Holdings: A guide to forensic accounting investigation

A guide to forensic accounting investigation:

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Bibliographic Details
Main Author:	Golden, Thomas W. (Author)
Format:	Book
Language:	English
Published:	Hoboken, NJ Wiley 2006
Subjects:	Bedrijfsleven Fraude Ondernemingen Forensic accounting > Auditing Fraud investigation > Auditing Rechnungslegung Betrug Revision > Wirtschaft
Online Access:	Inhaltsverzeichnis
Physical Description:	XXII, 554 S. graph. Darst.
ISBN:	0471469076 9780471469070

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adam_text	CONTENTS Preface xv Acknowledgments xix 1 Fraud: An Introduction 1 Fraud: What Is It? 2 Fraud: Prevalence, Impact, and Form 3 Fraud in Historical Perspective 4 Types of Fraud 5 Root Causes of Fraud 6 A Historical Account of the Auditor s Role 7 Auditing: Ancient History 7 Growth of the Auditing Profession in the Nineteenth Century 8 Federal and State Securities Regulation before 1934 9 Current Environment 10 Auditors Are Not Alone 12 Deterrence, Auditing, and Investigation 13 Conceptual Overview of the Fraud Deterrence Cycle 14 Corporate Governance 15 Transaction Level Controls 16 Retrospective Examination 16 Investigation and Remediation 16 First Look Inside the Fraud Deterrence Cycle 17 Corporate Governance 17 Transaction Level Controls 18 Auditing and Investigation 20 2 The Roles of the Auditor and the Forensic Accounting Investigator 21 The Patrolman and the Detective 22 Complexity and Change 25 Auditor Roles in Perspective 28 Not All Good People 29 Each Company Is Unique 30 Role of Company Culture 30 Estimates 32 Choices 33 What Auditors Do 35 Fraud versus Error 35 Reasonable Assurance 36 Materiality 38 iii iv Contents Bedrock of an Effective Audit 40 Professional Skepticism 40 Knowledge and Experience 40 Independence and Objectivity 41 SPADE 42 ; Auditing Standards Take a Risk Based Approach to Fraud 42 . Management Override 44 ¦ Regulatory Reaction to Fraud 45 Financial Benefits of Effective Fraud Management 46 I Conclusion 46 3 Psychology of the Fraudster 47 Calculating Criminals 48 Case 1: It Can t Be Bob 49 Situation Dependent Criminals 49 Power Brokers 50 Fraudsters Do Not Intend to Harm 51 Case 2: For the Good of the Company 51 Case 3: Personal Catastrophes 51 Case 4: An Educated, Upstanding Citizen 52 Kinds of Rationalization 55 Auditors Need to Understand the Mind of the Fraudster 55 Conclusion 57 4 Financial Reporting Fraud and the Capital Markets 59 Targets of Capital Market Fraud 60 : Securities Investment Model 61 Overview of Financial Information and the Requirement to Present Fairly 62 Overview of Fraud in Financial Statements 64 Accounting Irregularities as an Element of Financial Fraud 68 Some Observations on Financial Fraud 71 Fraud from Within 71 Summary 72 5 Auditor Responsibilities and the Law 75 6 Independence, Objectivity, Skepticism 87 SEC Final Rules for Strengthening Auditor Independence 88 SEC Regulation of Forensic Accounting Services 88 Consulting versus Attest Services 92 Integrity and Objectivity 93 Independence Standards for Nonattest Services 94 Professional Skepticism 95 J i Contents v Trust but Verify: A Case Study 96 Trust but Verify: Exploring Further 99 Loose Thread Theory of Auditing 103 Further Thoughts on the Loose Thread Theory 106 7 Forensic Investigations and Financial Audits: Compare and Contrast 109 8 Potential Red Flags and Fraud Detection Techniques 119 * Types of Fraud Revisited 120 Fraud Detection: Overview 121 Laying a Foundation for Detection 124 Assessing the Risk of Fraud 125 Fraud Risk Factors 125 A Word on Information Technology 126 Interpreting Potential Red Flags 127 Importance of Professional Skepticism 129 Revisiting the Fraud Triangle 132 Incentive and Pressure 132 Opportunity 134 Rationalization and Attitude 135 Identifying and Evaluating Risk Factors 137 Discussion among Audit Team Members 138 Information Gathering 140 Other Sources 143 Analytic Procedures 144 Current Company Data versus Company Data from Prior Periods 147 Company Data versus Company Budgets, Forecasts, or Projections 147 Company Data versus Industry Data and/or Comparable Company Data 147 Company Financial Data versus Company Operational Data 148 Company Data versus Auditor Determined Expected Results 148 Analytic Techniques 148 Assessing the Potential Impact of Fraud Risk Factors 150 Evaluating Controls 152 Addressing the Identified Fraud Risks 153 Unpredictable Audit Tests 154 Observation and Inspection 155 Financial Statement Fraud: Detection Techniques 157 Revenue Recognition 157 Corruption 158 Summary 160 9 Internal Audit: The Second Line of Defense 161 What Do Internal Auditors Do? 162 [ i i Contents Internal Audit Scope of Services 164 The Handoff to Forensic Accounting Investigators and Legal Counsel 166 Perception Problem 167 Complex Corporate Fraud and the Internal Audit 168 WorldCom and the Thornburgh Report 169 Case Studies: The Internal Auditor Addresses Fraud 170 No Segregation of Duties—and a Very Nice Car 170 Odd Transportation System 171 A Tragic Circumstance 1 72 How Many Lunches Can You Buy? 173 Making the Numbers Look Right 1 73 How Not to Earn a Bonus 174 A Classic Purchasing Fraud 175 The Loneliness of the Internal Auditor 176 Hitting the Jackpot in the Gaming Industry 1 77 Reporting Relationships: A Key to Empowering Fraud Detection 1 78 Tomorrow s Internal Auditor, Tomorrow s Management and Board 180 10 Financial Statement Fraud: Revenue and Receivables 183 Improper Revenue Recognition 185 Timing 186 Revenue Recognition Detection Techniques 188 Side Agreements 191 Liberal Return, Refund, or Exchange Rights 192 Channel Stuffing 195 Bill and Hold Transactions 196 Early Delivery of Product 198 Partial Shipments 199 Contracts with Multiple Deliverables 200 Improper Allocation of Value in Multiple Element Revenue Arrangements 201 Up Front Fees 202 Improper Accounting for Construction Contracts 202 Related Party Transactions 204 Revenue and Receivable Misappropriation 206 Revenues 207 Receivables 208 Fictitious Sales 209 Lapping 210 Redating 211 Inflating the Value of Receivables 211 Extended Procedures 212 Round Tripping 215 I 1 Contents vii Improperly Holding Open the Books 216 Consignments and Demonstration Goods 21 7 Summary 218 11 Financial Statement Fraud: Other Schemes and Misappropriations 219 Asset Misstatements 219 Inventory Schemes 219 I Investment Schemes 224 1 Recording Unrealized Declines in Fair Market Value 226 Recording Fictitious Fixed Assets 226 Depreciation and Amortization 226 Hanging the Debit 227 Software Development Costs 227 Research and Development Costs 228 Start Up Costs 228 Interest Costs 228 Advertising Costs 229 Understatement of Liabilities and Expenses 229 Off Balance Sheet Transactions 230 Two Basic Accounting Models 231 Cookie Jar Reserves 233 Improper and Inadequate Disclosures 234 Materiality 235 Disbursement Schemes 236 Invoice Schemes 236 Check Tampering 239 : Expense Reimbursement Schemes 240 Payroll Schemes 242 12 When and Why to Call In Forensic Accounting Investigators 243 Today s Auditors Are Not Forensic Accounting Investigators 244 Auditors Are Not Authenticators 244 Auditors Have Limited Exposure to Fraud 245 Auditors Are Not Guarantors 246 Historically, Audits May Have Been Predictable 247 Potential Trigger Points of Fraud 248 Reliance on Others 255 Conclusion 257 1 3 Teaming with Forensic Accounting Investigators 259 Forensic Accounting Investigators Cooperation with Internal Auditors 261 Internal Audit s Position and Function 261 Resource Models 262 Working Together 263 iii Contents Forensic Accounting Investigators Cooperation with External Auditors 264 Client History 264 The External Auditor in Today s Environment 265 Objectives of All Interested Parties 266 Forensic Accounting Investigators Objectives 266 Objectives of Other Parties to the Investigation 267 How Should the Investigation Objectives Be Defined? 269 Who Should Direct the Investigation and Why? 270 Ready When Needed 271 Where to Find Skilled Forensic Accounting Investigators 272 Internal Audit 272 Engaging External Forensic Accounting Investigators 273 Accounting and Auditing Firms 273 14 Potential Missteps: Considerations When Fraud Is Suspected 277 Confronting Suspects 277 Dismissing the Target 281 Assumptions 281 The Small Stuff Could Be Important 286 Materiality: More on a Key Topic 287 Addressing Allegations 288 The Case of the Central American General Manager 289 Exercising Skepticism 293 Case Outcomes 294 15 Investigative Techniques 295 Timing 295 Communication 296 Early Administrative Matters 296 Predication 297 What Should You Know before You Start? 299 Gaining an Understanding 299 Gathering and Securing Information 300 Coordination 303 Other 303 A Word about Insurance 304 Exceptions and Other Considerations 305 Document Review 306 ComQuest 306 CPA Services 308 How to Read a Check 308 Airline Tickets 310 Conclusion 311 1 Contents ix 16 Anonymous Communications 313 Typical Characteristics of Anonymous Tips 314 Federal Statutes Related to Anonymous Reporting and Whistle Blower Protections 315 Receipt of an Anonymous Communication 318 Initial Understanding of Allegations 320 Determine Whether Any Allegation Requires Immediate Remedial Action 320 Development and Implementation of the Investigative Strategy 321 The Investigation Team 321 Disclosure Decisions 322 Prioritize the Allegations 323 Interviewing Employees 325 Follow UpTip 329 Conclusion 330 17 Background Investigations 331 Commercial Media Databases 332 Other Public Records 335 Commercial Database Providers 339 Other Sources 342 Unique Internet Sources 342 Other Government Agencies 345 International Investigations 346 Conclusion 346 18 The Art of the Interview 349 Difficulty and Value of Obtaining an Admission 350 Planning for the Interview 351 Types of Interviews 353 The Information Seeking Interview 353 The Admission Seeking Interview 354 Others May Wish to Attend Interviews 358 Interview Process 358 Documenting the Interview 364 Summary 364 19 Analyzing Financial Statements 365 Developing Effective Analytic Procedures 366 Vertical Analysis 368 Horizontal Analysis 369 Ratio Analysis 369 Reasonableness Testing 369 Data Mining Analysis 370 Contents Using Financial Ratios as Measures of Risk or Indications of Fraud 371 Identifying Other Relationships That Might Indicate Fraud 375 Margin Analysis 376 Focus on Disparity of Net Income to Cash Balances 377 Evaluate Increases in Accounts Receivable in Relation to Sales Increases 377 Evaluate Interim Results and Seasonality 377 Common Analytic Pitfalls 377 Identifying Signs of Earnings Management 378 The Beneish Research 378 20 Data Mining: Computer Aided Forensic Accounting Investigation Techniques 385 Benefits and Pitfalls 386 Benefits 387 Other Considerations 387 Nearly Every Investigation Can Benefit from Forensic Technology 388 Effective Data Mining 389 What Relevant Data Might Be Available? 389 Audit Trails (Traffic Data) 390 Faster/Better/Cheaper 390 Access to Relevant Data 390 Assessing Data Quality and Format 392 Scope of Available Data 393 Quality of Available Data 394 Time Required and Data Requests 394 Data Cleaning 398 Eliminating Duplicate Information 399 Testing the Data for Completeness and Accuracy 400 Understated Amounts 401 Overstated Amounts 402 Incomplete Responses 402 Incomplete Data Sets 402 Skills of the Forensic Technologist 402 Technical Skills 403 Communication Skills 403 Effective Use of Data Analysis Results 404 Role of Data Analysis in the Investigation 404 Data Mining in Action 405 Check Disbursement File 405 Examining the Vendor Master File and Payments History 410 General Ledger Searches 411 Keyword Searches 412 Deleted/Slack/Unallocated Space 414 Data Sorting 415 Choice of Tools 418 Contents xi Presenting Results 419 Reviewing the Essentials 420 Conclusion 420 ; 21 Building a Case: Gathering } and Documenting Evidence 423 Critical Steps in Gathering Evidence 424 Considerations at the Time of Retention 424 Document Retention Considerations 425 Planning Considerations 425 Creating a Chain of Custody 427 Whose Evidence Is It? 430 Evidence Created by the Forensic Accounting Investigator 431 Working Papers 431 Reports 432 What Evidence Should Be Gathered? 433 Investigations of Vendors 433 Investigations of Foreign Corrupt Practices Act Violations 434 Investigations of Improper Related Party Activity 434 Investigations of Employee Misappropriations 434 Investigations of Specific Allegations 435 Investigations of Financial Statement Errors 435 Important Considerations regarding Documents and Working Papers 435 Conclusion 438 22 Supporting a Criminal Prosecution 439 Key Considerations 440 Deterrent Effect of Appropriate Response 440 U.S. Sentencing Commission Guidelines 440 Expense and Possible Outcomes 442 Referrals for Prosecution May Attract Public Attention 442 Referral Considerations 443 Refer the Matter to State, Local, or Federal Prosecutors? 444 Prosecutors Must Prioritize Cases 445 Forensic Accounting Investigator May Increase the Success of a Referral 446 Reputational Benefits 446 Plea Agreements 447 Filing a Civil Lawsuit 447 23 Report of Investigation 449 Types of Reports 450 Importance of Adequate Preparation 450 1 Contents Standards of Reporting 451 AlCPA Consulting Standards 451 ACFE Standards 453 The Written Report of Investigation 455 Basic Elements to Consider for Inclusion in a Report of Investigation 455 Summarizing Your Findings 457 Written Report of Expert Witness Opining ; for the Plaintiff on a Civil Fraud Claim 458 Affidavits 460 Informal Reports 461 Giving a Deposition 462 Be Prepared 463 It s Your Deposition 463 Objectives of a Deposition in Civil Litigation 464 You Are Being Measured 464 Reviewing Your Deposition Transcript 465 Other Considerations 465 Mistakes to Avoid in Reporting 466 Avoid Overstatement 467 Avoid Opinion 467 Identify Control Issues Separately from Investigative Findings of Fact 467 Use Simple, Straightforward Language Focused on the Facts 467 Avoid Subjective Comments 468 Working Papers 469 Signed Engagement Letter 469 Relationship Review 471 Substantive Working Papers 471 Each Working Paper Should Stand on Its Own 471 Testimony Binder 473 Interview Memorandums 473 24 Working with Attorneys 475 In the Company of Lawyers 475 Confidentiality Requirements 477 Forming the Investigative Team 477 Documentation 483 Civil Litigation 485 Interviewing 485 External Audit Firm 486 Working for or Interacting with Law Enforcement or Government Agencies 489 Disagreements with Counsel 490 Conclusion 491 I Contents xiii j 25 Conducting Global Investigations 493 I On International Assignment 494 j Getting Started 495 Coordinating the Engagement 496 Logistics 497 Work Plan 497 Preliminary Work Plan Example 498 Foreign Corrupt Practices Act 501 Internal Accounting Control Provisions 502 Antibribery Provisions 502 Record Keeping Provisions 502 1 Additional Considerations 503 Planning the Engagement 503 Accounting Issues 503 Knowledge of Corporate Personnel 504 Understand Company Policy 504 Understand the Company s Network 504 Local Licenses 505 Schemes and Other Matters 505 Personal Considerations 507 26 Money Laundering 509 Relationship between Fraud and Money Laundering 510 Placement 511 Layering 511 Integration 511 Varying Impact of Money Laundering on Companies 512 The Five Point Program for AML Regulated Businesses 514 Written Compliance Program 514 Minimum Standards of Customer Due Diligence 514 Activity Monitoring and Reporting 514 Training 515 Record Keeping 515 Impact of Money Laundering on Financial Statements 51 7 AML and Forensic Accounting Investigation 518 At the Request of the Regulator 518 At the Request of the Institution 518 Review of Transactions and Records 519 Decision Making 519 The AML Reporting Process 519 Corporate Culture and AML Corporate Governance 520 Legal Arrangements Lending Themselves to Anonymity 520 Potential Red Flags 521 Auditing and Money Laundering 522 Relationship between Fraud Investigation and AML 523 xiv Contents 27 Other Dimensions of Forensic Accounting 525 Construction 526 Environmental Issues 527 Intellectual Property 528 Government Contracting 529 Insurance and Business Interruption 530 Marital Dissolution 530 Shareholder Litigation 531 Business Valuation 532 Business Combinations 532 Cybercrime 533 28 Looking Forward: The Future of Forensic Accounting Investigation 535 Evolving Discipline 536 New Tools 538 Education and Training: To Better Support the New Discipline 538 Regulation and Enforcement 539 Changing Corporate Environment 540 Internal Audit 541 Corporate Judgment Calls 542 Forensic Accounting Investigators Serving Individual Corporate Clients 542 Nonfinancial Operating Data 543 Responsibility for Disclosure and Validation of NFOD 544 Other Legal and Stock Exchange Requirements 545 Future of Forensic Accounting Investigation: Increasingly Global 546 Index 547
adam_txt	CONTENTS Preface xv Acknowledgments xix 1 Fraud: An Introduction 1 Fraud: What Is It? 2 Fraud: Prevalence, Impact, and Form 3 Fraud in Historical Perspective 4 Types of Fraud 5 Root Causes of Fraud 6 A Historical Account of the Auditor's Role 7 Auditing: Ancient History 7 Growth of the Auditing Profession in the Nineteenth Century 8 Federal and State Securities Regulation before 1934 9 Current Environment 10 Auditors Are Not Alone 12 Deterrence, Auditing, and Investigation 13 Conceptual Overview of the Fraud Deterrence Cycle 14 Corporate Governance 15 Transaction Level Controls 16 Retrospective Examination 16 Investigation and Remediation 16 First Look Inside the Fraud Deterrence Cycle 17 Corporate Governance 17 Transaction Level Controls 18 Auditing and Investigation 20 2 The Roles of the Auditor and the Forensic Accounting Investigator 21 The Patrolman and the Detective 22 Complexity and Change 25 Auditor Roles in Perspective 28 Not All Good People 29 Each Company Is Unique 30 Role of Company Culture 30 Estimates 32 Choices 33 What Auditors Do 35 Fraud versus Error 35 Reasonable Assurance 36 Materiality 38 iii iv Contents Bedrock of an Effective Audit 40 Professional Skepticism 40 Knowledge and Experience 40 Independence and Objectivity 41 SPADE 42 ; Auditing Standards Take a Risk Based Approach to Fraud 42 . Management Override 44 ¦ Regulatory Reaction to Fraud 45 Financial Benefits of Effective Fraud Management 46 I Conclusion 46 3 Psychology of the Fraudster 47 Calculating Criminals 48 Case 1: "It Can't Be Bob" 49 Situation Dependent Criminals 49 Power Brokers 50 Fraudsters Do Not Intend to Harm 51 Case 2: "For the Good of the Company" 51 Case 3: Personal Catastrophes 51 Case 4: An Educated, Upstanding Citizen 52 Kinds of Rationalization 55 Auditors' Need to Understand the Mind of the Fraudster 55 Conclusion 57 4 Financial Reporting Fraud and the Capital Markets 59 Targets of Capital Market Fraud 60 : Securities Investment Model 61 Overview of Financial Information and the Requirement to Present Fairly 62 Overview of Fraud in Financial Statements 64 Accounting Irregularities as an Element of Financial Fraud 68 Some Observations on Financial Fraud 71 Fraud from Within 71 Summary 72 5 Auditor Responsibilities and the Law 75 6 Independence, Objectivity, Skepticism 87 SEC Final Rules for Strengthening Auditor Independence 88 SEC Regulation of Forensic Accounting Services 88 Consulting versus Attest Services 92 Integrity and Objectivity 93 Independence Standards for Nonattest Services 94 Professional Skepticism 95 J i Contents v Trust but Verify: A Case Study 96 Trust but Verify: Exploring Further 99 Loose Thread Theory of Auditing 103 Further Thoughts on the Loose Thread Theory 106 7 Forensic Investigations and Financial Audits: Compare and Contrast 109 8 Potential Red Flags and Fraud Detection Techniques 119 * Types of Fraud Revisited 120 Fraud Detection: Overview 121 Laying a Foundation for Detection 124 Assessing the Risk of Fraud 125 Fraud Risk Factors 125 A Word on Information Technology 126 Interpreting Potential Red Flags 127 Importance of Professional Skepticism 129 Revisiting the Fraud Triangle 132 Incentive and Pressure 132 Opportunity 134 Rationalization and Attitude 135 Identifying and Evaluating Risk Factors 137 Discussion among Audit Team Members 138 Information Gathering 140 Other Sources 143 Analytic Procedures 144 Current Company Data versus Company Data from Prior Periods 147 Company Data versus Company Budgets, Forecasts, or Projections 147 Company Data versus Industry Data and/or Comparable Company Data 147 Company Financial Data versus Company Operational Data 148 Company Data versus Auditor Determined Expected Results 148 Analytic Techniques 148 Assessing the Potential Impact of Fraud Risk Factors 150 Evaluating Controls 152 Addressing the Identified Fraud Risks 153 Unpredictable Audit Tests 154 Observation and Inspection 155 Financial Statement Fraud: Detection Techniques 157 Revenue Recognition 157 Corruption 158 Summary 160 9 Internal Audit: The Second Line of Defense 161 What Do Internal Auditors Do? 162 [ i i Contents Internal Audit Scope of Services 164 The Handoff to Forensic Accounting Investigators and Legal Counsel 166 Perception Problem 167 Complex Corporate Fraud and the Internal Audit 168 WorldCom and the Thornburgh Report 169 Case Studies: The Internal Auditor Addresses Fraud 170 No Segregation of Duties—and a Very Nice Car 170 Odd Transportation System 171 A Tragic Circumstance 1 72 How Many Lunches Can You Buy? 173 Making the Numbers Look Right 1 73 How Not to Earn a Bonus 174 A Classic Purchasing Fraud 175 The Loneliness of the Internal Auditor 176 Hitting the Jackpot in the Gaming Industry 1 77 Reporting Relationships: A Key to Empowering Fraud Detection 1 78 Tomorrow's Internal Auditor, Tomorrow's Management and Board 180 10 Financial Statement Fraud: Revenue and Receivables 183 Improper Revenue Recognition 185 Timing 186 Revenue Recognition Detection Techniques 188 Side Agreements 191 Liberal Return, Refund, or Exchange Rights 192 Channel Stuffing 195 Bill and Hold Transactions 196 Early Delivery of Product 198 Partial Shipments 199 Contracts with Multiple Deliverables 200 Improper Allocation of Value in Multiple Element Revenue Arrangements 201 Up Front Fees 202 Improper Accounting for Construction Contracts 202 Related Party Transactions 204 Revenue and Receivable Misappropriation 206 Revenues 207 Receivables 208 Fictitious Sales 209 Lapping 210 Redating 211 Inflating the Value of Receivables 211 Extended Procedures 212 Round Tripping 215 I 1 Contents vii Improperly Holding Open the Books 216 Consignments and Demonstration Goods 21 7 Summary 218 11 Financial Statement Fraud: Other Schemes and Misappropriations 219 Asset Misstatements 219 Inventory Schemes 219 I Investment Schemes 224 1 Recording Unrealized Declines in Fair Market Value 226 Recording Fictitious Fixed Assets 226 Depreciation and Amortization 226 Hanging the Debit 227 Software Development Costs 227 Research and Development Costs 228 Start Up Costs 228 Interest Costs 228 Advertising Costs 229 Understatement of Liabilities and Expenses 229 Off Balance Sheet Transactions 230 Two Basic Accounting Models 231 Cookie Jar Reserves 233 Improper and Inadequate Disclosures 234 Materiality 235 Disbursement Schemes 236 Invoice Schemes 236 Check Tampering 239 : Expense Reimbursement Schemes 240 Payroll Schemes 242 12 When and Why to Call In Forensic Accounting Investigators 243 Today's Auditors Are Not Forensic Accounting Investigators 244 Auditors Are Not Authenticators 244 Auditors Have Limited Exposure to Fraud 245 Auditors Are Not Guarantors 246 Historically, Audits May Have Been Predictable 247 Potential Trigger Points of Fraud 248 Reliance on Others 255 Conclusion 257 1 3 Teaming with Forensic Accounting Investigators 259 Forensic Accounting Investigators' Cooperation with Internal Auditors 261 Internal Audit's Position and Function 261 Resource Models 262 Working Together 263 iii Contents Forensic Accounting Investigators' Cooperation with External Auditors 264 Client History 264 The External Auditor in Today's Environment 265 Objectives of All Interested Parties 266 Forensic Accounting Investigators' Objectives 266 Objectives of Other Parties to the Investigation 267 How Should the Investigation Objectives Be Defined? 269 Who Should Direct the Investigation and Why? 270 Ready When Needed 271 Where to Find Skilled Forensic Accounting Investigators 272 Internal Audit 272 Engaging External Forensic Accounting Investigators 273 Accounting and Auditing Firms 273 14 Potential Missteps: Considerations When Fraud Is Suspected 277 Confronting Suspects 277 Dismissing the Target 281 Assumptions 281 The Small Stuff Could Be Important 286 Materiality: More on a Key Topic 287 Addressing Allegations 288 The Case of the Central American General Manager 289 Exercising Skepticism 293 Case Outcomes 294 15 Investigative Techniques 295 Timing 295 Communication 296 Early Administrative Matters 296 Predication 297 What Should You Know before You Start? 299 Gaining an Understanding 299 Gathering and Securing Information 300 Coordination 303 Other 303 A Word about Insurance 304 Exceptions and Other Considerations 305 Document Review 306 ComQuest 306 CPA Services 308 How to Read a Check 308 Airline Tickets 310 Conclusion 311 1 Contents ix 16 Anonymous Communications 313 Typical Characteristics of Anonymous Tips 314 Federal Statutes Related to Anonymous Reporting and Whistle Blower Protections 315 Receipt of an Anonymous Communication 318 Initial Understanding of Allegations 320 Determine Whether Any Allegation Requires Immediate Remedial Action 320 Development and Implementation of the Investigative Strategy 321 The Investigation Team 321 Disclosure Decisions 322 Prioritize the Allegations 323 Interviewing Employees 325 Follow UpTip 329 Conclusion 330 17 Background Investigations 331 Commercial Media Databases 332 Other Public Records 335 Commercial Database Providers 339 Other Sources 342 Unique Internet Sources 342 Other Government Agencies 345 International Investigations 346 Conclusion 346 18 The Art of the Interview 349 Difficulty and Value of Obtaining an Admission 350 Planning for the Interview 351 Types of Interviews 353 The Information Seeking Interview 353 The Admission Seeking Interview 354 Others May Wish to Attend Interviews 358 Interview Process 358 Documenting the Interview 364 Summary 364 19 Analyzing Financial Statements 365 Developing Effective Analytic Procedures 366 Vertical Analysis 368 Horizontal Analysis 369 Ratio Analysis 369 Reasonableness Testing 369 Data Mining Analysis 370 Contents Using Financial Ratios as Measures of Risk or Indications of Fraud 371 Identifying Other Relationships That Might Indicate Fraud 375 Margin Analysis 376 Focus on Disparity of Net Income to Cash Balances 377 Evaluate Increases in Accounts Receivable in Relation to Sales Increases 377 Evaluate Interim Results and Seasonality 377 Common Analytic Pitfalls 377 Identifying Signs of Earnings Management 378 The Beneish Research 378 20 Data Mining: Computer Aided Forensic Accounting Investigation Techniques 385 Benefits and Pitfalls 386 Benefits 387 Other Considerations 387 Nearly Every Investigation Can Benefit from Forensic Technology 388 Effective Data Mining 389 What Relevant Data Might Be Available? 389 Audit Trails (Traffic Data) 390 Faster/Better/Cheaper 390 Access to Relevant Data 390 Assessing Data Quality and Format 392 Scope of Available Data 393 Quality of Available Data 394 Time Required and Data Requests 394 Data Cleaning 398 Eliminating Duplicate Information 399 Testing the Data for Completeness and Accuracy 400 Understated Amounts 401 Overstated Amounts 402 Incomplete Responses 402 Incomplete Data Sets 402 Skills of the Forensic Technologist 402 Technical Skills 403 Communication Skills 403 Effective Use of Data Analysis Results 404 Role of Data Analysis in the Investigation 404 Data Mining in Action 405 Check Disbursement File 405 Examining the Vendor Master File and Payments History 410 General Ledger Searches 411 Keyword Searches 412 Deleted/Slack/Unallocated Space 414 Data Sorting 415 Choice of Tools 418 Contents xi Presenting Results 419 Reviewing the Essentials 420 Conclusion 420 ; 21 Building a Case: Gathering } and Documenting Evidence 423 " Critical Steps in Gathering Evidence 424 Considerations at the Time of Retention 424 Document Retention Considerations 425 Planning Considerations 425 Creating a Chain of Custody 427 Whose Evidence Is It? 430 Evidence Created by the Forensic Accounting Investigator 431 Working Papers 431 Reports 432 What Evidence Should Be Gathered? 433 Investigations of Vendors 433 Investigations of Foreign Corrupt Practices Act Violations 434 Investigations of Improper Related Party Activity 434 Investigations of Employee Misappropriations 434 Investigations of Specific Allegations 435 Investigations of Financial Statement Errors 435 Important Considerations regarding Documents and Working Papers 435 Conclusion 438 22 Supporting a Criminal Prosecution 439 Key Considerations 440 Deterrent Effect of Appropriate Response 440 U.S. Sentencing Commission Guidelines 440 Expense and Possible Outcomes 442 Referrals for Prosecution May Attract Public Attention 442 Referral Considerations 443 Refer the Matter to State, Local, or Federal Prosecutors? 444 Prosecutors Must Prioritize Cases 445 Forensic Accounting Investigator May Increase the Success of a Referral 446 Reputational Benefits 446 Plea Agreements 447 Filing a Civil Lawsuit 447 23 Report of Investigation 449 Types of Reports 450 Importance of Adequate Preparation 450 1 Contents Standards of Reporting 451 AlCPA Consulting Standards 451 ACFE Standards 453 The Written Report of Investigation 455 Basic Elements to Consider for Inclusion in a Report of Investigation 455 Summarizing Your Findings 457 \ Written Report of Expert Witness Opining ; for the Plaintiff on a Civil Fraud Claim 458 Affidavits 460 Informal Reports 461 Giving a Deposition 462 Be Prepared 463 It's Your Deposition 463 Objectives of a Deposition in Civil Litigation 464 You Are Being Measured 464 Reviewing Your Deposition Transcript 465 Other Considerations 465 Mistakes to Avoid in Reporting 466 Avoid Overstatement 467 Avoid Opinion 467 Identify Control Issues Separately from Investigative Findings of Fact 467 Use Simple, Straightforward Language Focused on the Facts 467 Avoid Subjective Comments 468 Working Papers 469 Signed Engagement Letter 469 Relationship Review 471 Substantive Working Papers 471 Each Working Paper Should Stand on Its Own 471 Testimony Binder 473 Interview Memorandums 473 24 Working with Attorneys 475 In the Company of Lawyers 475 Confidentiality Requirements 477 Forming the Investigative Team 477 Documentation 483 Civil Litigation 485 Interviewing 485 External Audit Firm 486 Working for or Interacting with Law Enforcement or Government Agencies 489 Disagreements with Counsel 490 Conclusion 491 I Contents xiii j 25 Conducting Global Investigations 493 I On International Assignment 494 j Getting Started 495 Coordinating the Engagement 496 Logistics 497 Work Plan 497 Preliminary Work Plan Example 498 Foreign Corrupt Practices Act 501 Internal Accounting Control Provisions 502 Antibribery Provisions 502 Record Keeping Provisions 502 1 Additional Considerations 503 Planning the Engagement 503 Accounting Issues 503 Knowledge of Corporate Personnel 504 Understand Company Policy 504 Understand the Company's Network 504 Local Licenses 505 Schemes and Other Matters 505 Personal Considerations 507 26 Money Laundering 509 Relationship between Fraud and Money Laundering 510 Placement 511 Layering 511 Integration 511 Varying Impact of Money Laundering on Companies 512 The Five Point Program for AML Regulated Businesses 514 Written Compliance Program 514 Minimum Standards of Customer Due Diligence 514 Activity Monitoring and Reporting 514 Training 515 Record Keeping 515 Impact of Money Laundering on Financial Statements 51 7 AML and Forensic Accounting Investigation 518 At the Request of the Regulator 518 At the Request of the Institution 518 Review of Transactions and Records 519 Decision Making 519 The AML Reporting Process 519 Corporate Culture and AML Corporate Governance 520 Legal Arrangements Lending Themselves to Anonymity 520 Potential Red Flags 521 Auditing and Money Laundering 522 Relationship between Fraud Investigation and AML 523 xiv Contents 27 Other Dimensions of Forensic Accounting 525 Construction 526 Environmental Issues 527 Intellectual Property 528 Government Contracting 529 Insurance and Business Interruption 530 Marital Dissolution 530 Shareholder Litigation 531 Business Valuation 532 Business Combinations 532 Cybercrime 533 28 Looking Forward: The Future of Forensic Accounting Investigation 535 Evolving Discipline 536 New Tools 538 Education and Training: To Better Support the New Discipline 538 Regulation and Enforcement 539 Changing Corporate Environment 540 Internal Audit 541 Corporate Judgment Calls 542 Forensic Accounting Investigators Serving Individual Corporate Clients 542 Nonfinancial Operating Data 543 Responsibility for Disclosure and Validation of NFOD 544 Other Legal and Stock Exchange Requirements 545 Future of Forensic Accounting Investigation: Increasingly Global 546 Index 547
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illustrated	Illustrated
index_date	2024-07-02T14:07:53Z
indexdate	2024-07-09T20:36:29Z
institution	BVB
isbn	0471469076 9780471469070
language	English
lccn	2004027090
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physical	XXII, 554 S. graph. Darst.
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spelling	Golden, Thomas W. Verfasser aut A guide to forensic accounting investigation Thomas W. Golden ; Steven L. Skalak, and Mona M. Clayton Hoboken, NJ Wiley 2006 XXII, 554 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Bedrijfsleven gtt Fraude gtt Ondernemingen gtt Forensic accounting Auditing Fraud investigation Auditing Rechnungslegung (DE-588)4128343-0 gnd rswk-swf Betrug (DE-588)4006249-1 gnd rswk-swf Revision Wirtschaft (DE-588)4049674-0 gnd rswk-swf Betrug (DE-588)4006249-1 s Rechnungslegung (DE-588)4128343-0 s Revision Wirtschaft (DE-588)4049674-0 s DE-604 Skalak, Steven L. Sonstige oth Clayton, Mona M. Sonstige oth HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=014681471&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis
spellingShingle	Golden, Thomas W. A guide to forensic accounting investigation Bedrijfsleven gtt Fraude gtt Ondernemingen gtt Forensic accounting Auditing Fraud investigation Auditing Rechnungslegung (DE-588)4128343-0 gnd Betrug (DE-588)4006249-1 gnd Revision Wirtschaft (DE-588)4049674-0 gnd
subject_GND	(DE-588)4128343-0 (DE-588)4006249-1 (DE-588)4049674-0
title	A guide to forensic accounting investigation
title_auth	A guide to forensic accounting investigation
title_exact_search	A guide to forensic accounting investigation
title_exact_search_txtP	A guide to forensic accounting investigation
title_full	A guide to forensic accounting investigation Thomas W. Golden ; Steven L. Skalak, and Mona M. Clayton
title_fullStr	A guide to forensic accounting investigation Thomas W. Golden ; Steven L. Skalak, and Mona M. Clayton
title_full_unstemmed	A guide to forensic accounting investigation Thomas W. Golden ; Steven L. Skalak, and Mona M. Clayton
title_short	A guide to forensic accounting investigation
title_sort	a guide to forensic accounting investigation
topic	Bedrijfsleven gtt Fraude gtt Ondernemingen gtt Forensic accounting Auditing Fraud investigation Auditing Rechnungslegung (DE-588)4128343-0 gnd Betrug (DE-588)4006249-1 gnd Revision Wirtschaft (DE-588)4049674-0 gnd
topic_facet	Bedrijfsleven Fraude Ondernemingen Forensic accounting Auditing Fraud investigation Auditing Rechnungslegung Betrug Revision Wirtschaft
url	http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=014681471&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA
work_keys_str_mv	AT goldenthomasw aguidetoforensicaccountinginvestigation AT skalakstevenl aguidetoforensicaccountinginvestigation AT claytonmonam aguidetoforensicaccountinginvestigation

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