Forensic Auditing. Ted Stehney, Director Office of Forensic Auditing Office of Inspector General, GSA. What is forensic auditing Why do we need it Why does the government need it Why does GSA need it What are our approaches What do we need to succeed. What is forensic auditing.
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Ted Stehney, Director
Office of Forensic Auditing
Office of Inspector General, GSA
Why do we need it
Why does the government need it
Why does GSA need it
What are our approaches
What do we need to succeed
While many definitions exist for the general term forensic1, the AICPAs Forensic and Litigation Services Committee (FLS) believes that forensic accounting consists of two major components: litigation services that recognize the role of the CPA as an expert, consultant, or other role; and investigative services that make use of the CPAs skills that may or may not lead to courtroom testimony.
1 According to the Random House Websters College Dictionary, forensic is defined as pertaining to, connected with, or used in courts of law or public discussion and debate.
Forensic accounting may involve the application of special skills in accounting, auditing, finance, quantitative methods, certain areas of the law, and research, and investigative skills to collect, analyze, and evaluate evidential matter and to interpret and communicate findings.
Professor D. Larry Crumbley, the KPMG Endowed Professor in the Department of Accounting, LSU, and a renown authority, defines forensic accounting as:
The action of identifying recording, settling, extracting, sorting, reporting, and verifying past financial data or other accounting activities for settling current or prospective legal disputes or using such past financial data for projecting future financial data to settle legal disputes.
D. Crumbley, L. Heitger and G. Smith, Forensic and Investigative Accounting, 3rd Edition, (Chicago, IL: CCH, 2007), p.1-5
“…a peremptory forensic accounting engagement, should not be confused with the more common review of internal controls or the like. Forensic accounting, whether peremptory or after-the-fact engagements, is applied to the evidence of first order activities, not secondary systems of controls.”
D. Larry Crumbley, "Forensic Accounting: The Evidentiary Nature of Accounting Data,” Journal of Forensic Accounting (http://www.rtedwards.com/journals/JFA/evidentiary.html)
Fraud, by its very nature, does not lend itself to being scientifically observed or measured in an accurate manner. One of the primary characteristics of fraud is that it is clandestine, or hidden; almost all fraud involves the attempted concealment of the crime.
2006 survey results of 5,331 students at 32 graduate schools across the USA and Canada
Academy of Management Learning & Education, 2006, Vol. 5, No. 3, 294–305.
$2.6 Billion fraud over 9 years
Year 1 $600K
Year 3 $4 million
Year 5 $80 million
Year 7 $600 million
Year 9 $2.6 billion
In years 8 and 9, four of the world’s
largest banks were involved and lost over
Some of the organizations involved: Merrill Lynch, Chase, J.P. Morgan, Union Bank of Switzerland, Credit Lyonnaise, Sumitomo, and others.
Source: Dr. Conan Albrecht, Six-Step Approach
If GSA were a public company, our $17.7 billion in revenues would place us at 141 on the Fortune 500, ahead of Google and Nike, among others.
GSA “A Report to Our Citizens”
MAS sales increased from $5.6 billion in 1997 to $36.7 billion by the end of fiscal year 2008.
GSA’s consolidated balance sheet assets over the same period of time have grown from $17,743 million to $29,791 million
Direct appropriation of stimulus funds in the amount of $5.5 billion, over and above the current workload
GSA is expecting $4 billion to $10 billion more in indirect stimulus money to flow through GSA