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Forensic accounting has seen a remarkable growth in the last decade due to accounting scandals like Enron, Arthur Anderson, and Bernie Madoff Investments. This study explicates the history and impact of the McKesson & Robbins fraud. This fraud indirectly led to the establishment of the Generally Accepted Auditing Standards (GAAS). Today, every audit is planned and executed based on the provisions of GAAS. In this pilot study, an instrument measuring awareness of the McKesson & Robbins fraud is administered to 115 accounting students. The results of this pilot study indicate that students have very little knowledge of this monumental fraud.
INTRODUCTION
The age old adage of "history repeats itself" may have some implications in the tumultuous world of auditing today. In the current decade, corporate scandals have made headlines in nearly every form of news media. From the likes of Bernie Madoff to the bankruptcies of Enron, Arthur Anderson, and WorldCom; scandals have created a public outcry for action. The aftermath of Enron saw the creation of the Sarbanes-Oxley Act (2002) and the establishment of the Public Company Accounting Oversight Board (PCAOB). Many corporate frauds were blamed on audit failures, such as Arthur Anderson's failures with Enron.
Definitions of Fraud
In academia, as well as the workplace, there are many definitions of fraud. For classification purposes, these definitions can be classified from an etymological, regulatory/legal, and academic standpoint. An etymological definition of fraud is that which defines fraud from the earliest times it was used in the English language. Thus, the Merriam-Webster's Collegiate Dictionary defines fraud as "an act of deceiving or misrepresenting."
A definition of fraud in the current regulatory and legal standpoint is given by various agencies like the Securities and Exchange Commission (SEC), Federal Bureau of Investigation (FBI), Public Company Accounting Oversight Board (PCAOB), etc. Thus, The Audit Commission defines fraud as any fraudulent behavior by which someone intends to gain a dishonest advantage over someone else (PCAOB, 2011).
The FBI defines accounting fraud as schemes designed to deceive investors, auditors, and analysts about the true financial condition of a corporation (FBI, 2006). These schemes may be material, or nonmaterial, but if the intention is to deceive investors, auditors, analysts, and the general public - then, these schemes may be...