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Today’s Topics. Why Studying Conversion is Important Sources of Information The Role of Net Worth Calculations Miscellaneous Articles and Cases Interviewing Techniques Types of Questions Shenanigan #2 Ethics for CPAs in Industry. Role of Conversion Analysis.

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Today’s Topics

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Today s topics

Today’s Topics

  • Why Studying Conversion is Important

  • Sources of Information

  • The Role of Net Worth Calculations

  • Miscellaneous Articles and Cases

  • Interviewing Techniques

  • Types of Questions

  • Shenanigan #2

  • Ethics for CPAs in Industry

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-1


Role of conversion analysis

Role of Conversion Analysis

  • Helps determine the extent of the fraud

  • Serves as a facilitation for confession

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-2


Sources of information study pages 247 255

Sources of Information(Study pages 247-255)

  • Variety of sources

    • Federal government sources

    • State government sources

    • Local government sources

    • Financial institution records

    • Public databases

    • Internet sources

Don’t try to memorize the details of these sources. Know how to use some of them.

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-3


Net worth method

Net Worth Method

  • For use in estimating “Funds from Unknown Sources”

  • Calculation:

    • Assets - Liabilities = Net Worth

    • NWc - NWP = Net Worth Increase

    • NWI + Living Expenses = Income

    • Income - Known Sources = Unknown Sources

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-4


General interview guidelines

General Interview Guidelines

  • Be aware of the “crisis cycle”

  • Remain a people person

  • Engage rather than challenge

  • Conduct the interview as close to the event as possible

  • Plan for the interview

  • See text for demeanor (p.274) & language (p.274)

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-5


Types of questions

Types of Questions

  • Introductory

  • Informational

  • Assessment

  • Closing

  • Self Admission-use carefully

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-6


Interview facilitators

Interview Facilitators

  • Expectation fulfillment

  • Recognition

  • Altruism

  • Sympathy

  • Newness

  • Catharsis

  • Sense of meaning

  • Availability of rewards

Don’t try to memorize the details of this list. Know how to use some of them.

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-7


Interview inhibitors

Interview Inhibitors

  • Time demands

  • Ego threats

  • Etiquette

  • Trauma

  • Forgetfulness

  • Time-line confusion

  • Logic confusion

  • Unconscious behaviors

Unwilling

Don’t try to memorize the details of this list. Know how to use some of them.

Unable

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-8


Fraud reporting

Fraud Reporting

  • WFO Suggestion:

    • Summary

    • Chronology

    • Interview & Procedural Summaries

    • Admission information

    • Loss Assessment

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-9


Shenanigan 2 recording bogus revenue

Shenanigan #2-Recording Bogus Revenue

  • Technique #1:

    • Lack of economic substance

  • Technique #2:

    • Loans recorded as revenue

  • Technique #3:

    • Investment income as operating revenue

  • Technique #4:

    • Supplier rebates as future revenue

  • Technique #5:

    • Post merger deferred revenue

FORENSIC ACCOUNTING - BA124 – Spring 2007Slide 9-10


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