Forensic Accounting Fraud Investigation (PowerPoint) by huanghengdong

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									Week 2 – Lecture 1
Overview
 Forensic Accounting
 Fraud
Welcome
Forensic Accounting

     WHAT IS FORENSIC ACCOUNTING?
Forensic
 Forensic means “belonging to, used in or suitable to
  courts or judicature or to public discussions and
  debate (Webster’s Dictionary)
 Anything that is suitable in a court of law
Forensic
 The term forensics in the accounting profession deals
  with the relation and application of financial facts to
  legal problems.
 Forensic accounting evidence is oriented to a court of
  law.
History of forensic accounting
 1817 – Meyer v Sefton (Expert Opinion)
 1824 – a young accountant called James McClelland
  started his business in Glasgow, Scotland.
 1856 – In England, the audit of corporations was
  required
 1927 – Al Capone
History of forensic accounting
 World War II
 - FBI employed 500 agents who were accountants from
 December 6th 1940 to June 24th 1941 to examine and
 monitor financial transactions totalling $538,000,000
History of forensic accounting
 1946 – Father of Forensic Accounting
 Pretenders or claimants to the title
    1953 – Max Lourie
    1986 – Robert Lindquist
 1970’s – Canadian Accountants support police
 1980’s – Police priorities shift away from corporate
  victims
History of forensic accounting
 1986 – 2 broad areas of forensic accounting
 1990 – increase in accounting practices
  - recognition of forensic accounting as a specialty
 2000’s – Corporate collapses (Enron, etc.)
 Sarbanes-Oxley Act of 2002 is introduce
 CLERP 9 Act
 Regulatory reforms
History of forensic accounting
 Today


 FNPF PROBE BEGINS
 Investigate without fear or favour, board tells forensic
  accountants
 (Fiji Sun, Wednesday, May 19, 2010)
What is forensic accounting?

 Forensic accounting is an integration of accounting,
 auditing and investigative skills during any financial
 investigation.
Main areas of forensic
accounting
  Two main areas:
 Investigative accounting


 Litigation support
Litigation support

 Is a service where forensic accountants provide an
 opinion based on known facts or facts that are yet to be
 uncovered
Litigation support
 Litigation support services include engagements
 concerning:
 - professional liability claims and
 - civil claims
Forensic accountant
 Forensic accountants are accounting detectives trained
 to look beyond the numbers and deal with real
 business situations
Forensic accountant
 A forensic accountant utilizes:
 - accounting,
 - auditing and
 - investigative skills during any investigation
Forensic accountant
 A forensic accountant provides an accounting analysis
 that is presented in any court or arbitration
 proceedings
Forensic accountant
 Attends court proceedings
 Should clearly communicate financial information to
  the judge or jury
 Approach their assignments with professional
  skepticism
 Trust but verify the numbers
Characteristics of forensic
accountants
 Education and training
 Advanced and continued education in appropriate
  disciplines
 Diversified accounting and auditing experience
 Communication skills – oral and written
 Practical business experience
 Diversified forensic auditing experience
 Ability to work in a team environment
 People skills and flexibility (Grippo, 2003)
Characteristics of forensic
accountants

The most important skill is ‘experience’.
How you can engage a forensic
accountant
 Forensic accounting experts
  (eg. Presenting investigation reports in court
  proceedings – a reactive approach)
 Forensic accounting consultants
  (eg. Risk profiling – a proactive approach)
 Forensic accounting investigation)
  (eg. Investigation of fraud cases)
Before any engagement

 Sign an ‘engagement letter’
Fraud

        WHAT IS FRAUD?
Fraud
What is fraud?
 Fraus – a Latin noun carrying a wide range of
 meanings clustered around the notions of:
   harm
   wrongdoing and
   deceit
What is fraud?
 Modern definition derived from case and statute law
  but many of ancient elements remain
 Focus on intent of fraudster to separate trusting victim
  from property or a legal right through deception for his
  or her own benefit
Fraud

 Fraud is unavoidable and an occupational hazard.
Fraud
 Fraud is an activity that takes place in a social setting
  and has severe consequences for the economy ,
  businesses and individuals.
  eg. Enron, etc.
Fraud

 Fraud is a deliberate misrepresentation which causes
 another person to suffer damages, usually monetary
 losses.
White-collar crime
 Should be viewed as a subclass of a fraud
 Committed by individuals, eg.
    Embezzlement
    Manipulating accounts
    Taking bribes, etc.
Types of fraud
 Financial Statement fraud/Manipulation
 Earnings management/Management fraud or abuse
 Employee fraud/Misappropriation of assets
 Lying on a resume
 etc.
What is common?
 Fraud vs White-collar crime

   The intent to deceive
Prosecution
 Criminal prosecution of fraud
   Must prove beyond a reasonable doubt that an act meeting the
    relevant legal definition of fraud has been committed by the
    accused


 Civil cases
    Liabilities must be demonstrated on a balance of
     probabilities
Remember

 Fraud can never be eliminated but can be reduced and
 controlled.
Welcome
Forensic accounting & Fraud


          QUESTIONS???



            Thank you

								
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