6 PG Accounting research

Every fraud examination is unique. As a result, the investigative techniques used often differ – including the parties involved in the investigation. For some investigations, the fraud examiner will perform the majority of the work, while in others a team of professionals will divide substantial roles in the process. One of the most common and important relationships in fraud examinations is the one between the fraud examiner and the attorneys involved, including inside counsel, external counsel and prosecutors.

This course examines the role of fraud examiners and attorneys in an investigation, as well as the best way to develop those relationships in various circumstances. It also explores important topics including the involvement of prosecutors in a fraud examination, the process of gathering and handling evidence and communicating with and reporting to legal counsel.

• Lesson 1: Introduction

• Lesson 2: The Roles of Examiners and Attorneys

• Lesson 3: Involvement of Law Enforcement in an Examination

• Lesson 4: Planning the Examination

• Lesson 5: Gathering and Handling Evidence

• Lesson 6: Communications with Counsel

• Lesson 7: Reporting to Counsel

• Lesson 8: Testifying in Legal Proceedings

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Many attorneys think that the forensic accountants are simply fraud investigators, yet that isn’t entirely a true statement. Forensic accounting is really much more than dealing with the numbers.

We live in a new world that deals with the issues of financial collapses, economic downturns, growing occurrences of fraud, a litigious society and an expectation of quick results from peers, clients – and even friends and family. Attorneys have benefited from the business that this new world has generated, as well as the increase in government and regulatory scrutiny.

Attorneys know that there is a value proposition to be presented to a client when working in tandem with a forensic accountant. Together, the attorney and forensic accountant can coordinate research needs and interpret the details uncovered.

The combination of attorney and forensic accountant will help analyze complicated financial data, and will persuasively and effectively communicate results with a high degree of credibility.

A maximum amount of team work is necessary for the just and proper results for the client whether it is in the advisory area, in a pre-litigation or a litigation scenario. Litigation often involves multiple, complex accounting and legal issues that overlap and intertwine. So, in this overly convoluted world, a client can maximize benefits, and minimize downsides, by retaining both an attorney and forensic accountant.

Working together, attorneys and forensic accountants can bring about optimal solutions. Clients that work with one and exclude the other are putting themselves at risk, and subject themselves to possible breakdowns. So, when do the attorneys and the forensic accountants best work together? According to the AICPA (American Institute of Certified Public Accountants) and the ABA (American Bar Association), the areas of specialty where it is considered to be wise, sound and necessary to work together include financial statement representation, economic damages calculations, valuations, bankruptcy/insolvency/reorganization, fraud prevention/detection/response, family law and computer forensic analysis. It seems that all these specialties embrace the business that is generated from the new world we live in.

Much has been written, discussed and argued about where to draw the line between attorneys and forensic accountants. Nonetheless, in the new world, the clients are a lot wiser, knowledgeable and expense intolerant. Therefore, it is not about drawing the line, but rather working on how to erase the line between the professions. Eliminating the line will allow true sportsmanship to be displayed, and will net the client just and correct results.

How should the attorney and the forensic accountant work together?

First, and foremost, they should both get involved at the early stage. The earlier they start working together, the more streamlined the process can be, both in terms of time and money. This is extremely important in this combination of professions, and the good job done by both, will be reflected in the bill and outcome for the client. Second, they must communicate constantly, effectively and clearly. In sum, although both the attorney and the forensic accountant can operate under their own independent roles, it works much better when they both agree that the cause for the client is a common cause.

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A Forensic Accountant Digs Beneath The Surface And Finds What Is Missing

The decision to hire a Forensic Accountant can be a gamble. Not all possess critical characteristics such as being able to see beyond what is immediately in front of them utilizing a panoramic approach.

Traditionally, a CPA looks at historical data, and focuses on the” fairness” of financial statement presentations and the preparation of tax filings. In contrast, a Forensic Accountant “follows the money” applying “investigative techniques” to historical information that results in a deeper and wider value-added look. Forensic Accountants look at the historical information regarding a matter often asking themselves “what happened before alleged events?”, or “what could have happened without alleged events?

How a Defendant Won the Lottery

During a criminal litigation in South Florida some 15 years ago, a defendant was charged with money laundering by the US Government. The Government alleged that the proceeds of a criminal enterprise were laundered by the defendant through purchasing winning lottery tickets from lottery winners for cash at a discounted price. The actual winners were not reporting their cash payments on their individual tax returns while the defendant reported the ticket winnings in his individual income tax returns.

The Government theory was that the proceeds of the criminal enterprise were the result of the sale of narcotics from a rented vacation home owned by the defendant. The location was rented out to a third party who was engaged in narcotics trafficking. The Government alleged that the defendant was in a business partnership with the renter of the location. The Government further alleged that the sale of narcotics funded the defendant’s purchase of the rented home and other expensive assets. The discovery documents provided by the Government completely omitted the business and personal financial records of the defendant.

A “Lifestyle” analysis reveals what is missing

A complete historical financial analysis of the business and financial records of the defendant as well as an investigation into the source of the funds used by the defendant to acquire the defendant’s home, rented property, other assets, and the defendant’s daily/monthly living expenses was performed. This analysis included a number of years of the filed income tax returns of the defendant, and the defendant’s business for comparison with the defendant’s verifiable cash flow. The analysis and related work product comparison demonstrated that all the defendant’s receipts, disbursements, and asset purchases were the result of legitimate sources of funds derived from the defendant’s business and from confirmable loans from family members and banks. These transactions occurred prior to the year that the defendant reported lottery winnings on his personal tax return. The defendant was found not guilty at his trial.

Without a panoramic in-depth approach, results could be catastrophic for a defendant

The world of forensic accounting is not fuzzy. Its roots are in historical verifiable information. An effective forensic accountant will combine the standards of evidence with the professional principles of Independence, Objectivity, and Integrity. Results that are verifiable, and easily explained to a jury, a judge, an opposing attorney or opposing expert will speak for themselves.

A Forensic Accountant that utilizes a panoramic perspective, simplifies information, stays factual and communicates effectively.

Do not wait to have a Forensic Accountant scrutinize transactions, assess if there is a financial motive, investigate, look for discrepancies, revise financial information, or find clues that can point to hidden wealth or assets.

Get started in order to obtain a favorable result for you individually as well as for your business.

A Forensic Accountant Bringing The Investigative Component To A Matter At Hand, Can Give An Attorney An Edge

Presenting results in an easily understood manner is something one must expect a forensic accountant to bring to the plate. The skill set of a forensic accountant can provide a significant advantage by taking complex financial data and putting it in an understandable format for an attorney, judge, and jury.

When we speak of forensic accounting, we are referring to the specialty practice area of accounting that describes engagements resulting from actual or anticipated disputes or litigation. It is also known as accounting litigation support.

Combining the professional principles of independence, objectivity and integrity, forensic accountants can provide results are verifiable and easily explained to a jury, a judge, an opposing attorney or opposing expert. They are based on the reality of what actually occurred. They speak for themselves. Forensic accountants work from a “historical verifiable information” perspective. Some of the activities that are undertaken by forensic accountants to verify information, and consequently add credibility to an attorney’s case are:

identifying documents that the attorney should request, or subpoena, early on in a case.

preparing the questions that the attorney can use in depositions, trials, or interrogatories.

conducting background investigations.

knowing how to trace and prepare exhibits to visually prove patterns.

conducting interviews of witnesses.

uncovering, calculating, and reporting on misuses of funds and other organizational assets; as well as the effectiveness of organizational processes.

going over books, records, bank accounts, data, and other pertinent documents with a “fine-toothed comb”.

knowing how to search for facts when fraud has taken place.

solving complex financial puzzles.

Forensic Accountants expand an Attorney’s capabilities

A forensic accountant that provides the resources and facts that support a successful case resolution for an attorney is one that can simplify information, stay factual and communicate effectively. This is particularly important in the environment that we live in. It is widely reported today that jurors prefer less effort when considering situations involving complicated or seemingly ambiguous material. Jurors tend to somewhat neglect standards of evidence when considering material that they do not understand. Consequently, clearer, and more convincing evidence will yield a better for a legal team.

Given that forensic accountants expand an attorney’s capabilities, a forensic accountant partnership is a winning situation, that bring full value to a client.