UNIVERSITAS AIRLANGGA

FACULTY OF ECONOMICS AND BUSINESS

MASTER OF ACCOUNTING PROGRAMME

A SYLLABUS
FORENSIC AUDITING AND FINANCIAL EXAMINATION
ODD SEMESTER 2021/2022

Description
The occurrence of fraud and fraudulent behaviour has been over time, subject of much
attention. The span of fraudulent behaviour goes from petty theft, massive
misappropriation of funds and assets and fraudulent financial reporting.

The impact causes much attention from the internal organization and can have a serious
impact on external stakeholders’ trust in a company. A relative minor “kickback” can
have a dire impact on a company’s financial position. One should not underestimate the
consequences of any fraudulent behaviour and the time and effort from top
management to deal with it.

Preventive actions and efforts to detect fraud occurrence have given rise to increased
demands on all aspects of internal control, external audits, and legislative initiatives
such as the Sarbanes Oxley Act in the US.

This course aims to provide students with a theoretical framework of fraud and a
powerful toolbox that allows them to proactively participate and lead an organized
effort to limit and detect the occurrence of potential fraud. Moreover, research issues in
forensic auditing and the research designs to address those issues will be discussed.
Students will find that this course will have a balanced approach between theory and
practice.

Course Objectives
Upon the completion of this course, students will be able to:
1. Define what constitutes fraud according to the ACFE fraud tree and explain why
people commit fraud.
2. Identify and describe red flags or symptoms of fraud and apply these flags regarding
fraud risk assessment.

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3. Explain auditors and internal officials’ responsibilities about fraud.
4. Explain and discuss corruption, financial statement fraud, and assets
misappropriation.
5. Apply various techniques to demonstrate the existence of fraud and identify potential
fraudsters.
6. Apply fraud prevention and fraud deterrence programmes.

Grading
After the completion of this course, the students will earn a grade based on the
following components:
1. Tasks (cases) 20%
2. Mid-term examination 25%
3. Final examination 25%
4. Assignment and participation 30%
Note: the weight of each grading component is subject to change.

Literature
1. Wells, J. (2017). Corporate Fraud Handbook, the 5 th edition. Wiley. ISBN
9781119351931. (Wells)
2. Scientific articles.

Course Plan
Week Topic Reference
1 Course introduction Syllabus
Fraud tree Well Ch 1
2 Asset misappropriation Wells Ch 2
Article 1
3 Skimming Wells Ch 3
Article 2
4 Cash larceny Well Ch 4
Article 3
5 Check tampering Well Ch 5
Article 4
6 Register disbursement schemes Well Ch 6
Article 5
7 Billing schemes Well Ch 7
Case 1
Mid-term Examination
8 Payroll and expense reimbursement schemes Wells Ch 8
Article 6
9 Inventory and other noncash assets Well Ch 9
Article 7
10 Bribery Wells Ch 10

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 Article 8
11 Conflict of interest Wells Ch 11
Article 9
12 Financial statement fraud schemes Wells Ch 13
Article 10
Article 11
13 Financial statement fraud schemes Article 12
14 Case 2 Article 13
Final Examination

List of the articles:

1. Nigrini, M.J. (2019). The patterns of the numbers used in occupational fraud
schemes. Managerial Auditing Journal, 34(5), 602-622.
2. Song, D., Lee, H. and Cho, E. (2013). The association between earnings
management and asset misappropriation. Managerial Auditing Journal, 28(6), 542-
567.
3. Gullkvist, B. and Jokipii, A. (2013). Perceived importance of red flags across fraud
types. Critical Perspectives on Accounting, 24(1), 44-61.
4. Lennox, C. and Pittman, J.A. (2010). Big five audits and accounting fraud.
Contemporary Accounting Research, 27(1), 209-247.
5. Ames, D., Brazel, J.F., Jones, K.L., Rich, S.J. and Zimbelman, M.F. (2012). Using
nonfinancial measures to improve fraud risk assessments. Current Issues in
Auditing, 6(1), C28-C34.
6. Siregar, S.V. and Tenoyo, B. (2015). Fraud awareness survey of private sector in
Indonesia. Journal of Financial Crime, 22(3), 329-346.
7. Kaplan, S.E. and Schultz, J.J. (2007). Intentions to report questionable acts: An
examination of the influence of anonymous reporting channel, internal audit
quality, and setting. Journal of Business Ethics, 71, 109-124.
8. Wu, W. and Huang, C. (2013). Motives and likelihood of bribery: An experimental
study of managers in Taiwan. Ethics & Behavior, 23(4), 278-298.
9. Feldman, Y. and Halali, E. (2019). Regulating “good” people in subtle conflicts of
interest situations. Journal of Business Ethics, 154(1), 65-83.
10. Krishnan, G. and Peytcheva, M. (2019). The risk of fraud in family firms:
Assessments of external auditors. Journal of Business Ethics, 157, 261-278.
11. Hogan et al. (2008). Financial Statement Fraud: Insights from the Academic
Literature. Auditing: A Journal of Practice & Theory, 27(2), 231-252.
12. Mock et al. (2017). Fraud Risk Assessment Using the Fraud Risk Model as a
Decision Aid. Journal of Emerging Technologies in Accounting, 14(1), 37-56.
13. Negangard, E. M. and Fay, R. G. (2020). Electronic Discovery (eDiscovery):
Performing the Early Stages of the Enron Investigation. Issues in Accounting
Education, 35(1), 43-58.

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Group Presentation
Each group should organize their presentation based on the following points:
 A description of the fraud
 Motivations for committing this type of fraud
 Who commits this type of fraud?
 Statistics relating to this type of fraud
 Actions that may be taken to prevent this type of fraud
 Actions that may be taken to detect this type of fraud
 Cases or examples of this type of fraud
 A list of articles or resources related to this type of fraud (references used for
developing the presentation (at least 5 references should be used)).

Each week, all students (or groups) shall also demonstrate their understanding related
to the topic by presenting and discussing the assigned articles. The discussion of each
article (empirical research) should answer the following questions:

1. Is the article published in a reputable, credible, and high-quality journal?

2. Overall Questions:
a. What is the research question?
b. Why is it important? (From both academic and practical perspective)
c. How is it addressed?

3. Theory:
a. Is the theory appropriate for the study?
b. Is the theory logically consistent?
c. Do the hypotheses follow from the theory?
d. What are the conceptual independent variables?
e. What are the conceptual dependent variables?

4. Design:
a. What is the design?
b. How are the independent variables operationalized?
c. How are the dependent variables operationalized?
d. What are other potentially influential variables?
o Which ones are most important?
o Did the author control for all the important ones?
o How did the author control for them, e.g., via matching, holding constant,
etc?
o Was the control appropriate?
e. Were data collection procedures sound?
f. What are your overall conclusions about internal validity?

5. Data Analysis:
a. What data analysis techniques were used?
b. Were the techniques appropriate for addressing the hypotheses?

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6. Results:
a. What were the results?
b. Were the results credible?

7. Conclusions:
a. Did the results add to our knowledge about the studied subject at the time of
the study was conducted?
b. What are possible extensions of this work?

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