FRAUD BUSTERS CHASE GHOSTS AND PHANTOMS
by Carol Schmidt
In the black and white world of accounting, Montana State University professor Bonita Peterson Kramer teaches students how to find crime in areas of gray. Kramer, a professor of accounting in MSU’s College of Business, is one of the country’s few academics to study, write and teach about how to detect fraud.
Her research deals with fraud’s manifestations in such things as phantom vendors, “cooked” sets of books and ghost employees. As a result of Kramer’s work, MSU is one of a small number of institutions that teach about fraud detection.“Fraud examination caters to the secret detective in all of us and students love it,” Kramer said, adding that fraud investigating is accounting’s version of a CSI, or crime scene investigator. That may be because, “by its very nature, fraud is hidden,” says Joseph Wells, a pioneer in contemporary fraud detection whom Kramer helped bring to campus to lecture in 2002.
While fraud is concealed, it seems to be everywhere. Several large-scale corporate fraud cases, including Enron, Tyco and WorldCom, have vaulted the issue to international prominence.
Kramer points out that fraud doesn’t just occur with large companies. In fact, one of her first published instructional fraud cases was inspired by an incident at MSU in which the manager of a department secretly sold off university computers for personal gain. Another of Kramer’s published case studies was inspired by an incident in a neighboring state in which a disgruntled employee of a food supply company invented fictitious vendors to defraud his employer of millions of dollars.
Kramer said fraud specialists believe that such incidents occur more frequently than is known. The accounting firm KPMG reported in 2003 that 75 percent of organizations experienced some type of fraud in the previous year. She noted the number is probably larger because many victimized companies are too embarrassed to report it and many frauds are undetected.
Kramer came to her specialty through the sister field of auditing. A Great Falls native, Kramer joined the Legislative Auditor’s Office in Helena after graduation from MSU’s accounting program in 1983. She later worked at KPMG Peat Marwick in Midland, Texas. While auditors are not fraud specialists, fraud detection “spilled over” into her work and she found that she liked its forensic qualities.
While earning advanced degrees in accounting from the University of Montana (master’s) and Washington State University (Ph.D.), Kramer found she also loved teaching. Since returning to her alma mater in 1994, Kramer has become an award-winning professor, winning the MSU Cox Excellence Award for scholarship and instruction as well as the Montana Society of CPAs’ Outstanding Educator Award. Kramer’s teaching ability is evident in her annual preparation of MSU students for the auditing section of the Certified Public Accountant exam. MSU students traditionally score among the top in the country on that rigorous exam.
As her teaching career flourishes at MSU, so has her cultivation of scholarship in the relatively new field of academic fraud research. Her work in the field began with her collaboration with MSU treasurer Tom Gibson on a case-based article that was published in 1999 in the academic journal “Issues in Accounting Education.”
After that, Kramer attended national meetings and conferences on the subject where she met and began to work with some of the leaders in what she says is a small scholastic field. She has published or co-published articles on fraud in several national and international journals and has published several fraud case studies that are used in accounting classrooms at universities around the country. Two of her articles have won national awards from accounting practitioner journals including, “10 Truths You Need to Know About Fraud.”
Kramer’s most recent article on the issue, co-written with MSU finance professor Greg Durham, has been accepted for publication by the “Journal of the Academy of Business Education.” Kramer said it is important to reach to general business journals because, “Fraud is a business problem, not just an accounting problem.”
Kramer has also developed an MSU course on fraud detection. Some 21 graduate students enrolled in the course when she first introduced it in 2003, making it the most popular graduate elective in accounting that year. She continues to teach the course in the summer.
Kramer said that several of her students have become so intrigued with fraud examination that they are pursuing careers in the area. For the majority of her students, however, fraud education will be an important tool in their future practice.
“I hope that as a result of my classes they are better prepared to recognize fraud if they run into it,” she said. “It’s something that I love to teach. It amazes me how prevalent it is and how such otherwise ordinary people can commit this crime.”
Great Falls native Bonita Kramer, shown here with her family, is one of the country’s few academics to study, write and teach about how to detect fraud.