Research efforts by faculty members of the WVU College of Business and Economics are making valuable contributions in the fight against fraud — and they’re being recognized for it left and right.
B&E professors Jack Dormancy. Scott Fleming, Dick Riley, along with colleague Mary Jo Kranacher from The City University of New York – York College, have published three papers which resulted in three prestigious awards from three very different constituencies. Two of these awards were announced recently: the CPA Journal’s 2012 Max Block Award (awarded by leading accounting practitioners) and the Forensic & Investigative Accounting (FIA) AAA Forensic Research Award (awarded by academics at the American Accounting Association. The third award, the 2012 Hubbard Award, given by the Association of Certified Fraud Examiners, was awarded last fall.
The faculty members’ research modernizes and expands upon forensic accounting and fraud examination’s cornerstone, a model called the Cressey Fraud Triangle, which assesses the motivation, opportunity and rationalization that occur when a person decides to commit fraud. While vital to the field, the researchers noted that the model had not changed since the 1950s.
“Since (the 1950s), others have found angles and aspects that influence the triangle, but no one had really thought about the bigger picture and how things are tied together,” said Dr. Riley.
“We have all these theories as to why somebody engages in fraud — how do you integrate them? We thought they had to be part of an overarching model,” Dorminey added.
The researchers created a metamodel that explains the entire process from the decision made by the perpetrator (captured by the original fraud triangle), to the act of the crime itself and, in between the decision to attempt fraud and the actual crime, organizations actively trying to prevent and deter fraud.
“White collar crime is really a societal problem,” Dr. Fleming said. “It affects investors, society as a whole and the firms. Our model looks at the perpetrator of the crime and also encapsulates everyone else. We came up with a unified look, a model that captures all avenues.”
Dr. Riley agreed.
“Basically, (previous research) was missing the fact that if a crime has already been committed, trying to understand that criminal act by looking backwards can be helpful but it’s not really the way you conduct an investigation,” he said. “If you’re thinking about preventing or detecting or deterring fraud, you really need to consider the actual crime that could potentially be committed and figure out ways to keep that from happening.”
So they wrote a paper titled “Beyond the Fraud Triangle” in a 2010 edition of the CPA Journal. It was later reprinted in a 2011 edition of Fraud Magazine. This first paper has taken off like wildfire throughout the forensic accounting and fraud examination community.
“It’s been cited 12 times,” Dorminey said, explaining that it is almost unheard of for a paper to be cited by so many others in so little time. “It’s uncanny. Clearly we hit a niche that needed to be hit. The CPA Journal is considered to be a very good outlet for speaking to the practitioner world.”
But the researchers didn’t stop there. They published a second paper, titled “The Evolution of Fraud Theory” that explains how their metamodel can be used in academia in Issues in Accounting Education (2012) that has already been cited five times. This is the paper that recently won the 2013 FIA AAA Research Award, an award given to the best research paper in forensic accounting and investigative services. It is given to an original research paper with the greatest contribution to the body of knowledge and the greatest potential impact on practice.
The third paper, “Financial Fraud: A New Perspective on an Old Problem”, also published in the CPA Journal, earned the researchers the Max Block Award. The award was given by The CPA Journal’s top practitioners for an outstanding article in the category of Technical Analysis. The award has been bestowed annually since 1975 on the most outstanding articles published in the past year. The main criterion: “an innovative and stimulating article which is of current significance and which is likely to be of lasting value.”
“We were anonymously nominated for it, which makes it all the more valuable,” Dorminey said. “The awards mean that those in the fraud and forensic community have looked at our work and said ‘That piece of work contributes markedly (to the fraud and forensic community).’ This has been an incredibly productive effort that helps the University. Three publications, multiple awards, multiple cites, and all of it says that WVU is doing good work in the FAFE and forensic fields,” Dorminey said.
The researchers were all pleasantly surprised at how much traction their research garnered within the academic, practitioner and fraud examiner communities.
“I knew there was a need for somebody to put the fraud theories into some sort of an organizational structure,” Riley said. “I thought the research would have value, but even I was surprised with the amount of recognition that’s come with it. To find that our research is actually being recognized as some of the best in recent years was really a little bit more than I anticipated.”
“It’s very fulfilling work, because the more we understand (the research), the better we can reduce the overall cost (of fraud) to the economy,” Fleming added. “There’s nothing better than becoming a cheerleader for your own employer, and we really have something to cheer about.”
“At WVU, we’ve thought hard and deep about forensic fraud. This is a place where we get it done,” Dorminey said.
Now that they have laid the groundwork for future research in the area of forensic accounting and fraud examination, new opportunities lie ahead.
“Our research has certainly allowed us to highlight the need for further research in these areas and then of course we plan to undertake that research,” Fleming said. “In the future, we continue to look to collaborate within and without the College. A lot of great researchers out there have expressed interest in working with us on this, so I think there’s more to come.”