The Bad Accountant. Offender-accountants and their offenses

List of contents

Acknowledgements

Abstract

List of tables

List of abbreviations

1. Introduction
1.1 Background of the subject
1.2 Outline of the research aims and objectives
1.3 Rationale for the research questions
1.4 Outline of the structure of the dissertation

2. Literature review
2.1 Outline of the literature review
2.2 Studies on characteristics of offender-accountants
2.3 Studies on characteristics of white-collar criminals

3. Methodology
3.1 Research design
3.2 Methods of data collection
3.3 Methods of data analysis
3.4 Advantages and disadvantages of the methods used
3.5 Ethical considerations

4. Results
4.1 Personal characteristics
4.1.1 Age
4.1.2 Gender
4.1.3 Marital status
4.1.4 Educational level
4.1.5 Addiction
4.2 Professional standing
4.2.1 Occupational rank
4.2.2 Length of service
4.2.3 History of previous offenses
4.3 Victimology
4.4 International scope of offenses
4.5 Study of offenses
4.5.1 Financial offenses (FINANCE)
4.5.1.1 Audit related offenses (AUDIT)
4.5.1.2 Offenses related to preparation and filing of financial statements (P&FFS)
4.5.1.3 Tax related offenses (TAX)
4.5.1.4 Other financial offenses (OFIN)
4.5.2 Non-financial offenses (NON-FIN)
4.5.3 Disciplinary offenses (DISCIP)
4.5.4 Social offenses (SOCIAL)
4.5.5 Concluding remarks on the study of offenses
4.6 Collusion
4.7 Damages caused
4.8 Duration of offenses
4.9 Method of detection
4.10 Penalties
4.10.1 Monetary penalties
4.10.2 Non-monetary penalties
4.10.2.1 Disciplinary penalties
4.10.2.2 Public administrative penalties
4.10.2.3 Criminal penalties

5. Conclusion
5.1 Answering the research questions
5.2 Challenges of research
5.3 Recommendations for future research

Appendix

Appendix 1: Summary of previous and relevant studies

Appendix 2: Summary of disciplinary hearing materials

Appendix 3: Age distribution (in years)

Appendix 4: Gender distribution

Appendix 5: Marital status

Appendix 6: Educational level

Appendix 7: Occupational rank

Appendix 8: Length of membership at the time of disciplinary hearing (in years)

Appendix 9: Previous disciplinary offenses

Appendix 10: Groups of victims

Appendix 11: Cases affecting colleagues

Appendix 12: Cases affecting other groups of victims

Appendix 13: Scope of offenses

Appendix 14: Victimised private entities

Appendix 15: Victimised public entities

Appendix 16: Victimised individuals

Appendix 17: Countries affected by international offenses

Appendix 18: Types of offenses

Appendix 19: Offenses related to auditing of financial statements (AUDIT)

Appendix 20: Offenses related to preparation and filing of financial statements (P&FFS)

Appendix 21: Offenses related to taxation (TAX)

Appendix 22: Other financial offenses (OFIN)

Appendix 23: Non-financial offenses (NON-FIN)

Appendix 24: Disciplinary offenses (DISCIP)

Appendix 25: Social offenses (SOCIAL)

Appendix 26: Parties involved in collusion with the offender-accountant

Appendix 27: Damages caused (in £)

Appendix 28: Duration of offenses (in months)

Appendix 29: Method of detection

Appendix 30: Monetary penalties

Appendix 31: Non-monetary disciplinary penalties

Appendix 32: Public administrative penalties

Appendix 33: Criminal penalties

List of References

Acknowledgements

I would like to thank my parents who have always believed in my abilities and who have always supported me with warmth and dedication throughout the years of my academic career. My love for thinking, reading and writing comes all from them

Abstract

Purpose – This dissertation aims to analyse demographic characteristics of the homogeneous group of white-collar crime offenders, who are qualified accountants and members of the UK chartered professional bodies ACCA, CAI, CIMA, CIPFA, CIOT, ICAEW and ICAS. Beyond demographics, the crimes and infringements committed, the victims, the methods of detection, the duration of offense and the damages caused are elaborated, scrutinised and commented. The disciplinary, public administrative and criminal penalty regimes applied to offender-accountants are also subject of analysis.

Methodology – The study examines 2,596 disciplinary documents by content analysis, that are published online by the UK chartered accountancy bodies, FRC, FCA/FSA and IS between January 2012 and June 2017. The total sample observed encompasses 1,390 chartered accountants.

Findings – The culprit is male, around 45, practicing in a small firm and mainly guilty of disciplinary infringements. In case of financial and tax delinquency, ca. five offenses are committed over four years, causing average damages of £5,000,000-£6,200,000. The study reveals that female delinquency is significantly below the results of prior research. Moreover, a growing population of elderly offenders and enhanced recidivism among accountants are observed that are above official crime statistics.

Limitations – The disciplinary materials analysed differ considerably in depth and quality of disclosure. This hinders comparison among the characteristics scrutinised.

Originality – The author is not aware of any study covering accountants from all UK chartered accountancy bodies. The results provide for opportunities of future research of offender-accountants, elderly criminality, recidivism among professionals and disciplinary policing regimes.

List of tables

Table 1: Professional accountancy / taxation bodies in scope of this research

Table 2: Criteria of offender-accountants and their offenses derived from previous research

List of abbreviations

Abbildung in dieser leseprobe nicht enthalten

1. Introduction

1.1 Background of the subject

Disciplinary and judicial action against accountants has attracted academic attention in the recent past. But this has not always been the case. Why?

During the last decades, academic literature and mass media have broadly covered the never-ending stream of deceit, fraud and monetary delinquency (Friedrichs, 2010). However, literature has essentially focussed on CEO / top management crimes. This interest was caused by the fraudulent involvement of the upper corporate echelons in highflying cases like Tesco (Merison, 2014) and the LIBOR scandal (Hou, & Skeie, 2014) in the UK, Enron (Schilit, & Perler, 2010) and WorldCom (Zerkany, Braun, & Warder, 2004) in the USA or Satyam (Niazi, & Ali, 2015) and Toshiba (Rahman, & Marc, 2016) internationally. Although many CFOs / CEOs happened to be qualified accountants (Bhasin, 2013), delinquent accountants as a group have attracted less scholarly attention. This is surprising, as several studies point out that the accounting profession is not exempt from sin. The trilogy of the accounting Professor Abraham Briloff (1981, 1976, 1972) shows on numerous occasions how accountants engage in fraudulent financial reporting. In more recent studies, Professor Prem Sikka demonstrates how accountants develop and commercialise tax avoidance schemes (Sikka, 2016, 2015; Sikka, & Willmott, 2013).

But things are changing now. With the works of Andon, Free and Scard (2015), Krom (2016), Mescall, Phillips and Schmidt (2017) and many others, that will be addressed in this dissertation, offender-accountants are becoming subject to academic scrutiny.

However, empirical research differs in the subject of analysis. Andon et al. (2015) provide invaluable insights into the demographics of perpetrators employed in accounting-related jobs. But the scholars include bookkeepers into the sample, who are not qualified accountants. These two groups are distinguishable as to their educational background and occupational roles, with bookkeepers being less educated and occupying lower employment ranks.

For the UK context, the empirical research of Bethune (2015) is of central interest as it provides insight into the demographics of offenders from accounting departments of UK businesses. Nevertheless, by including the total workforce of the accounting departments, Bethune (2015) does not focus on accountants as a group of professionals.

The global reports on occupational fraud and abuse published bi-annually by the Association of Certified Fraud Examiners (ACFE) cover samples of several thousands of employment-related financial delicts (ACFE 2012, 2014, 2016). Similarly, KPMG (2007, 2011, 2013) releases global empirical fraud studies including hundreds of instances of fraud. Due to the large samples, these works are of great importance for WCC scholarship. However, the focus of these reports is on employee transgression in the context of large business entities. In contrast, accounting as industry is mainly driven by small practicing firms (CAI 2013; CARB, 2013). Thus, the results of ACFE (2012, 2014, 2016) and KPMG (2007, 2011, 2013) cannot be easily transferred to delinquent accountants.

In contrast to prior empirical research, this dissertation aims to supply insight into the delinquency of accountants as a homogeneous group of offenders. The homogeneity is predetermined by similar standards of education, occupation and ethical environment, with the latter being imposed by professional codes of ethics (Brennan, 2016). Further, the author is not aware of any criminological study covering delinquent members of all UK chartered accounting bodies.

The importance of accountants and the threat of their offenses are well recognized in the markets. The Financial Reporting Council (FRC) ensures public oversight over accountants. The FRC operates the Accountancy Scheme to enforce compliance with law and regulations in cases of serious public concern, or those damaging public confidence in the accountancy profession (FRC, 2013). This enforcement is also applicable to accountants engaging in actuarial practice (FRC, 2014). Under the Audit Enforcement Procedure (APE) the FRC investigates offenses of auditors (FRC, 2017a). In the UK, auditors are in fact qualified accountants. The Financial Conduct Authority (FCA) and its predecessor Financial Services Authority (FSA) are another source of disciplinary action. The FCA oversees 56,000 financial service firms which may employ accountants (FCA, 2017). Finally, accountants are subject to monitoring and sanctions by the Insolvency Service (IS), if they engage as insolvency practitioners (IS, 2017). The disciplinary hearing materials of these authorities are also examined in this dissertation to gain a deeper insight into accountants’ transgression.

Knowing the attributes of offender-accountants may help in policing WCC (Goldstein, 2011). This knowledge supports the accountancy profession in regulating and disciplining its members (Fearnley, Hines, McBride, & Brandt, 2000). This is all the more true as studies reveal that white-collar criminals may be repeat offenders (Perri, Brody, & Paperny, 2014). Even worse, Brody and Kiehl (2010) take the view that WCC can turn to red-collar crime, i.e. violent crime, if not timely addressed.

1.2 Outline of the research aims and objectives

When dealing with financial delinquency, the term white-collar crime (WCC) is the central concept (Cliff, 2014). But who is the typical white-collar criminal? According to Alalehto (2015) the culprit is male and white, aged 40-45 and well educated, a high-income earner enjoying a prestigious social status, but greedy. Isn’t he? Or is the typical white-collar criminal rather a white woman around 25, with a high school degree and earnings below $10,000 per year, strained by private indebtedness (Price, 2009)? Maybe, the typical white-collar criminal is a “shady operator” (Sutton, & Wild, 1985), a “shaky business” (Rothschild, & Throne, 1976) or a “phantom capitalist” (Levi, 1981), defrauding consumers and the vulnerable (Croall, 1989)? These examples of just few works on WCC show how far the research results may lie apart. It may be argued, that the diverging perception of what is a typical white-collar criminal is rooted in the attempt to combine people and offenses that are too heterogeneous. Indeed, crime analysis that does not take the personal characteristics of the criminal into account may be misleading (Pontell, 2016).

The goal of this dissertation is to achieve results that are meaningful for the group under consideration (the accountants), whilst not claiming to have a general definition of what makes a typical white-collar criminal. According to Braithwaite (1985) this approach brings the research back to the original WCC as defined by the founder of its theory, the sociology Professor Edwin Sutherland. His definition of WCC is “a crime committed by a person of respectability and high social status in the course of his occupation“ (Sutherland, cited in: Newman, 1958). It may be argued that accountants represent a group of respected professionals due to technical proficiency (Mitchell, & Sikka, 2004). Furthermore, in the UK and the Republic of Ireland they may enjoy high social standing through membership in professional accountancy bodies operating under the Royal Charter (Cowton, 2009). Finally, accounting crimes constitute offenses committed by accountants in the course of occupation. Obviously, offender-accountants are at the very heart of WCC as it was originally elaborated by Sutherland.

Therefore, the research objectives of this dissertation can be formulated as follows:

- To scrutinise demographic characteristics of the homogeneous group of offenders, who are qualified accountants and members of the UK chartered accountancy bodies,
- To investigate the offenses committed by this distinct group of perpetrators,
- To draw conclusions about the characteristics of offender-accountants and their transgressions on the background of previous research,
- To contribute to the growing body of research on WCC, focussing on the UK context.

1.3 Rationale for the research questions

The study seeks to answer the two Research Questions (RQ):

RQ1: What are the characteristics of offender-accountants?

RQ2: What are the offenses committed by offender-accountants?

These Research Questions address the research objectives articulated above. RQ1 seeks to investigate the demographics, the individual characteristics and the professional criteria of offender-accountants. It is believed that typical traits can be elaborated that make accountants distinguishable from other groups of offenders.

The rationale behind RQ2 is to analyse the offenses committed by accountants. Generally, financial crimes are not limited to certain groups, albeit they can be facilitated through professional proximity (Reurink, 2016). On the other hand, disciplinary offenses can only be committed by members of professional bodies who breach the internal rules. Hence, RQ2 aims to encompass both the financial delicts that are regularly associated with WCC, as well as further infringements, that are not limited to WCC, but are nevertheless committed by offender-accountants.

1.4 Outline of the structure of the dissertation

The dissertation is structured as follows. The literature review in Chapter 2 locates this study in the field of previous and current research on offender characteristics. Key criteria are collected from prior scholarly works to be applied against the offender-accountants, as presented in the methodology section of Chapter 3. Here, the research design, the methods of data collection and data analysis are discussed. Furthermore, advantages and disadvantages of the methods applied are articulated, as well as the limitations of this study. The outcomes of the study are scrutinised in Chapter 4. This chapter is to be read along with the Appendices 3-33 which entail graphical illustrations and statistics of the results. Chapter 4 exemplarily presents the most significant findings and discusses them on the background of previous research and criminological theories. The final Chapter 5 concludes the study by answering the Research Questions and making recommendations for professional accountancy bodies and future research.

2. Literature review

2.1 Outline of the literature review

To elaborate the crucial characteristics of offender-accountants, the academic literature will be reviewed in the following manner: Studies whose primary focus is on accountants and those including accountants will be analysed first (Subchapter 2.2). In the next step, research will be reviewed that does not differentiate between accountants and other white-collar offenders. Here, comparative studies are included that examine white-collar and non-white-collar criminals (Subchapter 2.3).

2.2 Studies on characteristics of offender-accountants

In the seminal work of Andon et al. (2015) Australian court materials of 106 accountants and 86 bookkeepers convicted for accounting fraud are examined. The offender-accountant according to Andon et al. (2015) is male (52.1% of the sample), around 45 years old, with almost no criminal history. This fraudster causes damage in the range of $5,539-$45,367,248 over a period of roughly 32 months, through cash theft and cash disbursement schemes (48.8%) and is detected mainly through whistle-blowing (21.9%) or by accident (18.8%), resulting in a prison term of four years. This analysis merits attention, as it applies demographic criteria that are of central interest for this study. The metrics adopted for this dissertation are “gender”, “age”, “damage caused”, “duration of offense”, “offense”, “method of detection” and “prison sentence”. For this dissertation, the metric “history of previous offenses” is refined by the criterion “history of disciplinary procedures”.

Regarding gender, prior research has focussed on women occupying lower employment positions, where the proportion of female offenders in less complex crimes (like embezzlement) is higher (Holtfreter, 2005a). However, Bethune (2015) shows that with more women employed in finance and accounting, female participation in complicated fraud schemes increases. In this regard, Haantz (2002) and Gottschalk and Glasø, (2013) claim that the male/female distribution depends on the occupational position, rather than on the gender itself.

Age is an important metric, as it may take considerable time to achieve positions of trust and influence that are abused in WCC (Piquero, & Weisburd, 2009).

Regarding the history of previous offenses, Walters and Geyer (2004) argue that white-collar perpetrators without a prior history of arrests generate less criminal thinking. Criminal thinking consists of cognitive approaches like the idea of entitlement to financial gains, or the belief to be able to escape prosecution (Walters, 2006). It may be assumed that less criminal thinking generates less crime.

Andon et al. (2015) also employ the metric “gambling addiction”, which drives 28.6% of the offenders in that study into criminality. Further evidence of accountants committing crimes to finance gambling is provided by Sakurai and Smith (2003). For this reason, the disciplinary hearing materials will be examined for the criterion “gambling addiction”.

The study of Krom (2016) analyses 775 disciplinary proceedings against US certified public accountants (CPA), the equivalent to the UK chartered accountants. The study focusses on the sanctions imposed and on the modus operandi of the state CPA societies, which may not be transferrable to the UK context. However, it is worth noting that Krom (2016) differentiates between offenses as follows: “financial reporting crimes” and “tax crimes” as resulting from primary accountant activity, with the residual categories being “financial crimes” (like money laundering), “non-financial crimes” (like drug and violent crimes), “public administrative offenses”, “disciplinary offenses” and the so-called “social crimes”. The last category includes behaviour that may discredit the profession under the code of ethics of a professional body (IFAC, 2016). Indeed, accountants may be liable for offenses other than those committed over a set of accounts (Henning, 2015). Therefore, all these sub-categories of the criterion “offense” will be used for this dissertation. In this connection, the old, but formative research of Stephen Leob (1972) deserves attention. His research on violations of the CPA code of ethics distinguishes between “offenses against colleagues”, “clients”, or “the public”. The dichotomy colleagues/clients will be applied in this dissertation, but not the criterion “the public”. This dissertation attempts not to inflate the number of potential victims. Instead, only those victims are analysed who are clearly stated in the disciplinary materials to have been damaged. It is believed that examining concrete victims can provide more insight into victimology than generalising statements (Barbot, & Dodier, 2014).

Mescall et al. (2017) examine 403 disciplinary cases of the Canadian Institute of Chartered Accountants of Ontario (ICAO). The scholars aim to measure the severity of penalties imposed. They find that an accountant-offender could become a “member of good standing” again if a severe monetary penalty was combined with obligatory continuing professional education (CPE) courses. The criterion “CPE” will be used to refine the metric “disciplinary penalties”.

The Association of Certified Fraud Examiners (ACFE) releases bi-annual global reports on occupational fraud and abuse. The last three surveys cover 1,388 cases from 100 countries, including 21 from the UK (ACFE, 2012), 1,483 cases from 103 countries, including 29 from the UK (ACFE, 2014) and 2,410 cases from 112 countries, including 30 from the UK (ACFE, 2016), respectively. The surveys deal with occupation fraud, which presuppose being an employee or a partner / owner of the victimised organisation. The criterion “offenses against organisations” as the counterpart to “offenses against individuals” will be adopted for this dissertation.

The perpetrators are distinguished by department, so that fraud committed by accountants is observable. The accounting department accounts for the most fraud cases throughout the surveys (16.6-22%) with a median loss between $150,000 and $197,000. Billing schemes (payable and receivable fraud) and check forgery are the most recurring offenses (57.5-67%). Financial statement fraud, which is considered primary accountant activity by Krom (2016), emerges in only 8.3-12.9% of cases. The average fraudster is male (67%), which corresponds with more males occupying senior positions at work, aged 36-45, having an university degree, and a clean criminal/disciplinary history. In the majority of cases, the fraudster acts alone (52.9%). This invokes the metric “collusion”. These results are broadly consistent with Andon et al. (2015), albeit not for the period of offense. According to ACFE (2016) fraud usually continues over a period of 12 months (45.3%), which is apparently shorter than 32 months of Andon et al. (2015).

Back in 2007, the accounting firm PwC conducted the Global Economic Crime Survey (GECS) among 5,428 companies from 40 countries. The raw data from this survey is explored by Bethune (2015). From the analysis of 1,830 fraud cases included in the materials, he develops five profiles of the typical white-collar criminals, depending on the crime committed. The study differentiates between asset misappropriation, accounting fraud, bribery and corruption, money laundering and intellectual property infringement. The work of Bethune (2015) emphasizes the criteria “gender”, “occupational rank”, “educational level”, and “length of service”. For the purpose of this dissertation, the results concerning accountants are intriguing. The fraudulent accountant according to the profile is 40 and male. Interestingly, Bethune (2015) reports that the highest proportion of female perpetrators among the offense groups is concerned with accounting fraud (21.4% globally and 26.9% for the UK). In 64% of the UK cases the accountant does not occupy management position. Surprisingly, given the high number of non-managerial offenders, the UK accountants cause more losses ($2,426,852) as compared to their Western European ($1,015,335) and global ($1,474,106) peers.

Bethune (2015) finds that only 40% of UK accounting fraudsters are university graduates, compared to 60% in Western Europe and 62% globally. If looking at the losses caused and the tenure, a certain relationship may be established. 38.5% of the UK offender-accountants spend more than 10 years with the organisation and 26.7% spend more than 10 years even in the same position, which is considerably longer than the length of service reported by other studies. This, and the high proportion of non-managers among offenders, makes Bethune (2015) draw two conclusions. First, fraud may serve as compensation for lack of promotion. Second, opportunities to commit fraud that arise from high occupational rank may be substituted by knowledge and trust accumulated through long service. Finally, it may be misleading to look on university education in the UK context. University education is not required in the UK to become qualified accountant. The qualification is obtained via studying with the professional accountancy bodies (FRC, 2016).

Filstad and Gottschalk (2012) analyse 67 Norwegian white-collar criminals, with three of them being chief accountants and three external auditors. The characteristics surveyed are the same as of Andon et al. (2015), but additional metrics are personal wealth and business revenue. On average, the outcome is a white-collar criminal of 46, involved in a $30,000,000 crime. Unfortunately, from the average numbers it is not possible to evaluate the three chief accountants and the three external auditors. Regarding the metrics, information about personal wealth and business income regularly cannot be derived from disciplinary hearing materials.

In the paper of Wilson (2004), 2,163 subscribers of the US magazine Risk & Insurance are asked about occasions of employee fraud. Reportedly, 13%-21% of the 3,113 employees involved in fraud are clerks/accountants. The study does not disclose whether these are qualified accountants or just bookkeepers. Most of the schemes continue over 1-2 years and cause losses from $10,000 to $500,000. Around 80% of crimes under review are committed by a single perpetrator. It is not possible to connect these statistics to the accountants involved, but it can be stated that around 60% of reported cases are payable fraud, receivable fraud and diversion of funds, which makes accounting knowledge necessary.

In a paper on four securities fraud and seven tax fraud cases, Ehrlich and Williams (2013) observe “wilful blindness fraud” among qualified US accountants. This term describes indifference of CPAs towards suspicious or false financial information used by clients to market their stock or to obtain illegal tax advantages. Smith (2004) observes a similar pattern among professionals in Australia, including accountants. The scholar traces illegal activity of accountants to “client-centred altruistic dishonesty”, i.e. crimes committed not to the personal advantage of accountants, but for the benefit of clients. This view finds support by the neutralisation theory. De Bock and Van Kenhove, (2010) argue that serving clients may be used as a neutralisation technique by the perpetrator to rationalise his malpractice. Dion (2009) explains this phenomenon by the dysfunctional network theory: serving clients, even if they are fraudulent, may be necessary to survive in a competitive market. Indeed, financial gains from client retention may be the true reasons for deviance (Messier, Bernardi, & Bernard, 2014). The possibility to charge a risk premium for supporting criminal cliental may provide another explanation (Paino, 2012). If ill-gotten gains are shared between the client and the accountant, criminal activity may even intensify, as proposed by the social learning theory (Meneses, & Akers, 2011). For this dissertation, the criterion “offense on client demand” will be noted.

The work of Konishi (2010) analyses two case studies of corporate fraud committed by accountants in Japan and one in the United States. The author points out that fraudulent cultural and occupational environment may trigger transgression. This view is shared by several criminological theories. The social support theory argues that individuals adapt to criminal conduct as long as they are supported by their social group (Gottfredson, & Hirschi, 1990). According to the social network theory, corroboration among white-collar criminals is facilitated, as the members are mainly recruited from the same social background (Bruinsma, & Bernasco, 2004). The differential association theory states that deviant behaviour can be learned from peers (Donegan, & Ganon, 2008). Finally, the coercion theory draws on pressure executed by peers and supervisors that can push others into criminality (Colvin, Cullen, & Ven, 2002).

In contrast, the informal social control theory developed by Sampson and Laub (1993) argues that crime occurs when social ties are weak or broken. Engdahl (2011) applies the informal social control theory to 74 white-collar criminals from the Swedish banking and finance industry. He finds that crime is driven by private crisis and is facilitated by lack of monitoring and control, i.e. by weak social ties.

To address the different academic views, this dissertation differentiates among offenders as to their occupational position as “sole practitioner”, “partner / managerial employee” or “non-managerial employee”. It is assumed, that a sole practitioner is less prone to social control, differential association and coercion than his employed peers. However, this may be mitigated by lack of supervision and internal controls, which again may tempt to crime (Smith, 2000).

The role of occupational position is also stressed by Dellaportas (2013). His interview-based study of 10 convicted Australian accountants reveals that opportunities to commit crimes arise out of expertise and employment rank. The opportunities grow when the accountant climbs the career ladder, which is a phenomenon of the agency theory (Tinker, & Okcabol, 1991). According to this theory, information asymmetry between the agent (accountant) and the principal (client) arises as the agent possesses more information due to his technical expertise, which he may deploy to his own advantage (Shapiro, 2005). The position of trust may be considered a moral hazard in such a case, as it enables the accountant to hide his crimes from the defrauded client (Caillaud, & Hermalin, 2000).

This view is also supported by Willott, Griffin and Torrance (2001) in a study of four convicted male white-collar criminals in the UK, one of them being an accountant. During group-discussions, they establish high technical expertise as a key distinction drawn by the interviewees between themselves and other criminals. Connell (1993) argues that competition with other males of less proficiency and education is driven by masculinity. According to Messerschmidt (1986), masculinity and striving for financial prosperity are interlinked. Both can push individuals into crime, when further wealth cannot be accumulated by legitimate means (Willott et al., 2001). There may be reasonable doubts as to whether the small sample of four interviewees can provide for representative results (Ben-David, 1991). However, the study underlines the importance of the criteria “educational level” and “gender”. It is to be noted that the criterion “educational level” may serve as a proxy for expertise.

2.3 Studies on characteristics of white-collar criminals

The following studies do not name accountants as a distinct group of white-collar criminals. Gottschalk (2012) analyses newspaper articles about 255 convicted white-collar criminals in Norway. The same metrics are applied as in Filstad and Gottschalk (2012). Here, the researcher distinguishes between single operating and organised offenders. Gottschalk (2012) finds that those organised receive a shorter sentence than single perpetrators. He assumes that judges discount personal guilt of criminals who follow out of loyalty and who share responsibility with others. This illustrates the importance of the criterion “collusion” and of the penalty-related criteria.

The accounting firm KPMG provides three empirical studies to profile the typical fraudster. The first survey analyses 360 offenders from Europe, India, the Middle East and South Africa (KPMG, 2007), the second deals with 348 fraud cases from 69 countries (KPMG, 2011), and the last one with 596 criminals from 78 countries (KPMG, 2013). The results constitute an offender driven by greed and personal gain, who is around 45 years old, a highly respected senior manager form the finance department colluding with others after having spent up to five years in the organisation. Interesting metric not addressed yet are: “national scale of crime” and “international scale of crime”.

Several academics try to extract typical traits of white-collar criminals by comparison with non-white-collar offenders. Walters and Geyer (2004) study three groups of US prisoners: 34 white-collar convicts without non-white-collar criminal history, 23 white-collar felons that have been previously arrested for at least one non-white-collar offense and 66 non-violent non-white-collar inmates. The pure white-collar criminal is distinguishable from the other two groups through higher age (criterion: “age”), higher education (criterion: “educational level”) and higher marriage rate (criterion: “marital status”). The scholars further differentiate among ethnic groups of convicts. This criterion is not disclosed in disciplinary hearing materials. The materials provide for the accountants’ location, so that members situated in non-UK countries can be indicated. But lots of accountants in the UK do not belong to the ethnic majority of the UK. Certain conclusions can be drawn from the accountants’ names that are disclosed in the materials. But this cannot be done with academic accuracy. Hence, no criterion for ethnicity will be included in this research.

Ragatz, Fremouw and Baker (2012) apply the same metrics as Walters and Geyer (2004) in a study of US prisoners: 39 only-white-collar offenders, 88 white-collar convicts who had also committed other crimes and 86 non-white-collar felons. The new criteria of mental health and substance abuse are introduced. The researchers find that only-white-collar delinquents tend to suffer from alcohol abuse and anxiety. Generally, psychological disorders are out of scope of this study for the lack of medically reliable information in disciplinary hearing materials. But the criterion of “substance/alcohol abuse” is included as drug offenses may trigger disciplinary procedures.

The last study in this subchapter is that of Harel (2015) who surveys 97 white-collar felons, 307 blue-collar criminals and 1,298 thieves. Harel (2015) defines blue-collar as occupational offenders with annual income below $90,000, to distinguish them from white-collar high earners. The study determines so-called “well-to-doers” as highly educated white married males in their mid-forties. Obviously, these results correspond with Andon et al. (2015), Filstad and Gottschalk (2012), ACFE (2012, 2014, 216) and KPMG (2007, 2011, 2013). However, no support is provided for alcohol abuse found by Ragatz et al. (2012). The only new criterion introduced is that of “previous military service”. Laub and Sampson (2001) argue that military service provides for later opportunities of employment and education, thus reducing the probability of a criminal career. On the other hand, service may delay or interrupt a better paid employment, creating financial constraints, and teach gang-like behaviour (Galiani, Rossi, & Schargrodsky, 2011). However, this criterion is considered non-relevant in the UK context of this dissertation. The British army of today consists of volunteer force, so that the majority of population is not affected by military service (Mallinson, 2009). Appendix 1 provides a summary of the most recent and relevant papers scrutinised in this literature review.

3. Methodology

3.1 Research design

To study offender-accountants and their offences, disciplinary hearing materials of professional accountancy bodies are analysed. The idea behind this approach is straightforward: accountants are subject to disciplinary oversight by professional bodies of which they are members. Disciplinary hearings provide a cohesive research material focussing on just this group of offenders. Professional bodies have been restricted to those with the Royal Charter. At the time of writing, these are the following bodies as per Table 1:

Table 1: Professional accountancy / taxation bodies in scope of this research

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Beyond the professional bodies, disciplinary hearing materials of the FRC, FCA/FSA and IS provide further insight into the accountants’ affairs.

The study covers materials published in the period January 2012 – June 2017. Appendix 2 contains a table with the number of publications per body per year per material used (ACCA, 2018a; CAI, 2018; CIMA, 2018; CIPFA, 2018; CIOT, 2018; ICAEW, 2018; ICAS, 2018; FRC, 2018, FCA/FSA, 2018; IS, 2018). In total, there are 2,596 publications analysed in this dissertation. A catalogue of demographical, organisational and offense-related criteria is collected from prior research (Table 2). The disciplinary hearing materials are examined for the catalogued criteria to unveil offender characteristics.

Table 2: Criteria of offender-accountants and their offenses derived from previous research

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3.2 Methods of data collection

Disciplinary hearing materials constitute the main body of data examined by this dissertation. The materials are obtained through systematic search of the webpages of the professional accountancy bodies and of the FRC, FCA/FSA and IS. Only disciplinary hearing materials that are available in public domain are used in this study.

Academic literature is obtained through the Portsmouth University online library, the library at the author`s place of residence, as well as academic online networks SSRN, ResearchGate and EconPapers. Additional information relevant to this research is collected using the search engine Google, print and online magazines and newspapers.

3.3 Methods of data analysis

The study applies the content analysis. This terminology refers to reading of materials and searching for cues and characteristics in order to systematically generate a sample of relevant cases and to exclude those that are out of scope of the research (Hall, & Wright, 2008). Therefore, the 2,596 publications have been read by the author to exclude materials that do not contribute to answering the Research Questions. This constitutes the preliminary stage of analysis. During this stage, the following adoptions have been applied to the disciplinary hearing materials:

First, materials dealing with student members of accountancy bodies are excluded, as students are not accountants yet. The same is true for affiliate/provisional members, i.e. students, who have completed all exams but have not gained the practical experience yet that is required to be granted chartered accountant status (ACCA, 2018b).

Practitioners under the oversight of public authorities FRC, FCA/FSA or IS are excluded if they are not chartered accountants.

Materials concerning firms are excluded, if the offense committed by the firm cannot be traced to an individual accountant. Penalties declared against firms are included in the analysis only to the extent that the offender-accountant bears joint liability for payment.

Cases of accountants becoming insolvent are excluded to the extent that no breach of law accompanies bankruptcy.

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