Forensic and Investigative Accounting

1. Forensic and Investigative Accounting Chapter 2 Forensic Accounting Education, Institutions, and Specialties © 2011 CCH. All Rights Reserved. 4025 W. Peterson Ave. Chicago, IL 60646-6085 1 800 248 3248 www.CCHGroup.com

2. Just as termites never sleep, fraud never sleeps. Just like termites, fraud can destroy the foundation of an entity. Termites, Rust, and Fraud Forensic and Investigative Accounting

3. Professors’ Top Ten Topics in Forensic Accounting Curricula • Fundamentals of fraud. • Financial statement fraud. • Types of fraud. • Cooking the books and problems in accounting. • Elements of fraud: pressure, opportunity, and rationalization. (continued on next slide) Forensic and Investigative Accounting

4. Professors’ Top Ten Topics in Forensic Accounting Curricula • Antifraud controls. • Internal control evaluation. • Theory and methodology of fraud examination. • Principles of ethics and corporate code of conduct. • Fraud detection and deterrence programs. Practitioners tend to emphasize litigation service more than professors. Forensic and Investigative Accounting

5. Knowledge, Skills and Abilities Needed by Forensic Accountant • Law, legal system, courts, and courtroom procedure. • Financial statement fraud. • Corporate governance, shareholder rights and litigation, securities laws, and protections. • Report writing and communication. • Criminal law and procedure. (continued on next slide) Forensic and Investigative Accounting

6. Knowledge, Skills and Abilities Needed by Forensic Accountant • Computer fraud and cybercrime. • Human factors involved in intelligence gathering, interview techniques and understanding the motivations for fraud and other criminal activities. • Ethical issues in business. • Business valuation. Forensic and Investigative Accounting

7. Accountants must be attuned to detecting fraud at every level of service, including standard accounting services, compilations, reviews, and bank reconciliations. If there is fraud and you don’t detect it, you are going to be sued, and you will likely lose, as the public perception is the accountant is the watchdog. Robert J. DiPasquale, Parsippany, N.J. Source: H.W. Wolosky, “Forensic Accounting to the Forefront,” Practical Accountant, February 2004, pp. 23-28. Find It, or I’ll Sue Forensic and Investigative Accounting

8. Forensic Accounting Knowledge Base Forensic and Investigative Accounting

9. Careers in Forensic Accounting Parade magazine on April 15, 2007, indicated that the hottest jobs for college graduates were forensic accountants. Forensic and Investigative Accounting

10. Income Expectations for Forensic Accountants • Salaries start around $50,000. • Senior-level government employees can earn between $85,000 to $95,000. • In the private sector, one can earn between $125,000 to $150,000. Forensic and Investigative Accounting

11. Consulting Fees • Forensic accountants work with attorneys, private investigators, law enforcement officers, corporate security specialists, the IRS, and the FBI. • In 1999, Kessler International stated that the firm charges about $300 per hour for forensic consultations. Forensic and Investigative Accounting

12. Accountants Consultants Internal auditors IRS auditors Government auditors FBI agents SEC accountants Bankruptcy specialists Professors Bank examiners Chief financial officers Valuators of closely held businesses Background in Forensic Accounting A forensic accounting background is helpful in these professional specialties: Forensic and Investigative Accounting

13. Specialties Within Forensic and Investigative Accounting • Employee Crime Specialist • Asset Tracing Specialist • Litigation Services Specialist and Expert Witness Forensic and Investigative Accounting

14. Forensic Groups and Credentials Forensic and Investigative Accounting

15. Forensic Groups and Credentials Forensic and Investigative Accounting

16. Professional Groups and Credentials Forensic and Investigative Accounting

17. CPA Certificate Important AICPA research indicates that CPAs represent 94 percent of forensic experts hired over two years. Source: Field of Forensic Service Remains Hot, A. E. Feldman Blog, http://blog.aefeldman.com/2009/04/13/field-of-forensic -services-rem... Forensic and Investigative Accounting

18. Difficulties With Fraud Joseph Wells says Regrettably, the actual cost of fraud is unknown and unknowable. It is a concept the criminologists call “the dark figure.” Unlike visible crimes such as robbery, not all frauds are uncovered. Of those uncovered, not all are reported. No agency is tasked with compiling comprehensive data on fraud. Source: http://www.nysscpa.org/cpajournal/2006/906/infocus/p16.htm Forensic and Investigative Accounting

19. Predication The ACFE group indicates that in the private sector, a fraud investigation should not be conducted without proper predication. Examples: Anonymous tips, complaints, audit inquires, conflict of interest. Thus, predication is the basis for undertaking a fraud investigation. Without predication, the target might be able to sue for real or imaginary damages. Forensic and Investigative Accounting

20. Skills of a Forensic Accountant Source: D.A. McMullen and M.H. Sanchez, “A Preliminary Investigation of the Necessary Skills, Education Requirements, and Training Requirements for Forensic Accountants,” Journal of Forensic and Investigative Accounting, Vol. 2, Issue 2, July-December, 2010, p.43. Forensic and Investigative Accounting

21. Characteristics of a Forensic Accountant Source: D.A. McMullen and M.H. Sanchez, “A Preliminary Investigation of the Necessary Skills, Education Requirements, and Training Requirements for Forensic Accountants,” Journal of Forensic and Investigative Accounting, Vol. 2, Issue 2, July-December, 2010, p.43. Forensic and Investigative Accounting

22. Demand for Forensic Accountants Robert Half 2009 Salary Guide indicates that even in the 2009 economic recession, there was still a strong demand for forensic accountants. In a 2008 AICPA survey, two out of three accountants indicated that their forensic practices had grown over the past year. Source: Robert Half, 2009. Robert Half 2009 Salary Guide, Accounting and Finance. P.R. Newswire, 2008. Demand for Forensic CPAs Accelerates, AICPA, Survey Shows, New York, September 25, 2008. Forensic and Investigative Accounting

23. Society for Financial Examiners Established in 1973, the Society for Financial Examiners is a professional organization for examiners of insurance companies, banks savings and loans, and credit unions. SOFE offers three professional designations which are earned by completing extensive requirements and a series of examinations. Source: www.sofe.org/about Forensic and Investigative Accounting

24. International Association of Asset Recovery The International Association of Asset Recovery (IAAR) has a new certification called the Certified Specialist in Asset Recovery (CSAR). The IAAR mission is to help practitioners to win back assets that rightful belong to victims, government agencies, other organizations, or individuals who have been victimized by criminal or wrongful conduct. Source: www.iaaronline.org Forensic and Investigative Accounting

25. Corporate Crime Reporter The Corporate Crime Reporter is a legal print newsletter published and mailed 48 times a year (corporatecrimereporter.com). Some articles are posted on their website, but are only highlights from the print newsletter. Forensic and Investigative Accounting