Overview

Forensic accounting is a procedure performed by auditors, where they conduct an examination on accounting practices, that investigate fraudulent actions. Through this examination, fraud and embezzlement are addressed. The auditor then must determine where the questionable financing has been allocated, by asking the entity to explain the nature of a financial transaction in court. This research is conducted as a small group assignment written by two students studying at the Amsterdam University of Applied Sciences, enrolled in the course International Business and Languages, and Business Administration. 

For this case study, we choose to conduct an interview from a big accounting firm in the Netherlands. This source was used to find the cultural difference that arise in a big four company and how these cultural differences are managed when dealing with fraud or embezzlement is found, which is discovered in the examination of forensic accounting. This case model examines embezzlement within the banking sector that was substantiated.

Power Distance Index

The company we interviewed has a hierarchical structure with growth opportunities. The partners are very accessible, and this is very normal within Dutch culture. We observed that there is a low power distance within the organization, which is partly due to high Dutch femininity in low power distance. Whereas British and German culture, there would be a greater power distance and higher masculinity.

Individualism vs collectivism

The person we interviewed is more collectivist. However, the employees are more individualistic. It is a big company with large departments, and it is therefore hard to get to know everyone. The direction tries to change that trough organizing events. Although everyone on the department is available for questions, employees of the Netherlands and Great Britain score relatively high on individualism, and people from Germany have a relatively low level of collectivism. These cultures could therefore clash with each other. People from Germany are used to collectivism, and it would therefore feel inhibitive for them to be motivated by personal rewards.

Uncertainty avoidance index (UAI)

According to the person we interviewed, the company investigated is a very safe place. If there is an issue, everyone knows where to go. Great Britain has a very low UAI, whereas the Netherlands has a higher UAI index, and Germany the highest level of UAI. We observed that the company investigated has a low UAI level, which means that the relaxed attitude would feel inhibitive for the German employees.

Masculinity vs femininity

There are more men working at the investigated company than women, although the proportion of women is increasing. In the HR department the majority are woman. This is very normal for the Dutch culture because of the lower level of masculinity. This would feel inhibitive for the German employees, since they have a higher level of masculinity.

Long-term orientation vs short term orientation

According to the person we interviewed, the company investigated is like a teaching school. Most people are growing in the curve, and some people do not become partners and go somewhere else. The company does have a long-term view, as an employee, you can gain a lot of experience and learn a great deal. In addition, the company offers a good basis for your carrier. The employees from Germany are also long term oriented, therefore they would feel very comfortable with this type of behaviours. Dutch and British people are less long term oriented, this would, however; not be an issue for them, because they can leave the investigated company whenever they want.

Outcome

The current situation is that the company being investigated embezzled two milliard euros. The British forensic accountant did not notice this when making the balance sheet for the company being investigated. An employer of a German accounting firm took the time to further examine this case and found the mistake that British accountant had missed, namely the fact that senior executives had secret interests in an offshore investment vehicle. 

Employees of the company being investigated started to become suspicious on the fact that individuals were suddenly investing a great deal of money into the investigated company and then winning a lot of money back. Therefore, 40 forensic accountants of the German accounting firm were hired to dig through the company’s books. The British forensic accountant reported that there was no need for extra attention on this issue because the British accounting organization was “evaluating the matters sufficiently”. This categorizes the uncertainty avoidance of Great Britain as their cultures tends to have more tolerance for ambiguity orientation than Germany. The forensic accountant of the Germany accounting firm noticed that the British accounting organization was indolent when asking for documentations on accounts in Asia. As Germany scores highly on the uncertainty avoidance scale of Hofstede, meaning that they have a need for certainty orientation, it did not come as a surprise when the German accounting firm said that the documentation was not enough, and they insisted on seeing original documents. It was noticeable that the individual who was interviewed, was surprised by the reaction from the British accountant. This categorizes her for her Dutch culture, as the Dutch and German culture do not differ much on the uncertainty avoidance index.

Furthermore, the person we interviewed told us that the investigated company lost a lot of money on the stock market, due to this scandal. Germany is categorized as a company that scores lower on the individualism index, compared to the Netherlands and Great Britain. As mentioned before, the person we interviewed does not categorize herself as being an individualistic, but does feel that the employees of the German accounting firm do have this culture. When asking her why, she said that she thinks it is because she works in the HR department, where being collectivistic is a requirement. The company being investigated reacted to the scandal by defending itself and aggressively hitting back at critics, which was a weird action as this company was categorized as a company with a low individual index, where the focus lies on the degree to which the society reinforces individual achievement or failure.

The power distance, masculinity, and femininity long-term and short-term orientation were not explicitly used by the German accounting firm for handling the investigated company’s scandal. Therefore, only the applicable dimensions of Hofstede were presented in the outcome.

Possible solutions/ best practice

The company we interviewed saw that there were more cultural clashes than they thought. They also saw that this was an important factor to work easily together. That is why they gave their employees a special gift. For Christmas, they gave their employees a book with information about cultural differences. This opened the employees’ eyes and made them understand why people from other countries handled the situation in that way. According to the person we interviewed, the impact of the book was immediate, and that the number of clashes decreased.

Student Authors

Kimberly Buitenhuis (LinkedIn)
Student, International business and Languages, Amsterdam University of Applied Sciences, The Netherlands
Block 4, Semester 2, 2021

Bilal Lazaar (LinkedIn)
Faculty Business and Economics Amsterdam, University of Applied Sciences, The Netherlands
Block 4, Semester 2, 2021