Forensic Accounting Today

Expert Speakers Lined Up for GSCPA Fraud & Forensic Accounting Conference

"Who's who" of Georgia professionals to speak at 9/18/09 event

 

Next Friday's 2nd Annual Fraud & Forensic Accounting Conference, presented by the Forensic and Valuation Services (FVS) Section of the Georgia Society of CPAs, will provide CPA practitioners a wide array of relevant topics to help sharpen their FVS-related skills. Sessions and speakers are as follows:

 

The New Hard Times: Business Crimes, Ponzi Schemes and Affinity Frauds, Bill Jennings, Navigant Consulting, Inc.

 

Implementing Professional Standards in Forensic Accounting Engagements, Charles Phillips and Mark Zyla, Acuitas, Inc.

 

Building and Expanding Your FVS Practice, Howard Zandman, Tauber & Balser, P.C.

 

Raising the Bar: The 7 Habits of the Highly Effective Rainmaker, Robin Hensley, Raising the Bar

 

Fraud Investigation: A Composite Case Study, David Sawyer, Sawyer & Company

 

Evidence Management & E-Discovery, Brent Tarr and Brendan Sullivan, eMagSolutions

 

Analysis Do’s and Don’ts – Valuation Approaches to Use in Turbulent Times, Rob Taylor, Taylor Consulting Group

 

How to Predict Impending Financial Crisis Before the Numbers Reveal It, Frank Chamberlain, Frank Chamberlain, Inc.

 

The Effective Use of Communication in Expert Witness Testimony, Dean Driskell, FTI Consulting

 

Business Damages vs. Business Valuation, Jim Hart, Lightfoot Group, LLC; Bill Black, William H. Black, CPA

 

Family Law Financial Forensics – A Panel Discussion, Laurie Dyke, Investigative Accounting Group, LLC (Moderator); Lyn Reagan, Bennett Thrasher PC; Linda Schaeffer, Frazier & Deeter LLC; Paul Tigner, FairShare Financial PC; Scott Thurman, Thurman Financial Consulting, Inc.

 

Understanding eDiscovery in Corporate America, David Benton, The Home Depot

 

Business Valuations in Bankruptcy, Grant Stein, Alston & Bird; Kit Weitnauer, Alston & Bird, LLP

 

The conference drew over 150 attendees last year and is designed for Georgia CPAs, however their should be several slots open for other registrants. Click here for more information.

To Catch a Thief: Recovering Assets After an Embezzlement

Lately, primarily due to its amazing ease of use, I've been relying heavily on Twitter to direct my audience to topics pertaining to forensic accounting. In this blog post, I want to emphasize one of my recent Tweets which points my Twitter followers to a concise and well-written article on the subject of fraud/internal investigations. The author, G. Michael Bellinger, Esq, in an article in Risk Management, offers great advice and insight that's applicable to forensic accountants and financial investigators. In summary, Bellinger offers a four-step approach to gathering evidence and recovering assets after an embezzlement:

1. Immediately launch an internal investigation

2. Retain outside experts to conduct the investigation

3. Make it a goal to obtain a confession using proper, legal interrogation techniques

4. Develop a program for restitution.

Read the entire article

Investigating Fraud Takes Courage: How Do You Get It?

Following is one small excerpt of the notes I took the last two days at the ACFE's "Conducting Internal Investigations" conference held in Atlanta. The presenter, who did a super job, was Allen F. Brown, CFE, CPA.

To investigate fraud, you must have...

1. The authority to do what you need to do;

2. The support of those above you;

3. The necessary skills;

4. COURAGE (Fraud work can get ugly/nasty).

    How do you get the courage to be an effective fraud investigator?

    ...have 1, 2, and 3, above!

Document Production in Litigation: Use an Excel-Based Control Sheet

In litigation cases, forensic accountants and the lawyers they serve depend greatly on documents and other data obtained from opposing counsel through the discovery and document production process. It can be frustrating when requested information is not timely received, or even worse if not received at all. I'm always amazed at how litigants avoid producing relevant data via a myriad of legal arguments, some sound and legit, and others quite laughable.

To help combat document production abuse, litigation specialists must utilize an effective methodology for tracking the discovery requests made and what information has been received. Via an e-newsletter article I received this morning from the National Association of Valuation Analysts (NACVA), I learned of a practical tool that you may want to consider. It was written by James R King, CPA/ABV, CFE, FCPA, CVA, CFF and includes these excerpts: 

This article describes one way to set up a document production control sheet in Excel which can serve many different purposes. While this is written from the perspective of a litigation engagement, the same principles could be used in a business valuation engagement.

It is important to maintain control over the numerous document requests. In our litigation engagements, we are continuously requesting additional documents. Having one schedule allows us to (1) easily communicate with the attorney regarding production status; (2) follow up on what has/has not been provided; (3) locate the documents in our files; and (4) provide an exhibit for use in court of production problems that have limited the scope of the work we were able to perform and report on.

We utilize a production template when the engagement begins to make a list of documents that are need (sic) for our work. As the work progresses, we add to this list new information as needed.

If an exhibit is needed for a hearing on failure to produce documents, your control sheet becomes the source for that exhibit. This is easily accomplished by hiding the column that contains the hyperlinks to where the electronic copy of the document is stored. The worksheet now becomes a good visual exhibit to communicate with the judge the numerous times you have requested documents and the lack of production that has been provided.

Read the entire article and see the example Excel-based "Production Tracking Worksheet"

Readers: Do you have other examples of tools you've used in the document production process? Have you got any war-stories you'd like to share about abuses you've seen in the discovery phase of your engagements? Do you have any practical tips or suggestions about this subject which you'd like to share? If so...please reply via the below comment feature.

Forensic Accounting Niche is Embraced by Georgia Society of CPAs

Recognizing the ongoing rapid growth in the field of forensic accounting, the Board of Directors of the Georgia Society of CPAs (GSCPA) began a strong initiative in 2008 to help meet the needs of GSCPA members who work in this exciting practice area. Steps taken to-date include:

• Approved a name change for the Section which was formed several years ago to serve members interested in valuation and litigation services. Formerly called the Valuation & Litigation Services Section, the new, re-branded name is the Forensic & Valuation Services Section.
• Increased the number of practice areas addressed by the section to include all eight niche areas identified by the AICPA's Forensic and Valuation Services Center. The targeted areas are: 1) Bankruptcy and insolvency, 2) computer forensics, 3) economic damages, 4) family law, 5) fraud investigation, 6) litigation support, 7) stakeholder disputes, and 8) valuations. Other service specialties which may be added in the future might include such areas as internal controls, corporate governance, Sarbanes-Oxley Section 404, and internal audit.
• Expanded the size and makeup of the FVS Section Leadership Team to include GSCPA members with experience in each of the eight targeted niche areas.
• Launched an effective member communications program to announce the GSCPAs' commitment and plans for the FVS Section and its benefits to members.
• Surveyed the GSCPA membership regarding their interest in and perceptions pertaining to forensic accounting-related topics and how the GSCPA can best meet their needs through the FVS Section.
• Instituted the FVS Section Listserv, designed to improve the communication among Section members, offer a forum for exchanging ideas, and provide answers to questions and challenges faced by fellow members.
• Hosted the 2008 Fraud and Forensic Accounting Conference, an 8-hr CPE session attended by over 150 participants. The 2009 Fraud and Forensic Accounting Conference will be held on 9/18/09.
• Developed a schedule of monthly learning/networking events for Section members. These sessions include roundtable discussions, lunch 'n learn lectures (See my 2/9/09 post), webinars, informal discussion groups, and social/networking events, sometimes shared with organizations such as local bar associations, the Association of Certifed Fraud Examiners, and the Institute of Internal Auditors.

I am interested in hearing from leaders and members of other State CPA Society organizations that have targeted forensic accounting as a high-interest area among their constituents. There might be considerable mutual-benefit for our groups to exchange ideas. I encourage you to add your comments to this post, or if you prefer, email me at jeff.moore@jemoore.com.

Investigative Interviewing: Tips From an Ex-FBI Special Agent

"The next best thing to a confession is a real detailed lie."

I recently had the privilege of hearing Clifford E. Cormany, Jr. speak at one of the regular Lunch 'N Learn sessions hosted by the Forensic and Valuation Services Section of the Georgia Society of CPAs. In his 26-year career with the FBI, Mr. Cormany worked assignments involving criminal investigations, federal violations investigations, and organized crime investigations including public corruption matters, kidnapping, terrorism, and major narcotics cases.

Now President of Investigative & Polygraph Group, Inc., an association of retired FBI agents, Mr. Cormany has served as an expert witness and qualified on numerous occasions in Federal District Court, state courts and in other criminal and civil matters as an expert polygraph witness. At the program I attended, he discussed the role and importance of interviews and communication during financial investigations. Following is a summary of some of the key tips he offered the group:

• Before conducting an investigative interview, prepare yourself on all the important documents and issues.
• Research thoroughly the background of each interviewee. On-line research can be very helpful.
• It's OK to have a listing of questions you want to ask, but don't feel like you have to follow it precisely. Go with the ebb and flow of the interview.
• Make small talk in the early part of the interview...to establish common ground. For ex., where are you from? Do you like to play golf?
• Don't conduct interviews in public, for ex., in a noisy restaurant.
• When you expect the interviewee to be cooperative, it's OK to schedule the session in advance.
• Uncooperative or adversarial subjects should be interviewed on a surprise basis.
• If an interviewee is hostile or uncooperative, say, "OK, I didn't expect you to cooperate with me," and try to keep things moving on an even keel.
• Listen! Let the subject talk when they want to talk.
• Observe and read body language.
• If the interviewee wants a lawyer, friend, or family member present, say, "That's fine, but it won't change what I ask and how I ask it."
• Don't put a time limit on an interview. For ex., don't plan lunch in an hour when the interview may need to go another three hours.
• Don't lose your temper and or allow the interviewee to "get under your skin."
• Don't use ploys, tricks, or lies as an interview strategy. If you're caught doing this, the interviewee will be less likely to cooperate. Say, "I won't lie to you. I may not be able to tell you all I know and may not answer your questions, but I will not lie to you."
• Remember what you already know to be factual or what you think is the truth. Listen to what the subject says that may be different from what you know or think.
• The next best thing to a confession is a real detailed lie.
• Having a witness to the interview may be wise, especially with issues that may be key points in court. Or, after you prepare your interview report, consider having the interviewee confirm its accuracy.
• Well-written interview notes can be later used to prove lies.
• Use a neutral, non-defensive and non-aggressive approach during the interview.
• Seek permission from the interviewee to call them later if needed, and be sure you obtain their contact information.
• Just mentioning the idea of a polygraph exam may cause an uncooperative person to become cooperative and maybe even make a confession.
• Tape recordings can have a chilling effect on the interview. Obtain legal counsel regarding whether or not to record any interview.
• Take notes during the interview and dictate and clean them up within a day or two.
• As a forensic accountant, if you ever feel like you may be "in over your head" as it relates to an upcoming interview...then consider bringing in an expert interviewer, and sooner rather than later.

Trustee Chooses Lehman Examiner

Source: ajc.com

The federal government’s bankruptcy overseer chose Anton Valukas, a former federal prosecutor and a specialist in white-collar crime, as the examiner in the Lehman Brothers bankruptcy case. Valukas’ investigation could be used to determine whether Lehman executives lied, committed fraud or mismanaged the company. He will conduct his investigation simultaneously with several pending criminal investigations. Lehman and its former executives face investigations by U.S. attorneys in the Southern District of New York, the Eastern District of New York and the District of New Jersey, as well as the Securities and Exchange Commission.

Forensic Accounting War Stories...From the U.K.

Forensic accountant Michael Grayson has caught countless fraudsters out, saving companies thousands of pounds. Now he is warning that with a recession tightening its grip, North-East businesses could become easy targets.

Source: The Northern Echo 

Michael Grayson calls them his “war stories” – and he has plenty of them. In his role as a forensic accountant, he’s seen the spectrum of human emotion; the requisite mix of betrayal, tears, regret, anger and deceit.

His investigations have led to him catching a company director who wildly embellished his expenses while working for a multi-million-pound company, and saving a client £300,000 when he proved a sub-contractor was overcharging for the work he was carrying out. He saved another client (who was buying a multi-million pound kitchen and bathroom business) a staggering $25m after investigating the company’s final accounts and suggesting an adjustment of the figures.

He has worked for national banks, major airlines, local authorities, hospitals, FTSE 100 companies and assessed the assets of divorcing couples. And his job has taken him across the world – although there have been less glamorous environments too.

“I’ve worked anywhere from a big 50-story building in Texas to a stable in a back office, so for every Texas there’s also been a Rotherham,” says Michael, who leads a team of four forensic accountants at the Durham offices of Clive Owen & Co LLP.

“Basically, if you like to get up in the morning and know what you’re going to do next, forensic accounting isn’t for you. You could end up working anywhere and you’ve got to be able to start with a blank piece of paper and fill it from nothing, and some people don’t like that.”

Read entire article

CSI For CPAs: Searching For Financial Fraud

Forensic accountants find drama, routine on the job

By Livia Gershon, Staff Writer for Worcester Business Journal Online

As a rule, accounting probably isn’t a profession that’s ripe for a television drama. But the specialty of forensic accounting, essentially digging up financial information that could be used in court, may be an exception.

Sure, forensic accountants may need to spend days poring over boxes of records and convoluted spreadsheets, but they also confront crooked bookkeepers who’ve robbed their employers blind, face cross-examination on the witness stand and even go undercover.  

Forensic accountants may be hired by companies that suspect employees of wrongdoing, firms in the midst of criminal or civil proceedings, even divorcing spouses who want to make sure they know exactly how much income their husband or wife was really bringing in.

Sometimes straightforward methods for gathering evidence work fine. William E. Philbrick, a senior vice president at Worcester’s Greenberg, Rosenblatt Kull & Bitsoli who specializes in forensic accounting, said a first step in examining a company’s books is to compare expenses from one year to the next.

“If all the sudden your miscellaneous expenses, or any expense, is jumping, what’s the reason for that?” he said. “There may be a valid reason, but what’s the reason?”

Should You Call a Financial Investigator?

Financial investigators, often referred to as forensic accountants, are increasingly being called upon by lawyers, corporate governance officers, government officials, and others...to ferret-out monetary and other pertinent facts and data in a wide variety of situations. You may be faced with a matter, now or in the future, in which a specially-trained financial "bloodhound" is needed.

Financial Investigations Defined - According to the IRS, "Financial investigations are usually very document-intensive. Specifically, they involve records, such as bank account information, real estate files, motor vehicle records, etc., which point to the movement of money. Any record that pertains to or shows the paper trail of events involving money is important. The major goal in a financial investigation is to identify and document the movement of money. The link between where the money comes from, who gets it, when it is received and where it is stored or deposited, can provide proof of criminal activity."

Types of Forensic Accounting Cases - Financial investigators are typically retained by lawyers, business-owners, government agencies, bankers, lenders and investors to help protect the interests and rights of individuals and organizations involved in the following types of cases:

• Mergers and acquisitions due diligence
• Shareholder and partnership disputes
• Economic crime and other criminal investigations
• Personal injury claims / motor vehicle accidents
• Business interruption and property loss claims
• Employee dishonesty (fidelity) claims
• Business/employee fraud investigations
• Corporate internal investigations
• State and city government investigations
• Ethics hotline and whistleblower allegations
• Business contract disputes and economic losses
• Professional malpractice/negligence
• Divorce litigation
• Other types of civil litigation
• Mediation and arbitration
• Specialized audits
• Tax investigations
  

When you're faced with one of these situations, you should indeed consider how a forensic accountant might serve your needs. Discussing things with your lawyer or CPA might be your best next-step, as they can help you determine if and when a financial investigator is needed. In addition, these experts can help with the identification and retention of one or more well-qualified financial professionals.