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Forensic Accounting in Practice - Assignment Example

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Summary
This study focuses at providing a sharp insight on five important skills that forensic accountants should posses as well as their roles and responsibilities within a courtroom. Connectively, the study provides two cases where forensic accountant have been involved in providing vital evidence…
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Forensic Accounting in Practice
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 Forensic Accounting in Practice Introduction Forensic accounting involves utilization of auditing, accounting and criminal investigation skills to carry out an analysis of fraudulent acts committed when preparing financial reports (Kranacher, Riley & Wells, 2011). Therefore, forensic accountants employ complex investigation techniques to determine the accuracy of financial reporting and detect any fraudulent act implied or committed during and after preparation of financial statements (Kranacher, Riley & Wells, 2011). Normally, forensic accountants employ pictures, graphs, images and other tools to communicate the outcomes of their forensic investigation to non accounting people like lawyers, juries and court judges (Kranacher, Riley & Wells, 2011). Connectively, forensic accounting is more comprehensive and involves application of pro-active measures to sniff and detects fraudulent act implied or committed by corporate entities and individuals. This is because forensic accounting not only involves detections of intentional misappropriation but also non-intentional miss statement on the companies’ financial reports (Kranacher, Riley & Wells, 2011). Additionally, forensic accounting goes beyond scrutinizing numerical data to uncover both deliberate and non deliberate misappropriation (Echaore-McDavid & McDavid, 2008). This indicates that forensic accounting not only helps to fight against fraud but also helps to bring numerous benefits to corporate entities that have embraced it (Echaore-McDavid & McDavid, 2008). This indicates that forensic accounting remains contemporary and has emerged as a remedy to numerous scandals that have been reported in various parts of the world especially in the United States (Echaore-McDavid & McDavid, 2008). Therefore, this study will focus at providing a sharp insight on five important skills that forensic accountants should posses as well as their roles and responsibilities within a court room. Connectively, the study will provide two cases where forensic accountant have been involved in providing vital evidence and their importance in each case. 1. Five skills most important skills that a forensic accountant needs to possess Forensic accountants should posses accounting skills, whereby, they should be conversant with the current accounting conventions, policies and reporting procedures used when preparing financial statements and reports (Silverstone, 2005). Additionally, forensic accountants should be conversant with different currencies used in different countries in order to determine the value of those currencies in relation to fraud that may have been committed by international companies (Silverstone, 2005). This skill is important in a business in a sense that organization is able to utilize forensic accountants to conduct a regular audit on companies’ financial statement and detect any fraudulent acts that may have taken place (Silverstone, 2005). Forensic accountants should posses’ legal skills, whereby they should be conversant with the federal law and international law as well as the law applicable to different states (Adamson, 2008). This skill is important in a business because it helps a business to gather and present forensic evidence in the court to show that certain individual within or outside the organization have participated directly or indirectly in committing a fraud so that legal actions can be taken against them(Adamson, 2008). Additionally, this skill is vital in an organization because forensic accountants can act as witness to defend their companies in the court of law by presenting unbiased and objective evidence that indicate that their companies did not participate in any form of fraud(Kranacher, Riley & Wells, 2011). In above connection, forensic accountants should posses’ analytical skills (Kranacher, Riley & Wells, 2011). This may help them to conduct a comprehensive analysis of both print and electronic media and derive some vital evidence that may help to detect financial fraud that may have been organized or committed (Kranacher, Riley & Wells, 2011). This may help to save the business against incurring financial losses that could have occurred if not for a forensic accountant with this skill (Kranacher, Riley & Wells, 2011). The analytical skills may help the business to conduct a comprehensive analysis of financial loss that occurs as a result of fraud committed through invoices and inappropriate recordings of sales by suppliers (Kranacher, Riley & Wells, 2011). Therefore, this skill may help the business not to loss money through fraudulent sales and inappropriate invoice recordings (Kranacher, Riley & Wells, 2011). Additionally, forensic accountants should possess personal skills such as; paying attention to details; knowing how to communicate effectively using both oral and written forms of communication (Owojori and Asaolu, 2009). Having the ability of paying attention to details may help them to detect important information that may help the organization to have more than one approach while finding a remedy to their problems (Owojori and Asaolu, 2009). A forensic accountant should further possess computerized application skills; those skills include; proper application of financial modeling language and software (Owojori and Asaolu, 2009). This skill is vital in a business because it help forensic accountant to be able to carry out comprehensive financial investigations (Owojori and Asaolu, 2009). Additionally, apart from having basic computer application skills forensic accountant should be well conversant with application of statistical package for social science (SPSS).This skills may help them to carrying out a comprehensive statistical data analysis and present the statistical analysis data into statistical tables, charts and graphs that can be understood by legal officers and judges in the law court (Owojori and Asaolu, 2009). Apart from having good computer application skills, forensic accountants should possess strong interview skills. Those skills are very vital to any organization because they enable forensic accountant to gather vital information from different respondents that could not have been obtained from companies’ financial statements and reports (Echaore-McDavid & McDavid, 2008). In above connection, forensic accountants should posses strong interview skills so that they can be able to inquire critical issues that may act as evidence in the court of law (Echaore-McDavid & McDavid, 2008). Therefore, this skill may help the company to prevent fraud and eliminate financial officers who may compromise profitability of the company through fraudulent acts (Echaore-McDavid & McDavid, 2008). 2. Role of a forensic accountant within a courtroom environment. Forensic accountants play numerous vital roles in the court of law. Among the roles played by a forensic accountant include: they act as expert witness, they provide pretrial support, they gather facts that may be used as evidence. Additionally, they organize data and provide trial settlement assistance as well as formulate strategies (Owojori and Asaolu, 2009). They act as expert witness in the court of law whereby; unlike ordinary witness who give their testimonies based on facts only, forensic accountants are allowed to give their testimonies based on both objective evidence, facts as well as based on their opinion(Owojori and Asaolu, 2009). The judges in the trial determine expert witness by looking on their qualifications and experience. Normally, expert witness utilize exhibits such as audited financial statements, statistical figure, images and picture to testify and give their opinions with reference available exhibits(Owojori and Asaolu, 2009). However, experts witness are strongly urged to conduct adequate investigation on the materials used when testifying in order to prevent the problem of presenting incredible and invalid information(Owojori and Asaolu, 2009). This may help judges to prevent arriving at a wrong conclusion when making a ruling (Owojori and Asaolu, 2009). In above connection, forensic accountants play a role of providing pretrial support to the attorney. This means that forensic accounts may be involved at the early stage of investigation in order to provide vital information that may be used in formulating a case (Owojori and Asaolu, 2009). Connectively, forensic accountants play an important role of calculating damages incurred as well as writing a report on the findings arrived at after computation (Owojori and Asaolu, 2009). This may help the attorney to have the basis of evidence that may be used in the trial. Additionally, forensic accountants provide support of translating accounting and financial Jargon used when preparing financial statements into a language that can be understood by non financial experts (Owojori and Asaolu, 2009). This may help non accountants to scrutinize and understand the level of magnitude for the crime committed (Owojori and Asaolu, 2009). Forensic accountants play the role of gathering facts that may be used as evidence in the court. They normally play this role by helping the attorney to identify business documents that may be required to act as evidence during the trial (Owojori and Asaolu, 2009). They achieve this role by conduct a comprehensive review of various business documents over a given time (Echaore-McDavid & McDavid, 2008). Some of the documents reviewed include; companies’ cash flow statements, comprehensive income statements and statements of financial position commonly referred to as balance sheet (Owojori and Asaolu, 2009). Whereby, after they are through with the review, they provide the attorney with the most credible documents containing relevant information that may be used as evidence in the court of law to substantiate their assertions (Owojori and Asaolu, 2009). Additionally, forensic accountants help to organize data and forensic evidence in a manner that can be understood by non accountants. This may involve managing data base from various sources using the computerized application skills (Owojori and Asaolu, 2009). Connectively, they may play a significant role of helping the attorney in formulating strategies by gathering substantial facts and evidence that may be used by the attorney when developing strategies to be used in the court when presenting evidence (Owojori and Asaolu, 2009). 3. Analysis of legal responsibility of a forensic accountant while providing service to a business Forensic accountant plays an important responsibility in legal field; whereby, they actively carrying out investigations by reviewing financial statement to determine whether fraud has been committed (Hiles, 2011). Additionally, forensic accountants are actively involved in legal matters concerning insurance claims (Hiles, 2011). They work closely with attorneys, risk managers, underwriters and adjusters to carry out an audit of whether the policy holder incurred a loss that he or she had insured against. Connectively, they determine whether the principals of proximate cause and insurable interest have been observed prior any indemnifications are made (Silverstone, 2005). Additionally, forensic accountants have the responsibility of determining the magnitude of fraud committed so that judges can determine the kind of punishment to be applied to the accused (Hiles, 2011). In above connection, forensic accountants have the responsibility of advocating and implementing legal programs aimed at educating the members of the public on the importance of fraud prevention. In above connection, forensic accountant intervene to provide assistance on cases concerning professional negligence whereby, they conduct a comprehensive analysis on the work of other professionals and identify areas of negligence (Kranacher, Riley & Wells, 2011). They also play a vital role on matters pertaining claims on marital and family law. Whereby, they may be involved in determining the amount of compensation and that the divorcee’s children may get from their parents (Adamson, 2008). Additionally, forensic accountants may help to determine how property may be allotted among the members of the family on matters pertaining property law (Adamson, 2008). 4. Two cases where forensics accountants have provided vital evidence and their importance role during each case. A case one: Midwestern Lights Company on false entry. In this case occurred in the year 1997 whereby, the general ledger of Midwestern Lights indicated an entry a debit entry of $51,418.49 showing that the amount was paid to Mid west Lights Company. On the other hand, same figure was credited in the United States checking (Thomas & Mark, 2003). However, despite the transaction talking place there were no documents that could indicate any transactions that had taken place. Therefore, it can be scrutinized that no payment was made to Mid west Light Company (Thomas & Mark, 2003).Therefore, a forensic accountant in this case can play a significant role of detecting that no payment was made to Mid Western Light Company and therefore, indicating that there was a breach of trust by the US checking (Owojori and Asaolu, 2009). Case two: Northern Lights Vs Flying Sly, Inc. In this case Northern Lights Company paid all the necessary legal cost to incorporate Flying Sly, Inc Company was paid to Thomas Burns the owner of flying sly, Inc (Thomas & Mark, 2003). However, such transfer of ownership did not have any legal enforcement because it amounted to violation of partnership agreement. This further led to misappropriation of partnership assets (Thomas & Mark, 2003). Therefore, forensic accountant plays a significant role in this case by detecting fraud whereby, recommending strategies that may be adopted to prevent losses emanating from fraudulent acts (Thomas & Mark, 2003). Conclusion The study indicates that for a forensic accountant to be effective and efficient in carrying out their roles and responsibilities they should posses some special skills such as; accounting skills, legal skills, interview skills, computerized software application skills, personal skills and strong analytical skills to name just but a few. Additionally, it can be scrutinized that forensic accountants have numerous roles and responsibilities within a court room as discussed. In above connection, they have a responsibility of reviewing financial statements to determine whether a fraud has been committed as well as assist in computation of the amount of claims to be paid by insurance companies. Conclusively, the study has provided two cases where forensic accountants have provide vital evidence and their roles role in each case. References Adamson, J. E. (2008). Law for business and personal use. Mason, OH: South-Western Cengage Learning. Echaore-McDavid, S., & McDavid, R. A. (2008). Career opportunities in forensic science. New York: Ferguson. Hiles, A. (2011). The definitive handbook of business continuity management. Hoboken, N.J: Wiley.Kranacher, M.-J., Riley, R., & Wells, J. T. (2011). Forensic accounting and fraud examination. Hoboken, N.J: John Wiley. Silverstone, H. (2005). Fraud 101: Techniques and Strategies for Detection. Hoboken: John Wiley & Sons. Owojori, A.A and Asaolu.T. O, (2009).The Role of Forensic Accounting in Solving the Vexed Problem of Corporate World. European Journal of Scientific Research. Retrieved :< http://www.eurojournals.com/ejsr_29_2 04 .Pdf>on 11th February 2013, ISSN 1450-216X Vol.29 No.2 pp.183-187. Thomas A. Buckhoff & Mark H. Taylor (2003). “A Case Study of the Role of the Forensic Accountant in a Legal Dispute”. Retrieved :< http://www.forensicsolutions.org/publications /expert%2520witness%2520article%2520JOFA%2520Submission%2520Revision.pdf> on 12th February 2012. Read More
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