Penny R. Clayton, Ph.D., associate professor of accounting and certified fraud examiner, Drury University

Why is fraud an important topic in accounting education?
It’s very timely. It became more popular, I think, a couple of years ago, when we had the fraud issues with WorldCom and Enron … and the public really became more aware that there is fraud at the corporate level. The (Securities and Exchange Commission) developed new legislation … Sarbanes-Oxley, and so for all public corporations, they have to follow the new guidelines.

How will you use this designation as a consultant or expert witness?
An expert witness would be someone who would come in and explain, possibly in the courtroom, financial statements, financial statement analysis and relationships. If you look at any accounting records, maybe helping the jury and the court to understand what those numbers represent, because a lot of times there are signals in the financial statement that indicate fraud. Unless you’re used to reviewing and recognizing those signals, you really wouldn’t know what they represent.

What are some of those signals of possible fraud?
A problem with small business, a lot of times, there’s not a lot of employees at that particular business. A major red flag is what we call segregation of duties. There may be one individual who’s handling a lot of different duties for that particular company, and it creates a situation where fraud can occur. For example, let’s say that you’re working for a company and you’re in charge of collecting the mail every day. You’re also in charge of removing any checks that have been paid to the corporation. In addition to that, you’re also in charge of recording that those checks have come in, and you’re in charge of taking the checks to the bank and making the deposit. There are a lot of smaller organizations where all of those tasks are completed by the same individual, so there’s a natural tendency for some people to maybe skim, or falsify records, something like that.

What are other common problems?
A huge problem is that so many business owners have trusted employees – they might have employees that they’ve worked with 10, 15, 20 years. They might have family members that they really trust, and that’s a huge problem area, because that’s the whole issue. If an employee is really trusted, it gives them more opportunity to commit fraud. There’s been one case after another (where) that’s been noted, that these trusted individuals have actually stolen thousands, even up to hundreds of thousands of dollars from a good friend or a relative, and the owner never even realized it was taking place.

Has there been good student response to the fraud class that you teach?
This is the first time that we’ve offered it, and I have 10 students right now. That’s a good initial start, but we hope to get 20 to 30 students enrolled per semester.

What’s your educational background?
I have a Ph.D. in accounting from Oklahoma State University, a master’s degree from Drury and a bachelor’s degree from Southwest Missouri State University. I graduated from Hillcrest High School.

How did you end up back in the classroom?
When I first got out of college, I worked for a public accounting firm, and then from there, I worked for a tax company, where I was just doing mostly taxes and some accounting services. I really was not liking the professional side of things, and that’s when I went to Drury to get an MBA, and I was still working at the tax firm at the time. Curtis Strube, a longtime director for the Breech School of Business, after I graduated, asked me if I might be interested in trying teaching for one year. They had a finance class, a few sections of it, that they needed to fill with an instructor. I was hooked, and then Dr. Strube made arrangements for Drury to send me and support my education while I got my Ph.D.

Tell us about your family and spare-time interests.
My husband’s name is Stu Dunlop. We’ve been married five years. We have no children. My parents live in town, and so does Stu’s family, so we’re close with brothers and sisters and nieces and nephews. Stu is in business for himself as a marketing representative.
We’ve been athletes – we were softball players when we were younger, so we spend a lot of time working out, giving softball instruction or attending basketball games or something like that. I do a lot of cycling, too.