litigation support services.
 The forensic accountant, in fighting crimes and corruption, has a better
advantage within his distinct functions or roles performed compared to the
regular auditor. If Bangladesh desires to be ‘deranked’ as the most corrupt
nation by Transparency International, she must rush to embrace this emerging
trend in the accounting profession so that crimes and corruption can be
combated adequately both in the private sector and most especially the public
sector of the nation.
 This is the age of knowledge economy and the accountancy professional
bodies should increase their effort in providing functional and cutting edge
education to their members and develop curriculum that would incorporate
forensic accounting with a view to make them globally competitive.
 It is true that in Bangladesh there are no effective tools to measure, detect and
prevent fraud and corruption. In such a context forensic accounting now
appears as a one of the strategic and dynamic tool for the management of all
types of corruption.
Finally, it is no doubt this study could not have covered all areas of forensic
accounting. In an economy such as the Bangladeshi economy, forensic accounting is
needed as it goes deeper to uncover fraud and hidden records.
5.2 Recommendations
To minimize management overrides, the study recommended the following;

 In a country like Bangladesh where the unethical aspects of creative

accounting are rampant, the practice of forensic accounting (i.e., investigative
accounting done by forensic accounting consultants to solve problems in
courts) needs to be introduced and recognized.
 It can also be recommended that public and private institutions to make the
accounting students expert for detecting fraud and corruption should launch
some courses, related to this issue.
 Some workshops, seminars, and symposium can be arranged to make people
in corporate sector more familiar with this issue.
 Educational institutions should lead the way while the legislative arm of
government should enact legislations that will not make all anti-graft, financial
crimes and corruption agencies to not only be autonomous, but effective and
efficient in performing their duties. It is not when a corrupt government
official has lost face with powers that be that he should face investigation and
trials.
 A firm wishing to grow with reduced frauds must therefore put into place
sufficient resources to be able to properly practice forensic accounting in its
different departments.
 In order to sustain effective operations in the economy, fraudulent expense
claims must be monitored since it was the most prevalent type of fraud, which
occurred in this sector.
5.3 Conclusion
In Bangladesh, some recent corporate scandals like Hallmark-Sonali Bank, Jubok,
Destiny 2000 Ltd, Money laundering activities happened that call for detailed and
investigative accounting practices to prevent such audit malfunctioning and
corruption. So far the scope is traced; it is not possible for an auditor to cover the area
of accounting investigation and trace fraudulent transactions. Forensic accounting has
grown in popularity in this regard in recent years as it is founded upon understanding
the mind of the fraudster in order to understand why frauds are committed (Hecht and
Redmond 2010). It applies accounting principles and investigation techniques to
ascertain fraud and theft. The forensic accountants are applying various types of
approaches to investigate and seek out financial misfeasance. But the experiences of
yesterday are not adequate to track the fraudulent activities today (Oyedokun, 2014).
The violations occurring frequently are proving all the previous detection approaches
obsolete. Forensic accounting is a newly introduced term in the realm of corporate
governance. The time has come to apply this technique to reduce, even remove, fraud
and white-collar crimes such as embezzlement from the From the findings and
discussion above, it is apparent that auditors are not in a position to reveal and combat
financial crime in an effective way because, investigation of financial scandals and
initiation of legal remedial measure needs special skills and knowledge. Corruption in
Bangladesh is taking many forms in different sectors at an alarming scale. To lessen
the intensity and impact of corruption in different strata forensic accountant is in great
need. Establishment of proper knowledge base, training, skill development and
motivational initiative can develop this special human resource that can prevent the
financial crimes in Bangladesh. Consequently, the incorporation of modern forensic
auditing techniques in an audit in Bangladesh is seen as timely in order to prepare the
accounting profession to deal effectively with the problem of unearthing ingenious
fraud schemes arising from audit failure to detect frauds in Bangladesh.
Chapter: 6
Appendix
6.1 List Of Abbreviations
FAs - Forensic Accountants

ICAB - Institute of Chartered Accountants of Bangladesh

CA - Chartered Accountant

SEC- Securities and Exchange Commission

IAS’s - International Accounting Standards

GAAP’s - Generally Accepted Accounting Principles

FIU- Financial Intelligence Unit

BFIU -Bangladesh Financial Intelligence Unit

FERA- Foreign Exchange Regulations Act

MLPA - Money Laundering Prevention Act

ACC - Anti-Corruption Commission Act,

LCs - Letters of Credit

KYC - Know Your Customer

TIB –Transparency International Bangladesh

CLERP - Corporate Law Economic Reform Program Act

FAFD - Financial Accounting Fraud Detection

PCAOB - Public Companies Accounting Oversight Board

6.2 References
 Adamu, G. Z. (2012), The Relevance of Forensic Accounting Education in
Financial Accounting, retrieved at :http://ssrn.com/abstract=2193962
 Alam, I. and Chowdhury, M.A.A. (2011).Investors' response to the recent
phenomenon of the stock market of Bangladesh, The Cost & Management,
39(2):1-8.
 Bhide S. (2012), "A Study of the Importance of Forensic Accounting in the
Modern Business World", DYPIMS's International Journal of Management
and Research, 1(1), 12-17.
 Crumbly, D.L (2001).Forensic Accounting: older than you think, Journal of
Forensic Accounting, 2:181-202.
 Fenton, E. D. & Isaacs P. (2012), "Preparing Deposition Questions: The
Critical Role of the Forensic Accountant", Journal of Forensic & Investigative
Accounting, 4(2), 37-109.
 Gray,D.(2008) "Forensic Accounting and Auditing: Compared and Contrasted
to Traditional Accounting and Auditing". American Journal of Business
Education, 1(2):115-126.
 Bhasin, M.L. (2007), Forensic Accounting and Auditing – Perspectives and
Prospects, Accounting-world-magazineviewedon
 American Institute of Certified Public Accountants (2002), AICPA Issues
New Audit Standard for Detecting Fraud, Cornerstone of Institute’s New Anti-
Fraud Program, http://www.aicpa.org/news/2002/p021015.htm.
 file:///Users/estefaniawestcottfernandez/Downloads/721_1710.pdf