The Incremental Benefits of a Forensic Accounting Course on Skepticism and Fraud-Related Judgments

Abstract

ABSTRACT: This study examines the extent to which providing a course that emphasizes forensic accounting influences students’ fraud-related judgments. We follow a cohort of students (trained students) who have enrolled in a forensic accounting course and examine their fraud judgments at various points in time—the first day of instruction, the last day of instruction, and seven months later. We compare these fraud judgments to a control group of students who have completed a typical two-course audit sequence (untrained students) and to a panel of fraud experts. We find that when confronted with a bad debt expense account that is unusually small, trained students provide significantly higher initial risk assessments post-training (1) than they did pre-training and (2) than did the untrained students. In addition, after being presented with a set of potential fraud-risk factors, trained students provided higher revised risk assessments post-training than they did pre-training, and importantly, not significantly different from a panel of experts. Using risk assessments as an indication of skepticism, we infer that the forensic accounting course raised the students’ level of skepticism. We also find, in general, that post-training students assigned higher relevancy ratings to fraud-risk factors than did a panel of experts, while the untrained students ascribed significantly less relevance than the experts did to these same facts. Finally, we find seven months after the course that the trained students’ performance is sustained, suggesting that the effects produced by taking a fraud-specific forensic accounting course persist.