Forensic Accounting in Practice

Throughout history and in our own time, legitimate accounting methods have been utilized to fraudulently engage in manipulating activities that results in illicit gains to the perpetrators and losses to individuals and financial institutions.

After the Enron debacle the responsibility of auditors shifted more towards fraud detection as the scandal highlighted the lack in auditing process with regards to fraud prevention since auditors were partaking in the fabrication and falsification of accounting statement. Thus auditors legitimized the falsified financial statement whether through inaptitude to properly conduct their work or conflict of interest between management and auditors. To sum this view it is important to keep in mind that researching misrepresentation within financial statement only became recently part of the auditor’s legal obligation.

Proof of intent to defraud is not required under the Federal False Claims Act and because of this the court utilizes accountants to see if companies acted knowingly. Accountants help the court understand things such as costs in the contract, measurement of costs, damages from fraud and accounting concepts and rules in regards to the contract. An accountant’s expertise in investigating companies’ business practices and their records is very valuable to litigation and claims in under the Federal False Claims Act.

In this course, students are introduced to the conduct of fraud examinations, including a discussion of specific procedures used in forensic accounting examinations and the reasoning behind these procedures. Topics include an overview of fraud and abuse, forensic evidence, substantive procedures for cash outflow irregularities, substantive procedures for asset irregularities, financial statement fraud, and examination reporting.

AICPA Code of Professional Conduct principles prevents vises such as fraud that are experienced in accountancy field. Audit is the best measure of the effect of the fraud that are imposed to investors by accountants. The relationship of the investors and account holders are supposed to be affirmed through auditing to ensure accounting principles are upheld(Weirich, Pearson, & Churyk, 2010). Improper loss of the funds through propagation of the accountant officer should be treated as fraud and criminal activity that should lead to prosecution. Therefore, the paper seeks to relate two fraud cases that have been audited and presenting AICPA Code of

It is the legal responsibility of a forensic accountant to be independent and impartial while researching and investigating both the financial records and the conduct of the employees that are involved. They are responsible for presenting all information found and making a determination on if the parties involved have a case. It is also their responsibility to know all tax and accounting laws in order to make sure they are presenting accurate findings. Accounts have to also be very discrete when conducting investigations because a company’s reputation is at stake.

Forensic accounting is an investigative style of accounting used to verify whether a single or company has occupied with any illegal financial movement (Forensic Accounting Online, 2013). It is used to detect fraudulent activity such as false insurance claims, embezzlement, bribery, tax evasion, etc. Since

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

The chief accountant of an organization has the tremendous responsibility of establishing and administering accurate, transparent, fraud-free accounting reports. To successfully fulfill the duty, the chief accountant must be ethical and knowledgeable. The chief accountant must be knowledgeable of the managerial account as well as the financial account. Since the accounting reports of an organization are of interests to so many entities, the media with its reporters will want to make sure that there are accuracy and integrity with the details. A good understanding of the managerial account is of crucial importance for the chief accountant. According to Hitzig (2004), and Edmonds et al. (2011), the integrity of the staff will be challenged to bring effective, efficient and useful data if the chief accountant is not savvy in financial and managerial accounting.

Forensic accountants also should consider that confidential sources of information may have a hidden motive for providing information. Former spouses, business partners, employees, neighbours, and friends may know specific details. However, the reasons for providing such information may be suspect. The confidential source may be providing information that is intended to discredit or embarrass the target. A forensic accountant should weigh the benefits of relying on the evidence against the risk of potential damage to the case if the information proves false. To the extent possible, information received from confidential sources should be corroborated through independent investigation.

15. In the 1920s, what senior partner began giving speeches encouraging financial and industrial investigations?

The American Association of Public Accountants, created in 1887, tasked accounting professionals with the responsibility to ascertain, maintain, and evaluate company financial statements for accuracy, fraud, and compliance utilizing current accounting guidelines. Financial frauds, in the twentieth century, however continued to evaded detection due to loose accounting oversight, and a lack of proper internal and external controls (Events that shaped a century, 2005).

Embezzlement is a common crime in large corporations, especially those where Chief Financial Officers (CFOs) operate under autonomy on fiscal activities. The organization that called upon us is huge in terms of personnel employed; however, their Information Technology (IT) department isn’t staffed or trained adequately for thoroughly investigating crimes of this nature. It is this reason the organization has reached out to the police department; where I hold the position as Chief of the digital forensics division, whose division with spearhead the investigation procedure. Capturing all the evidence used to commit crime will be tedious & complicated, but well within our sphere of capabilities (Nelson, Phillips, & Steuart, 2010, p. 14).

The SNIFFING book-cooking schemes of major corporations and firms such as HealthSouth Corp, Enron global etc, plaguing our financial world in this era, is an indication that we require “all hands on deck” in the fight against financial crimes. The variability and self-motivated nature of frauds, characterized by material destructive consequences, has raised a myriad of alarms in the corporate world. In reality, the dynamic nature of fraud perpetration present complex, intricate and titanic tasks to the forensic investigator who by mandate and dictate from the fast growing technology and sophisticated defrauding strategies of phonies, is required to expand Knowledge and proven skills to be relevant and become verifiable human tool. Forensic investigators are obliged to push forward innovative and exhaustive practices in order to squash this canker-worm. This study hopes to provide support to the literature on “Financial Crimes Fight” that has tried to establish that;

Forensic accounting is defined as "the action of identifying, recording, settling, extracting, sorting, reporting, and verifying past financial data or other accounting activities for settling current or prospective legal disputes or using such past financial data for projecting future financial data to settle legal disputes". Forensic accountant are very important part of the business for the expert services, legal system such as financial statement analysis on securities and exchange tax, fraud schemes and bankruptcy. However forensic accounting is used for the investigation and prosecution of fraud. (Curtis, 2008) Said, that accounting curriculum needs to be upgraded because accounting professionals or accountants are key player in account management and financial management. Accountants are involved in accounting practices and fraudulent activities therefore there is need for forensic accounting curriculum. Curriculum plays a major role in accountant 's professional life because what they learn during their studies, they execute it as well.