White collar detectives

Don’t call them number-crunchers. The next generation of accountants is being trained to root out fraud and serve as financial watchdogs in the international world of business.

CAPTION: Accounting students Christina Harding, left, Benjamin Wu and Australia Cazares applied skills they learned in classes by entering as a team in the American Institute of Certified Public Accountants’ 2011 Competition. The “Super Stars” beat out approximately 200 teams from universities across the nation to make it to the semi-final round.

Enron. WorldCom. AIG. Bernie Madoff. Stories of major financial scandals have dominated headlines for the past decade.

Incidents of financial wrongdoing have led to the downfall of entire corporations, devastated the retirements and salaries of American workers and rattled the public trust.

So it’s more important than ever to ensure the next generation of accountants is properly educated to act as watchdogs in an increasingly complicated world of international business and finance.

“Ethics is becoming more and more important,” said Professor Rick Hayes, who teaches courses in auditing and forensic accounting. “Forensic accountants have seen how employees can have their whole lives turned upside down by financial wrongdoing.”

Accountants are more than just bean counters. They are fiscal detectives taught to produce, gather and analyze financial data to determine the viability of a business.

Demand for quality accountants is high and expected to continue because of society’s concern with financial accountability in both business and government. The state now requires students complete more credits before they can take the certified public accountant exam.

To address this need for versatile accountants, Cal State L.A.’s Department of Accounting has introduced two forensic accounting courses within the past six years, according to Accounting Chair Kathryn Hansen, and a special topics class in ethics made its debut in the spring quarter.

Hansen said, “Forensic accountants are hired by courts or someone who thinks something might be wrong, and once they review the documents for evidence, it can become a court case. When a business person goes into court, it can become a deterrent to others against fraud.”

Though the topic of ethics is not on the CPA exam, it is a subject that every student will face after graduation, Hansen said.

“The rules for the business world are changing,” she explained. “There are different rules and standards for auditors, tax accountants and preparers. This course introduces students to all the different standards of the profession.”

Accounting seniors tested their knowledge recently by entering a team in the American Institute of Certified Public Accountants’ 2011 Competition.

As part of the “Super Stars” team, Cal State L.A. students Benjamin Wu, Christina Harding and Australia Cazares demonstrated their skills in uncovering fraud with a hypothetical case.

For weeks, the team members pored over financial documents, researched Internal Revenue Service and U.S. Securities and Exchange Commission guidelines and memorized corruption laws to craft an analysis as consultants hired by a fictional Texas-based oil company to assess its planned expansion into Nigeria.

“There’s a misperception about what accounting is,” said team captain Wu. “People always think accountants are just number-crunchers. In reality, most of the work we’ll do is consulting. We’re more like problem-solvers.”

The Super Stars, advised by Rick Hayes, beat out approximately 200 teams from universities across the nation to make it to the semi-final round, in which they were required to make a six-minute video that was put up for a public vote online. Though they didn’t receive enough votes to make the final round, the students said it was a good experience and are eager to test their resolve with real clients after graduation.

“It’s about holding true to morals and principles,” explained Harding, who wants to be an accountant to “bust” the Madoffs and Ponzi schemers. “At some point, the pressure from outside sources may affect us. It may occur in our jobs or maybe managers will put us into a shady ethical position, but it comes down to what we believe to be right.”

Cazares added, “I am prepared now, but when the time comes, it will be a different situation. I know that I would try to use all my resources to take on the situation the best way possible.”

All the team members have received offers from major accounting firms after graduation.

Other Cal State L.A. accounting students are getting lessons on ethics through the department’s first course dedicated solely to the subject.

Professor Rafik Elias, who created the proposal for the class, points out that every public company gets audited every year, so the course curriculum addresses ethical issues the students may face as both preparers and auditors.

“If there is unethical behavior in a company, then the financial statements will have fraud,” Elias said. “We try to prevent that by teaching the students about fraud, how not to get involved in it, what kind of pressure is placed on accountants to commit fraud, and what happens when your boss asks you to commit fraud.”

The course explores human factors related to ethics, such as the motivation for fraud, the lure of rewards, the fear of losing a job if the accountant doesn’t agree with the fraud and the fear of retaliation for whistleblowers.

“There’s no shortage of cases of fraud from the preparers’ side … and auditors also have pressure because they want to get paid and keep the client. But we teach our students that there are people out there who rely on these financial statements; and you cannot let them down by agreeing to something that looks unethical,” said Elias.