Chapter 1 Introduction to Forensic Accounting and Fraud Examination 15. How imp

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Chapter 1 Introduction to Forensic Accounting and Fraud Examination
15. How important are information technology skills to the forensic accountant? Give five examples of ways that forensic accountants use information technology skills.
IT skills are very important to the forensic accountant. The main areas of forensic accounting include auditing and investigation. Both these areas involve computers and information technology. Examples: 1) forensic auditing in an IT environment, 3) security consulting, 3) expert testimony in computer crimes, 4) recovering erased data from computers used in computer crimes, 5) tracing the source of an email message relating to a computer crime.
16. Explain the roles played by forensic accountants in areas besides those relating to fraud.
Examples of non-fraud-related forensic accounting roles include valuation, dispute resolution, due diligence in mergers and acquisitions, expert testimony in divorce or bankruptcy proceedings.
17. List and explain the most important skills required of forensic accountants.
Forensic accountants must be skilled a working with people, with communications, must have excellent analytical and investigative skills, and have good overall accounting skills. Forensic accountants must also have various specialized skills, including those in the areas of valuation and expert consulting and expert testimony. Results of investigations and analyses are of little value unless the forensic accountant is skilled at communicating such results to others.. List and explain the most important skills required of forensic accountants.
Forensic accountants must be skilled a working with people, with communications, must have excellent analytical and investigative skills, and have good overall accounting skills. Forensic accountants must also have various specialized skills, including those in the areas of valuation and expert consulting and expert testimony. Results of investigations and analyses are of little value unless the forensic accountant is skilled at communicating such results to others.
Chapter 2
The Forensic Accounting Legal Environment:
46: Discuss the rules of evidence.
In criminal trials, the rules of evidence control both the content of the evidence and the manner in which it is presented. In federal and most state courts, the rules of evidence are set forth in statutory codes.
The number one rule relating to evidence is that it can be introduced only if it is shown to be relevant, meaning that the attorney must logically connect it to the questions at hand. However, not all relevant evidence is admitted. For example, judges may exclude relevant evidence that is deemed to be overly prejudicial or inflammatory to the emotions.
A second major rule of evidence, the personal knowledge rule, is that witnesses can testify only to things that they personally know through one or more of their own senses.
The major exception to the personal knowledge rule applies to expert witnesses, who are permitted to draw expert conclusions based on facts admitted into evidence. For example, a handwriting expert could testify that in her opinion, a defendant forged a given document, even though the expert did not personally witness the act of forgery.
49. Compare and contrast the role of the forensic accountant in the investigation of a civil matter as compared to a criminal matter. Are there any similarities in the nature of the investigations? Are the goals of the investigation the same? Is there any specific training a forensic accountant would need to conduct the different investigations? The criminal and civil processes are very similar. Criminal cases may need to involve law enforcement, and in criminal cases the discovery rules favor the defendant much more than they do in civil cases.
52. In the investigation of a criminal or civil matter, how does the forensic accountant obtain the necessary information? Discuss the use of all investigative tools, including the subpoena, the grand jury, and the search warrant.
In criminal cases law enforcement may subpoena information when there is probably cause that a crime has been committed. Subpoenas can sometimes take weeks to obtain the desired information and may or may not require a judge’s signature, depending on the jurisdiction. Warrants, on the other hand, are normally signed by a judge and permit authorities to immediately seize evidence. Warrants are normally needed to seize evidence contained in a suspect’s home. Grand juries normally have subpoena power, and the power to summon witnesses and compel them to give testimony under oath.
In civil cases, attorneys typically act as officers of the court and issue subpoenas as part of the discovery process. Chapter 3
Fundamentals I: Accounting Information Systems
46. Assume that you are a forensic accountant consulting for the Mixed Veggies Company. The company has been suffering inventory losses for unknown reasons. Every inventory count for the last five years has shown a significant shortage. The CEO and controller have been debating possible causes for the problem including everything from theft to accounting errors. The controller thinks the investigation should take place strictly within the inventory department. The CEO, on the other hand, things a much broader investigation is needed and should include sales and billing.
Given the information you have, state whether you agree with the CEO or the controller. Explain your position.
Certainly, the original investigation should take place within the inventory department. The first step would be to review all procedures relating to the receiving and release of inventory, and those relating to recordkeeping and physical safeguards.
50. John Goodtime is the accountant for the XYZ Business Services Company. His company provides basic accounting and tax services to about 100 small business clients in the Coral Gables area of Miami, Florida. John’s duties include managing accounts receivable, accounts payable, payroll, and cash disbursements. He pretty much handles everything to do with accounting and payments. John’s boss, Marina Jefe, was playing golf with a partner from a local CPA firm, when an unusual conversation evolved.
“I hear that you have only John Goodtime doing all your accounting and financial work,” said the CPA.
“He’s great,” said Marina. “I never have to worry about anything. He does it all.”
“That’s crazy,” said the CPA. “You need separation of duties. You’re an accounting firm, and you have a guy in charge of your accounting who doesn’t even follow basic textbook segregation of duties.”
“But we’re making a lot of money. Things are going well,” said Marina.
“Get rid of him. He’s a walking time bomb,” said the CPA. “Take my professional opinion.”
Marina was terribly saddened after her golf game with the CPA. She liked John Goodtime and hated the thought of firing him, so she told him what the CPA said.
John responded that the CPA was “off his rocker.” He added, “Your CPA friend is used to working with large clients. We’re too small to have separate accounting and finance. Do you really want to pay a second person to do some of my work? You don’t have anyone else who can do it. All our staff members are overloaded already, and it would be even worse to let one of them handle both clients and billing.”
a. Who is right, John Goodtime or the CPA?
b. Should Marina consider firing John Goodtime?
c. Should she consider hiring another person? The money is there to hire someone else, but it would come out of the bottom line and her pocket.
The CPA is right, although this is a common issue in small businesses. But firing John Goodtime is not necessary, and she doesn’t need to hire an extra person. She could simply sign the checks herself, after reviewing payment documentation.

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