Forensic
Accounting
Agenda
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Definition
History
Skills
Business scandals
Cases
Forensic Accounting
The forensic Accountant:
The Sherlock Holmes of the
accounting world. “Messmer, Max”
History
As per the National Association of Forensic
Accounting: It has been stated that the first
known use of forensic accounting was in
the conviction of AL CAPPONE!
Forensic Accounting
Today’s forensic accountants perform their work in a
number of diverse areas:
“Fraud investigation and prevention – Forensic
accountants often look for evidence of any criminal
activity in company’s financial records. This could
include anything from securities fraud and
overvaluation of inventory to money laundering and
improper capitalization of expenses.
Forensic Accounting
But the work of forensic accounting professionals is
not always crime-related. Businesses also value
their guidance when considering potential structural
changes. Their input during mergers or acquisitions.
For example, can give all parties an accurate
assessment of an enterprise’s financial situation and
value.
Skills
Unlike other accounting specialties, careers in forensic
accounting often follow non-traditional paths.
Forensic accountants typically possess a variety of
backgrounds, including auditing and law
enforcement.
Many starts as Certified Public Accountants (CPAs),
gradually learning forensic techniques simply by
handling cases that require these skills. Some enter
the field with a bachelors degree in business
administration or accounting. The most common
accreditation offered is Certified Fraud Examiner
(CFE).
Case Studies
Decline in Profits Case Study
Situation
A client was experiencing an unexplainable decline in profits. The Chief Financial
Officer was suspected of embezzling corporate funds, so the client hired forensic
accountant and investigative team to look into the situation.
Solution
By analyzing the company's financial statements and records and uncovered a large
fraud scheme. From available documents and records, and from interviews with key
employees, a fraud report revealed that the CFO's fraudulent activities. The primary
suspect was interviewed and confessed. The client is assisted in filing an employee
dishonesty claim, and further assisted law enforcement in the prosecution process.
Results
- Chief financial officer gave a written confession and was then fired. The case was
turned over to law enforcement and charges were filed by the local prosecutor.
- New chief financial officer was hired.
- Company is experiencing increased profits.
Inventory Losses Case Study
Situation
A large recreational wholesaler was experiencing significant inventory losses, a high
number of customer complaints and a loss in revenue in the warehouse department.
They decided to bring in an independent forensic team.
Solution
After meeting with the company's executives, the team of forensic investigators
determined the company needed to proceed with some investigative work. Covert
surveillance is conducted of the warehouse department, onsite interviews of
warehouse employees, and analyzed the financial statements for key account
variances.
Results
- Obtained key confessions from the warehouse supervisor and two warehouse
employees.
- Installed proper internal controls designed to safeguard the assets of the company.
- Inventory variances have greatly improved.
- Proper controls are in place, giving owners peace of mind.
Unexplainable Low Margins Case Study
Situation
A client in the service industry was experiencing unexplainable low margins. This was
unacceptable to the client. He hired a forensic team to help him analyze the situation.
Solution
Experienced forensic investigators performed behavioral assessment interviews to
determine each employee's level of fraud awareness. They also looked for internal
control deficiencies and reasons for low margins. The client is provided with a
complete report regarding the findings and recommendations.
Results
- Two employees were profiled as deceptive during the interviews-due to their
responses and behavior.
- One employee, who confessed to stealing, was fired. The case was turned over to
local law enforcement; assistance in helping the client file an insurance claim.
- The client implemented recommendations for improved internal controls over cash,
resulting in increased margins.
The End