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Chapter 2. Careers in Fraud Examination and Financial Forensics. Critical Thinking Exercise. Why are manhole covers round ?. Does Doing the Right Thing Pay-Off ?. Baruch Lev, Christine Petrovits and Sresh Radhakrishnan Proxied this concept by examining corporate philanthropy growth

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Chapter 2 l.jpg

Chapter 2

Careers in Fraud Examination and Financial Forensics


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Critical Thinking Exercise

Why are manhole covers round ?


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Does Doing the Right Thing Pay-Off?

  • Baruch Lev, Christine Petrovits and Sresh Radhakrishnan

  • Proxied this concept by examining corporate philanthropy growth

  • The researchers found that charitable contributions are significantly associated with future revenue

  • Particularly for firms that are highly sensitive to consumer perception

  • Overall, corporate philanthropy, under certain circumstances, furthers firms' economic objectives.


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Background

  • Increased legal and regulatory requirements

  • Increased demand for entry-level and seasoned practitioners

  • Growing demand for forensic and litigation advisory services

  • Unprecedented opportunity in fraud examination and financial forensics fields


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Becoming a Professional

  • Competency

  • Proficiency

  • Specialized Training

    • Organization Specific

    • Task Specific



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Places Where Fraud Examiners & Financial Forensic Specialists Work

  • Professional Services Firms

  • Public and Private Companies

  • Regulatory Agencies

  • Government and Non-profits

  • Law Enforcement Agencies

  • Law Firms


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Related Professions Specialists Work

  • Law

  • Psychology

  • Sociology

  • Criminology

  • Intelligence

  • Information Systems and Computer Forensics

  • Other Forensic Sciences


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A Fraudster’s Perspective Specialists Work

  • Window Dressing Board of Directors

  • Lack of Independent and Qualified Audit Committee Members

  • Lack of Properly Trained Auditors

  • Lack of Resources Devoted to White Collar Crime


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Guide to Managing the Business Risk of Fraud Specialists Work

1. A written policy that outlines the fraud risk management program

2. Risk assessment of the exposure of the organization to potential schemes

3. Prevention techniques

4. Detection techniques:

  • in place in case preventative measures fail

  • in place to address unmitigated risks

  • in place to address concerns over collusion and management override

    5. A reporting process


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Business Administration, Management and Corporate Governance Specialists Work

  • Board of Directors

  • Audit Committee

  • Senior/Executive Management

  • Internal Audit

  • External (Independent) Audit

  • Regulators and Governing Bodies


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Board of Directors Specialists Work

  • Primary responsibility is to protect shareholder interest

  • Board of Directors must:

    • Safeguard assets and invested capital

    • Review and approve important management decisions

    • Asses managerial performance

    • Allocate rewards that encourages shareholder value creation


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Audit Committee Specialists Work

  • Primary responsibility is to monitor the financial reporting and auditing processes

  • Addresses risk of collusion and management override of internal controls

  • Audit committee must assure:

    • Efficiency and effectiveness of operations

    • Reliability of financial reporting

    • Compliance with applicable laws and regulations


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Senior/Executive Management Specialists Work

  • Responsible for the quality, integrity, and reliability of the financial reporting process

  • To discharge financial reporting responsibility management should:

    • Identify circumstances, conditions, and factors that can lead to fraud

    • Assess and manage the risk of fraud associated with the identified circumstances, conditions, and factors

    • Design and implement an adequate and effective internal control process for prevention and detection of fraud


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Internal Audit Specialists Work

  • Can be tasked to help ensure reliable reporting process of company

  • Assess high-risk aspects of the internal control environment and financial reporting process


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External (Independent) Audit Specialists Work

  • Evolved from detection of fraud to expressing opinion on the fair presentation of financial statements

  • SAS No. 99 Consideration of Fraud in a Financial Statement Audit


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Regulators and Governing Bodies Specialists Work

  • Regulations:

    • Inspire investor confidence

    • Protect investors

  • Governing Bodies

    • Must create environment where risk of fraud is mitigated to below materiality threshold


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Organizations and Their Related Certifications Specialists Work

  • Association of Certified Fraud Examiners (ACFE)

    • Certified Fraud Examiner (CFE)

  • American Institute of Certified Public Accountants (AICPA)

    • Accredited in Business Valuation (ABV)

    • Certified Information Technology Professional (CITP)

    • Certified in Financial Forensics (CFF)

  • Forensic CPA Society (FCPAS)

    • Forensic Certified Public Accountant (FCPA)

  • Information Systems Audit and Control Association (ISACA)

    • Certified Information Systems Analyst (CISA)

    • Certified Information System Manager (CISM)

    • Certified in the Governance of Enterprise IT (CGEIT)


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Organizations and Their Related Certifications Specialists Work

  • Institute of Internal Auditors

    • Certified Internal Auditor (CIA)

  • National Association of Certified Valuation Analysts (NACVA)

    • Certified Forensic Financial Analyst (CFFA)

    • Accredited Valuation Analyst (AVA)

    • Certified in Fraud Deterrence (CFD)

    • Certified Valuation Analyst (CVA)

  • Society of Financial Examiners (SOFE)

    • Accredited Financial Examiner

    • Certified Financial Examiner

    • Automated Examiner Specialist


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International Specialists Work Forensic Accounting and Fraud Examination

  • Chartered Accountant (CA)

    • Equivalent to CPA around the globe

    • World’s first professional body of accountants

    • Established in 1854


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Prerequisite Knowledge and Skills Specialists Work

  • Basic Accounting Concepts

  • Basic Auditing Concepts

  • Basic Finance and Economics

  • Basic Law Concepts

  • General Business Communications Skills and Business Ethics

  • Basic Computer Skills



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ACFE’s Bi-annual “Report to the Nation” Specialists Work

  • Covers such topics as:

    • Is the incidence of fraud increasing or decreasing?

    • What types of fraud are being committed?

    • What is the cost of fraud?

    • How is fraud committed?

    • How is fraud detected?

    • What are the victim profiles?

    • What are the perpetrator profiles?


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The Institute for Fraud Prevention Specialists Work

  • Founded by the ACFE and AICPA

  • Voluntary association of organizations and researchers

  • Focus on research and education

  • www.theIFP.org