Co-Authors: Jay J. Leiner, George R. Young Grounded firmly in real-world practice, Forensic Accounting provides the most comprehensive view of fraud investigation on the market. Where other books focus almost entirely on auditing and financial reporting, Hopwood, Young, and Leiner. PDF | This paper documents the rise of fraud examination and forensic accounting education and research in Africa, using Nigeria to mirror the. Program Content: Forensic Accounting and Fraud Investigation provides an 8 /2/D/%7B82DFF3FEA91BEDCA3C%7Dtipdf. 17 J.W.
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Describe the fraud examiner/financial forensic professional's approach to investigations. .. forensic accountant needs to think critically, the direction of the investigation is medical-site.info 6. Fraud This paper reviews the literature on fraud and forensic accounting. . From the perspective of a fraud examiner, forensic accounting is relation between. 1 Here, the term “forensic accounting” is a generic term which includes the narrower terms of “fraud examination” and “financial crime investigation.” 2 In this .
What are some business processes that could result in risks affecting financial reporting? The accounting system itself is a business process.
Poor security and weak controls in the accounting system could lead to errors or intentional miscalculations in reporting. Failures in other business processes could also lead to incorrect financial reporting: internal auditing and management review of reports. List the various elements of fraud within the organization. Give several examples of each. This is a thinking question, since the various types of fraud are not discussed in this chapter. But common sense provides a basic list.
Various types of fraud include, for example, theft of assets, theft of information, improper downloads, and improper hiring. Assets can be stolen by their unauthorized conversion to personal use and embezzlement. Information can be stolen in a variety of ways; examples of such ways include by smuggling disks out of the office and by emailing information to unauthorized. Improper hiring may include, for example, hiring friends or family without disclosing the relationship, or by hiring friends or family and improperly inflating their salaries or wage rates.
How important are information technology skills to the forensic accountant? Give five examples of ways that forensic accountants use information technology skills. IT skills are very important to the forensic accountant. The main areas of forensic accounting include auditing and investigation.
Both these areas involve computers and information technology. Examples: 1 forensic auditing in an IT environment, 3 security consulting, 3 expert testimony in computer crimes, 4 recovering erased data from computers used in computer crimes, 5 tracing the source of an email message relating to a computer crime.
Explain the roles played by forensic accountants in areas besides those relating to fraud. Examples of non-fraud-related forensic accounting roles include valuation, dispute resolution, due diligence in mergers and acquisitions, expert testimony in divorce or bankruptcy proceedings.
List and explain the most important skills required of forensic accountants. Forensic accountants must be skilled a working with people, with communications, must have excellent analytical and investigative skills, and have good overall accounting skills.
Forensic accountants must also have various specialized skills, including those in the areas of valuation and expert consulting and expert testimony. Results of investigations and analyses are of little value unless the forensic accountant is skilled at communicating such results to others. What are some special considerations for forensic accountants in working with law enforcement investigations? Evidence and the chain of custody for evidence must not be compromised in any way.
Westag Mills Company is considering a merger with a competitor. There are three branches of government at both the Federal and state levels, Each branch is independent of the others. The President serves for a term of four years with a maximum of two terms. Within the Executive Branch, there are 15 executive departments which together constitute the Cabinet.
See References for government websites. In addition, there are hundreds of Commissions, including the Securities and Exchange Commission. Since , the Public Company Accounting Oversight Board PBAOB , which is under the SEC, establishes auditing standards for auditors that audit the financial statements of companies that issue securities to the public and regulates who may perform the audits.
Each state elects two Senators who serve for six years. Each state also elects representatives who serve for two years. The Judicial Branch consists of 94 District Courts trial courts , 13 Courts of Appeal, and the Supreme Court, as well as specialty courts such as tax courts. Federal courts only adjudicate cases in which the U. As a result, the market determines the supply and demand for products and services. The economic system, along with the rights of the states as explained below, are of paramount importance in determining the nature of the forensic accounting profession and the forensic accounting industry in the U.
As explained in greater detail in the following section, one exception to free-market competition concerns the public accounting profession. The states regulate the licensing of public accountants. In general, although it varies from state to state, obtaining a license to practice public accounting requires four to five years of education, passing examinations, and fulfilling an experience requirement.
The supply of public accountants is therefore restricted. On the demand side, only auditors who are licensed by a state and registered with the PCAOB may audit financial statements of public companies. Thus, both supply and demand in the public accounting are simultaneously regulated, creating an unparalleled distortion in the market Huber, a. Constitutional and Judicial Issues The U.
Constitution was adopted in The power of the Federal government is one of enumerated powers. The Tenth Amendment of the U. The Rules of Federal Courts are established by law as enacted by the Congress, and by the various courts.
The Supreme Court determines rules for all Federal courts which are then enacted into law. Each Federal court also adopts its own rules, as long as they are not in conflict with Supreme Court Rules. Local rules are not law. Rule states: Rule Testimony by Expert Witnesses. A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: FRE , Rule states: An expert may base an opinion on facts or data in the case that the expert has been made aware of or personally observed.
If experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject, they need not be admissible for the opinion to be admitted.
But if the facts or data would otherwise be inadmissible, the proponent of the opinion may disclose them to the jury only if their probative value in helping the jury evaluate the opinion substantially outweighs their prejudicial effect.
FRE , These Rules were subsequently interpreted in two landmark cases: Daubert v. Merrell Dow Pharmaceuticals 5 U. Carmichael U. Daubert established the parameters for permitting and limiting the testimony of expert scientific testimony in Federal cases.
Many considerations will bear on the inquiry, including whether the theory or technique in question can be and has been tested, whether it has been subjected to peer review and publication, its known or potential error rate, and the existence and maintenance of standards controlling its operation, and whether it has attracted widespread acceptance within a relevant scientific community.
Rather, the law grants a district court the same broad latitude when it decides how to determine reliability as it enjoys in respect to its ultimate reliability determination. Legal and Regulatory Issues As a result of the Tenth Amendment, the Federal government is powerless to regulate the professions. Each state defines the practice of public accounting, prohibits the practice of public accounting by those who are not licensed, and determines the qualifications for obtaining a 5 One can track Daubert cases on the Internet at Daubert Tracker, http: A state grants the public accounting profession6 a legal monopoly to those who are allowed to audit financial statements of public companies Fogarty and Parker, Being licensed in one state does not necessarily permit a CPA to practice in another state, although there is usually reciprocity.
The Federal government does not regulate the licensing of CPAs or the practice of public accounting, but it does regulate who may audit the financial statements of companies that issue securities to the public. The Securities Act of 15 U. While the states regulate public accounting, neither the states nor the Federal government regulate either the forensic accounting profession or the forensic accounting industry. The following section discusses the profession and the industry.
There is no minimum educational requirement, no examination requirement, and no experience requirement. The corporations that issue the certifications in forensic accounting set their own standards and requirements for eligibility for certifications, with the codes of ethics, standards of practice, and eligibility requirements of some corporations stricter than those of other corporations.
The confusion is particularly problematic when those to whom the certifications are issued are citizens of other countries. Lack of familiarity with U.
Since the forensic accounting profession and the forensic accounting industry are unregulated, anyone can call him- or herself a forensic accounting. However, merely holding oneself out as a forensic accountant lacks the symbolic capital necessary for a forensic 7 This is not to say that such misperceptions do not occur in the U.
Huber a has clearly shown they do. However, it is more likely occur with citizens of other countries. Therefore, many have chosen to acquire the necessary symbolic capital by obtaining a degree or certificate in forensic accounting. There are approximately colleges or universities in the U. Education alone, however, may be insufficient establish one as a forensic accountant.
Therefore, many have chosen either to supplement a degree with a certification, or to forego a degree and obtain only a certification. There are many who hold multiple certifications in forensic accounting Huber, b. The domains of the forensic accounting profession are both broader and deeper than the domain of public accounting profession, which by law is limited to auditing,8 although there are some obvious parallels and overlaps.
The certifications listed below are not listed in any particular order. However, as a profession public accounting refers only to the auditing of financial statements. A license is not required to engage in other services such as tax. The organizations that issue forensic accounting certifications are corporations.
NACVA also issues certifications in valuation which are not specifically focused on courts and evidence. The examinations for the certification are based on textbooks. Examinations cover the following texts: The Certified Fraud Examiner CFE certification is focused only and entirely on all aspects of fraud — prevention, detection, and response.
In the U. The domains of the Cr. FA include: There is at this time, no examination. The next section discusses the corporations that issue the certifications.
The Forensic Accounting Industry Although Williams defines the forensic accounting industry in broader terms11, he traces the evolution of the industry and its institutionalization in its current form. His analysis is limited to Canada, but it has parallels to that of the U.
As with the profession, so with the industry. Forensic accounting corporations12 are not regulated under either Federal or state laws.
No state imposes minimum qualifications for incorporators, officers, or directors, to form or operate a forensic accounting corporation.
The officers and directors of some of the corporations have neither education, nor experience, in forensic accounting or fraud examination. Furthermore, as discussed below, forensic accounting corporations may be either for-profit or not-for-profit. As a rule, for-profit forensic accounting corporations do not disclose the fact that they are for-profit.
There are at least six corporations in the U. Each of the corporations and their certifications are discussed below, and excerpted from Huber, , c, d, and a.
The corporations are not listed in any particular order.