5ed cch forensic investigative accounting ch02

8/12/2019 5Ed CCH Forensic Investigative Accounting Ch02

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Forensic and Investigative Accounting

Chapter 2

Forensic Accounting Education,Institutions, and Specialties

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Chapter 2 Forensic and Investigative Accounting 2

Just as termites never sleep, fraud never

sleeps.

Just like termites, fraud can destroy the

foundation of an entity.

Termites, Rust, and Fraud


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Professors Top Ten Topics in

Forensic Accounting Curricula

1. Fundamentals of fraud.

2. Financial statement fraud.

3. Types of fraud.4. Cooking the books and problems in

accounting.

5. Elements of fraud: pressure, opportunity, andrationalization.

(continued on next slide)


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Professors Top Ten Topics in

Forensic Accounting Curricula

6. Antifraud controls.

7. Internal control evaluation.

8. Theory and methodology of fraud

examination.9. Principles of ethics and corporate code of

conduct.

10. Fraud detection and deterrence programs.

Practitioners tend to emphasize litigation servicemore than professors.


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Knowledge, Skills and Abilities

Needed by Forensic Accountant

Law, legal system, courts, and courtroom

procedure.

Financial statement fraud.

Corporate governance, shareholder rights and

litigation, securities laws, and protections.

Report writing and communication. Criminal law and procedure.

(continued on next slide)


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Knowledge, Skills and Abilities

Needed by Forensic Accountant

Computer fraud and cybercrime.

Human factors involved in intelligence

gathering, interview techniques andunderstanding the motivations for fraud and

other criminal activities.

Ethical issues in business.

Business valuation.


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Accountants must be attuned to detecting

fraud at every level of service, including standardaccounting services, compilations, reviews, and

bank reconciliations. If there is fraud and you

dont detect it, you are going to be sued,andyou will likely lose, as the public perception is the

accountant is the watchdog.

Robert J. DiPasquale, Parsippany, N.J.

Source: H.W. Wolosky, Forensic Accounting to the Forefront, Practical Accountant, February

2004, pp. 23-28.

Find It, or Ill Sue


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Forensic Accounting Knowledge Base


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Careers in Forensic Accounting

Parademagazine on April 15, 2007, indicated

that the hottest jobs for college graduates were

forensic accountants.


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Income Expectations for

Forensic Accountants Salaries start around $50,000.

Senior-level government employees can

earn between $85,000 to $95,000.

In the private sector, one can earn between

$125,000 to $150,000.


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Consulting Fees

Forensic accountants work with attorneys,

private investigators, law enforcement

officers, corporate security specialists, the

IRS, and the FBI.

In 1999, Kessler International stated that the

firm charges about $300 per hour for

forensic consultations.


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Background in Forensic Accounting

Accountants

Consultants Internal auditors

IRS auditors

Governmentauditors

FBI agents

SEC accountants

Bankruptcy specialists Professors

Bank examiners

Chief financial officers Valuators of closely

held businesses

A forensic accounting background is helpfulin these professional specialties:


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Specialties Within Forensic and

Investigative Accounting Employee Crime Specialist

Asset Tracing Specialist Litigation Services Specialist and

Expert Witness


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Forensic Groups and Credentials

Group Credential

American College of

Forensic Examiners

International (ACFEi)

Certified Forensic

Accountant (Cr.FA)

Association of Certified

Fraud Examiners (ACFE)

Certified Fraud Examiner

(CFE)

Association of Certified

Fraud Specialists (ACFS)

Certified Fraud Specialist

(CFS)


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Forensic Groups and Credentials

Group CredentialForensic Accounting

Society of North America

(FASNA)

None

National Association of

Certified Valuation

Analysts (NACVA)

Certified Valuation Analyst

(CVA)

Certified Forensic Financial

Analyst (CFFA)Certified Fraud Deterrence

(CFD) (merged with CFFA

in 2007)


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Professional Groups and Credentials

Group CredentialNational Litigation Support

Services Association

(NLSSA)

None

Network of Independent

Forensic Accountants (NIFA)

None

Institute of Business

Appraisers

Certified Business

Appraiser (CBA)

American Institute of CPAs Certified Financial

Forensics (CFF)


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CPA Certificate Important

AICPA research indicates that CPAsrepresent 94 percent of forensic expertshired over two years.

Source: Field of Forensic Service Remains Hot, A. E. Feldman Blog,http://blog.aefeldman.com/2009/04/13/field-of-forensic -services-rem...


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Difficulties With Fraud

Joseph Wells says

Regrettably, the actual cost of fraud isunknownand unknowable. It is aconcept the criminologists call the dark

figure. Unlike visible crimes such asrobbery, not all frauds are uncovered. Ofthose uncovered, not all are reported. Noagency is tasked with compiling

comprehensive data on fraud.

Source: http://www.nysscpa.org/cpajournal/2006/906/infocus/p16.htm


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Predication

The ACFE group indicates that in the private

sector, a fraud investigation should not beconducted without proper predication.

Examples: Anonymous tips, complaints, audit

inquires, conflict of interest. Thus, predicationis the basis for undertaking a

fraud investigation.

Without predication, the target might be able to

sue for real or imaginary damages.


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Skills of a Forensic Accountant

Mean

Analytical Skills 6.51

Basic Accounting Skills 6.31

Problem Solving Skills 6.30

Data Analysis Skills 6.27

Interviewing Skills 6.25

Verbal Communication Skills 6.11

Basic Computer Skills 6.05

Source:D.A. McMullen and M.H. Sanchez, A Preliminary Investigation of the Necessary Skills, Education

Requirements, and Training Requirements for Forensic Accountants, Journal of Forensic and Investigative

Accounting, Vol. 2, Issue 2, July-December, 2010, p.43.


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Characteristics of a Forensic Accountant

Mean

Persistence 6.12

Skepticism 6.12

Puzzle Skills 6.08

People Skills 6.04

Flexibility 5.91

Works well in teams 5.84

Experience in Auditing 5.80

Source:D.A. McMullen and M.H. Sanchez, A Preliminary Investigation of the Necessary Skills, Education

Requirements, and Training Requirements for Forensic Accountants, Journal of Forensic and Investigative

Accounting, Vol. 2, Issue 2, July-December, 2010, p.43.


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Demand for Forensic Accountants

Robert Half 2009 Salary Guide indicates thateven in the 2009 economic recession, there wasstill a strong demand for forensic accountants.

In a 2008 AICPA survey, two out of threeaccountants indicated that their forensicpractices had grown over the past year.

Source:Robert Half, 2009. Robert Half 2009 Salary Guide, Accounting andFinance. P.R. Newswire, 2008. Demand for Forensic CPAs Accelerates, AICPA,Survey Shows, New York, September 25, 2008.


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Society for Financial Examiners

Established in 1973, the Society for FinancialExaminers is a professional organization forexaminers of insurance companies, banks

savings and loans, and credit unions. SOFEoffers three professional designations which areearned by completing extensive requirementsand a series of examinations.

Source: www.sofe.org/about


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International Association of Asset

Recovery

The International Association of AssetRecovery (IAAR) has a new certification calledthe Certified Specialist in Asset Recovery

(CSAR). The IAAR mission is to helppractitioners to win back assets that rightfulbelong to victims, government agencies, otherorganizations, or individuals who have beenvictimized by criminal or wrongful conduct.

Source: www.iaaronline.org


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Corporate Crime Reporter

The Corporate Crime Reporter is a legal printnewsletter published and mailed 48 times ayear (corporatecrimereporter.com). Some

articles are posted on their website, but are onlyhighlights from the print newsletter.

5ed cch forensic investigative accounting ch02

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