Determine the most important five (5) skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. Although forensic accounting is not a new field, it has become more talked about since cases like Enron came to light. For someone interested in the Forensic Accountant profession they should know that this field can be time consuming, but very rewarding. People who work in this career investigate white collar crimes such as company fraud, fraudulent financial record reporting, and illegal investment schemes. In a recent study by the Federal Bureau of Investigation shows that white collar crimes have cost the United States and estimated 300 billion dollars (DiGabriele 2008). I think five of the skills that a forensic account would need are communication skills, detail oriented, professional and ethical behavior, sound judgment and discretion. Communication skills are vital in any profession. It allows you to convey information for others to receive. The problem with communication is that it can be interpreted differently by other intended parties.
As a forensic accountant, communication skills, verbal and non verbal, are important when it comes to conducting interviews and gathering information. After gathering the records, forensic accountants often conduct interviews with the accused and other involved parties to get individual stories about the irregularities. Forensic accountants have to be able to intemperate correctly the information they receive as well as ask the right questions to get the information they need. They are also looking for non verbal forms of communication during this process. Forensic accountants also have to be detail oriented. Once they have done their initial interviews and gathered the required information, the accountant must go over everything with a fine tooth comb. They have to go through records, such as bank, credit card statements, journals, ledgers, databases, email and memos. Some clues are more obvious than others such as spending on new cars, numerous vacations and starting additional businesses without the financial means to do so. It is important that professional and ethical behavior is used at all times. As a professional in the field you are expected to conduct yourself with high standard. Forensic accounts hold the fate of a company in their hands. Working a case in which you have a bias, working a case in which your friend is the person under investigation, accepting bribes all show unethical behavior.
As a professional in the field you are under oath. If it is found that you were unethical in your finding you can be brought up on charges and have your CPA or other government clearances revoked. Sound judgment and discretion go hand in hand. After gathering all the facts and review all the materials collected. The forensic account has to use sound judgment in making a determination on his findings. It is then up to their discretion to decide what parties are liable. Describe the role of a forensic accountant within a courtroom environment In a courtroom setting, forensic accountants can be used in many ways. They can be used early on in the courtroom case as an advisor to the attorney. As an advisor, the attorney can present ideas on how to go forward with the case to the accountant or they may use them as an expert witness. As a expert witness in the courtroom, a forensic accountant would have to present expert testimony as to the information they found during their research.
It is the role of the accountant to present the information before the judge, jury, and the prosecutor and the States attorney in such a way that is convincing to each party. During the pretrial stage, the accountant may be asked to provide a report of the finding and a calculation of damages if any. If the accountant is retained by the defendant it will be the accountant’s duties to rebut the information provided by the plaintiff. During the settlement phase, the accountant would come up with calculations of the losses and help determine a range for the amount of settlement. Analyze the legal responsibility a forensic accountant has while providing service to a business It is the legal responsibility of a forensic accountant to be independent and impartial while researching and investigating both the financial records and the conduct of the employees that are involved. They are responsible for presenting all information found and making a determination on if the parties involved have a case.
It is also their responsibility to know all tax and accounting laws in order to make sure they are presenting accurate findings. Accounts have to also be very discrete when conducting investigations because a company’s reputation is at stake. Research two (2) cases where forensics accountants have provided vital evidence in a case. Summarize the cases and the importance of the forensic accountants’ role during each case. Enron was an energy, commodities and services company that had employed close to 22,000 people and had revenue of nearly $101 billion in 2000, shortly before its downfall (Fusaro 2002). Enron was named “America’s Most Innovative Company” by Fortune for six consecutive years between 1996 and 2001. Enron used creative accounting which allowed for them to appear more powerful on paper than it really was. They would make an investment on an asset, and immediately claim the estimated profit on its books, even though no profit had actually been made. If they brought in less revenue than projected, they would hide the loss by transferring it to Dummy Corporation which was off the books. This allowed for the loss to go unreported and for the company to write off losses without hurting the companies’ bottom line. In 2001 an article was written questioning if Enron was overpriced.
The article questioned how Enron could maintain its high stock value. It also questioned how analysts and investors did not know exactly how Enron made its income. While writing the article the reporter came across strange transactions that didn’t add up. While still reporting revenue growth, the company disclosed a $1.2 billion dollar reduction in the value of their shareholders stakes and prompted a inquiry by the Securities and Exchange Commission. After an initial investigation, the inquiry was upgraded to a formal criminal investigation. Forensic Accountants later determined that many of Enron’s recorded assets and profits were inflated, and in some cases, completely fraudulent and nonexistent. Some of the company’s debts and losses were recorded in offshore entities, remaining absent from Enron’s financial statements. Following this Enron’s accountancy firm, Arthur Andersen, received a federal subpoena and was eventually found guilty of fiddling Enron’s accounts. Adelphia Communications
Adelphia Communications was founded in 1952 by John Rigas. It was the sixth-largest cable company with $3.6 billion in annual revenues. Headquartered in a small rural town, the Rigases structured Adelphia Communications so that there were no checks and balances at the top. They also set it up so that they retained the majority of the shares in the company which enabled them to have the final say in all decisions. From time to time the Rigas family dipped into the account for personal business. Warning bells rang when a quarterly earnings report revealed that Adelphia was liable for $2.3 billion in off-balance-sheet loans to the Rigas family. This sparked an inquiry by the Securities and Exchange Commission which led to a full fledge criminal investigation. Forensic accountants discovered several issues. First, the Rigas family was using money from Adelphia to fund other business ventures that were off the books. This gave investors the impressions that debts were being paid off. Second, they intentionally misrepresented the company’s performance leading investors again to believe they were making money.
They were also inflating numbers to show that they were adding more subscribers than they were. Third, they found that the Rigas family omitted or hid the other dealings that family had in which they used company funds. This included buying obtaining more than 1.3 Billion in company stock through manipulation of cash funds. They were also were found to be using the company’s money to pay off personal debts such as sending their kids to college and buying vacation homes. To work for a company and upon retiring you find out you have no retirement fund can be devastating to a family. Employees willing give to stock plans and 401k plans with the hopes of putting money away for rainy days. Thanks to the likes of whistle blowers and forensic accounts, employees are able to get their money back or see these companies pay for their actions. Forensic accounting can be a very lucrative and enjoyable career with a wide variety of potential employers. Given the fact that embezzlement, fraud and financial inaccuracies are still on the rise these accountants are needed even more.
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