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Earnings Management Through Securitization in the Wake of Natural Disasters: A Study of Bank Holding Companies | Full Article PDF
Qiuhong Zhao

Abstract: This study examines the earnings management activities of public banks originating mortgages for structures with high flood risk following multibillion-dollar natural disasters. Banks overstating their financial strength despite disaster-related loan losses erode confidence in financial institutions. Compared to our control group, affected banks are more likely to approve mortgages that can be securitized to offload flood risk to Fannie Mae or Freddie Mac. Affected banks also are more likely to engage in securitization gains management compared to banks in the control group. Finally, affected banks do not change their behavior through loan loss estimates. The results are consistent with the argument that affected banks are incentivized to inflate earnings to minimize adverse effects on their balance sheets following natural disasters. The findings of this study provide insight into the types of earnings management channels to which the SEC should pay attention, particularly when examining financial statements of banks that originate mortgages with high flood risk.

Keywords: Banks; natural disasters; flood risk; mortgage; earnings management; securitization gains; loan loss provision

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Corporate Financial Misconduct and Accounting Reporting Complexity: Evidence from Financial Disclosures in XBRL | Full Article PDF
Chenyong Liu
Jacob Haislip
Howard Xu
Lanyi Peng

Abstract: This study examines the impact of financial misconduct on corporate accounting reporting behavior. We capture the likelihood of corporate financial misconduct with Benford Score, a measure based on Benford’s Law. We find that the Score is negatively associated with a firm’s accounting reporting complexity (ARC), measured by the number of tags in 10-K in XBRL reporting. A possible reason is that using more tags in reports reveals more details, which facilitates financial statements users to discover the misconduct; this effect might restrain misbehaving firms from disclosing more information. We further find that the restraint is more salient after firms adopting Inline XBRL (iXBRL). Despite extant research reports mixed findings on the relationship between accounting reporting transparency and quality, this article shows that firms may manipulate the numbers of tags set for XBRL/iXBRL reporting to conceal financial misconduct clues. Our findings could be of interest to regulators for future policy setting to restrain firms from hiding important information and help auditors and forensic accountants better assess a client’s risk of committing financial fraud.

Keywords: iXBRL; accounting reporting complexity; financial misconduct; accounting fraud

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Corporate Tax Avoidance and Fraud Risk | Full Article PDF
Zhonghua Cao
Chen Wu

Abstract: Accounting fraud is costly to corporations and society, and only a small portion of frauds are detected. Various fraud risk measures were proposed to raise the fraud detection rate and promote fraud prevention. According to the agency theory, tax avoidance (TA) strategies can be used by managers for their own benefit at the expense of shareholders and can lead to aggressive financial reporting, which is one of the indicators of fraud risk. Therefore, an aggressive TA can help assess the fraud risks of firms. However, few researchers have explored the relationship between tax avoidance and fraud risk. In this study, we extend the research of TA from the perspective of fraud risk assessment by examining the relationship between TA and fraud risk using accrual quality-related variables, performance variables, and non-financial measures (NFMs) to measure fraud risk. We find that TA is positively related to fraud risk, and all related parties, including auditors, managers, and investors, should pay close attention to those cases with aggressive TA strategies. In addition, our results show that fraud risk is a good predictor of accounting fraud.

Keywords: Tax avoidance; fraud risk; aggressive financial reporting; fraud

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Getting Active with an Excel Add-in to Boost Your Investigative Proficiency | Full Article PDF
David C. Hayes
James H. Irving
Matthew R. Reidenbach

Abstract: This article has three objectives: (1) to introduce the reader to ActiveData, an Excel add-in that consists of many valuable investigative tools, (2) to demonstrate several of these investigative tools useful for identifying data anomalies and evaluating potentially fraudulent activity, and (3) to provide teaching materials for instructors who would like their students to learn and master this software. ActiveData is conveniently embedded within Microsoft Excel and its functionality compares favorably with more expensive accounting data analysis software (e.g., ACL, IDEA). Accounting instructors will likely find ActiveData to be a practical resource for developing students’ data analysis and investigative skills. This tool is available at no charge for instructors and students who use it for educational purposes.

Keywords: ActiveData, Excel add-in, data analytics, software tool, instructor resources

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Twists and Turns in a Huge Forensic Accounting Trial: Interview of T. Boone Pickens’ Trial Attorney | Full Article PDF
D. Larry Crumbley

Abstract: The purposes of this interview is to follow the trial of oil tycoon and billionaire T. Boone Pickens against oil company defendants whom he claimed cut him out of his investment in what became the biggest oil play of his life. Dallas attorney Chrysta Castan?eda was the solo practitioner he hired to litigate the massive courtroom battle with potential damages up to one billion dollars. She wrote about the trial with her co-author, Loren Steffy, in The Last Trial of T. Boone Pickens (Stoney Creek Publishing 2020). This interview covers the case from the start to the finish, emphasizing how accounting and valuation concepts and expert witnesses can help attorneys win or lose lawsuits. Here, a judge in his first trial kept moving the goal posts numerous times, which helped protect the defendants and reduce the damage award significantly. Since accountants and valuation analysts are involved in litigation support, the focus is on the actions of the attorneys, judge, accounting/valuation consultants and expert witnesses, and jurors.

Keywords: Litigation services; breach of contract; fraud; fair market value; conversion; oil and gas; accounting expert witnessing; valuation; testifying; Daubert challenges; voir dire

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CEO Power and Employee Treatment | Full Article PDF
Akhilesh Bajaj
Li Sun
Zhenze Xing

Abstract: The authors investigate how CEO power affects employee treatment. The results show a significantly negative relationship between CEO power and employee treatment, indicating that firms led by CEOs with more power are less inclined to implement employee-friendly policies. This study contributes to the current debate about the effects of powerful CEOs and helps identify factors influencing employee treatment. Understanding the relationship between CEO power and employee treatment is important in forensic and investigative accounting because it sheds light on how governance mechanisms influence ethical decision-making and financial integrity within firms.

Keywords: CEO power; employee treatment; employee-friendly policies; financial integrity; powerful CEOs

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Feels Like Fraud: A Looming Storm? | Full Article PDF
Jenny Parlier
Susan D. Hermanson
Heather M. Hermanson
Dana R. Hermanson

Abstract: Several indicators suggest that the risk of fraudulent financial reporting cases is on the rise. Specifically, changes in economic/global, client, and audit firm conditions have created an environment of increased pressure and opportunity, in part due to concerns about decreased audit quality. Highly capable managers are well positioned to exploit such a situation, and managers under heavy pressure can more easily rationalize unethical behavior. We offer implications for accountants and auditors considering apparently heightened fraudulent financial reporting risk today.

Keywords: Fraudulent financial reporting; risk; economic conditions; global conditions; management; auditors

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Cultivating Skills for Addressing Culture: Exploring the Impact of National Origin on Fraud and Forensic Accounting Practitioners | Full Article PDF
Michael Killey
Oscar Harvin
Young Ro
Kevin Kobelsky

Abstract: Fraud investigations are complex and demand a rigorous and systematic approach. However, studies and professional articles often fail to account for cross-cultural differences in individual behavior. Our article focuses on the relationship between national culture and fraud investigation. Specifically, Hofstede’s primary cultural dimensions of individualism and collectivism, power distance, uncertainty avoidance (1980), and their impact on fraud and forensic accounting investigations are explored. We discuss common investigative approaches as well as suggestions for how fraud investigation protocols should be modified based on the national culture of the parties involved.

Keywords: International culture; forensic accounting; fraud examination; fraud investigations; Hofstede; cross-cultural differences

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Motivating Whistleblowers: The Role of Protection Motivation Theory and Organizational Commitment and Mandatoriness in Shaping Intent | Full Article PDF
Kalana Malimage
Arianna Pinello

Abstract: This study examines how Protection Motivation Theory (PMT), organizational commitment, and mandatoriness influence whistleblowing intentions in organizations. Given that more frauds are discovered through tips from whistleblowers than by any other method, understanding the drivers of whistleblowing behavior is critical. Using survey data from 269 MBA students, we test a theoretical model integrating PMT components with organizational factors. Results indicate that threat appraisal variables (perceived severity and vulnerability) and coping appraisal variables (self-efficacy and response costs) significantly influence whistleblowing intentions, while response efficacy shows no significant effect. Both mandatoriness and organizational commitment exhibit significant positive relationships with whistleblowing intentions, though organizational commitment does not moderate the relationships between PMT variables and reporting intentions.

These findings extend PMT's applicability to whistleblowing contexts and highlight the importance of formal reporting requirements and emotional attachment to organizations in promoting whistleblowing behavior. The insights from these findings contribute to both theoretical understanding and practical implementation of effective whistleblowing systems especially when more fraud is discovered with whistleblower tips.

Keywords: Behavioral accounting; whistleblowing; protection motivation; mandatoriness; organizational commitment

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Intersectionality, Gendered Racism, and the Consideration of Coworker Guilt | Full Article PDF
Stephani Mason
Claire Costin
Jason Rinaldo

Abstract:This article explores the association between biases and perception of guilt in alleged workplace wrongdoing with a survey using a case. We ask participants to assess the guilt of four possible suspects: two Black (male and female) and two White (male and female), and we measure participants’ explicit and implicit racial and gender biases. When providing only minimal information about each suspect, the participant's age, education, and explicit sexism scores are significantly associated with the likelihood of guilt of the Black female suspect. When we provide additional information that produces a convergence of opinion on the White male suspect, explicit racism and sexism and their interaction are associated with the binary choice of selecting the Black female as the most likely culprit. We find that biases are more obscured in lower evidence conditions and are more apparent in the presence of persuasive evidence.

Keywords: Implicit bias; explicit bias; fraud; intersectionality; gendered racism
 

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Book Reviews

From Digital Clues to Legal Proof: The Legal Guide to Cyber Forensics Raul Morales, 2024, 218 pp., $80 Springer Publishing Company    Cyber attacks are targeting companies and individuals, and some knowledge of digital forensics is becoming necessary. Cybersecurity expert Morales provides help in strengthening organizations’ defense systems and handling incidents. The author breaks down the forensic techniques used by professionals to analyze cyber-attacks and shows how digital clues can be presented in the courtroom. He provides help in these areas to navigate the legal complexities of cyber problems: Core Forensic Techniques: Explore proven methods for identifying, preserving, and analyzing digital evidence. Real-Life Cybercrime Case Studies: Learn how to trace cyber-attacks, recover data, and protect your business. Expert Insights on Legal and Ethical Standards: Get practical advice on ensuring evidence integrity, maintaining chain of custody, and adhering to data privacy laws.

Valuation: Measuring and Managing the Value of Companies, 8th Edition Tim Koller, Marc Goedhart, David Wessels, McKinsey & Company, Inc., 2025, 976 pp. John  Wiley & Sons 111 River Street Hoboken, NJ 07030-5774    After 30 years, the authors have again updated their latest holistic approach edition of a practitioners’ guide to valuation containing assessing high-growth companies, digital assets, and corporate portfolio strategy and acquisitions. The authors state while economic principles of valuation do not change much, they remain more critical than ever as leaders grapple with digital disruptions, geopolitical shifts, climate challenges, and other trends. The supposedly #1 best selling guide to corporate valuation can be purchased with or without the DCF Model (university edition). The authors use a refined DCF model that fouses on the free cash flow to the firm while emphasizing long-term value creation and economic undamentals. Their 14 chapters are broken into these four parts: Foundations of value Core valuation techniques Advanced valuation issues Managing for value

Accounting for Crypto Assets: Accountants, Tax Professionals and Investors Guide to Blockchain, DeFi, NTFs and More, 2nd Edition Taylor A. Zork and Brian S. Whalen Independently Published, 2023, Paperback, $24    FASB’s ASU 2023-08 now requires cryptocurrencies to be accounted for at fair value rather than by impairment. The IRS classifies cryptos as property rather than currency. Thus, individuals need to determine a capital gain or loss on each transaction. The authors provide a clear, hands-on discussion of the accounting and financial treatment of cryptos, including templates of financial sttements, ledgers, disclosures, journal entries, and sample workpapers. Some informative and interesting chapters include: Fair Value Accounting under ASU 2023-08 Accounting for Crypto Holdings: Recognition and Measurement Internal Controls and Wallet Security Tax Implications of Crypto Transactions

The Mysterious Mr. Nakamoto Benjamin Wallace, 2025, 342 pp. Crown Publishing Company crownpublishing.com    Satoshi Nakamoto published his original white paper in 2008 outlining “a peer-to-peer electronic cash system” called Bitcoin. Early purchasers are now millionaires and billionaires with the lowest price of .003 in March 2010 and the highest price over $120,336 on October 3, 2025. Author Wallace traces Mr. Nakamoto’s trail of computer codes and personal writing to determine who was the real creator of bitcoins and the block chain, supposedly “with the skill of Sherlock Holmes and the storytelling verve of Sir Arthur Conan Doyle.” The trail ends without finding out who was the real Mr. Nakamoto. Will there be another similar book in the future? Even AI does not give an answer, and 60 minutes said it is a mission impossible.

Events
2026 LSU Annual Fraud & Forensic Accounting Conference
LSUis having their two-day Fraud & Forensic Accounting Conference on July 23–24, 2026. Please mark your calendars. https://www.lsu.edu/business/accounting/fraud.php