GOJ Audit Commission Conference 2016 PRESENTS : FORENSIC Forensic - PowerPoint PPT Presentation

GOJ Audit Commission Conference 2016 PRESENTS : FORENSIC Forensic Audits-Help for Today’s Entity Thursday, October 27, 2016 PRESENTER : COLLIN A. A. GREENLAND, Forensic Accountant, MBA, FJIM, CFE, CFSA, CFC. 1

 To Sensitize / Review the essential aspects of Forensic Accounting, Definition, Nature, etc.  To Expose / Review the Need / Demand for Forensic Accounting Generally.  To Expose and Explain to Attendees the types of Forensic Assignments / Applications, the Main Elements of a Forensic Audit.  To Introduce “Cutting Edge” Forensic Accounting Methodologies, Techniques and Technology

WHAT IS FORENSIC ACCOUNTING ? DEFINITION 1. : The application of financial skills and an investigative mentality to unresolved issues, conducted within the context of the rules of evidence. As a discipline, it encompasses financial expertise, Fraud knowledge, and a strong knowledge and understanding of Business reality and the working of the legal system. (SOURCE : Fraud Auditing and Forensic Accounting : New Tools And Techniques , by Jack Bologna and Robert J. Lindquist, John Wiley & Sons, New York, 1987.)

WHAT IS FORENSIC ACCOUNTING (contd.)? DEFINITION 2. : Forensic accounting (or auditing) is the integration of accounting, auditing and investigative skills in order to provide an accounting analysis suitable for the resolution of disputes (usually but not exclusively) in the courts. (SOURCE : “Demystifying Forensic Accounting,” by Collin Greenland, The Weekend Observer, Pg. 5, December 7, 2001).

WHAT IS FORENSIC ACCOUNTING (contd.)? THE NATURE OF FORENSIC ACOUNTING Forensic accountants are required to be familiar with legal concepts and procedures and must be able to identify substance over form when dealing with an issue. Forensic engagements usually require the analysis, interpretation, summarization and presentation of complex financial and business-related issues in a manner which is both understandable and properly supported.

WHAT IS FORENSIC ACCOUNTING (contd.)? THE NATURE OF FORENSIC ACOUNTING According to the American College of Forensic Examiners Institute, (ACFEI) a group of their educators have broken forensic accounting into 75 topics as Follows (in alphabetical order) : 1. Accounting systems and the detection of fraud 2. Analytical procedures 3. Analyzing financial statements 4. Antitrust 5. Bankruptcy 6. Billing schemes 7. Bribery and corruption investigation 8. Business interruption

THE NATURE OF FORENSIC AUDITING (contd.) 9. Business valuations and cost estimates 10. Check tampering 11. Civil and criminal fraud statutes and regulations 12. Common fraud schemes 13. Compliance with applicable laws and regulations 14. Computers and computer fraud 15. Concealing fraud in accounting 16. Concealment investigative methods 17. Conflicts of interest investigative techniques 18. Conversion investigative methods 19. Corporate governance 20. Criminology and white-collar and economic crimes 7

THE NATURE OF FORENSIC AUDITING (contd.) 21. Cyber fraud and computer topics 22. Detecting management and employee fraud 23. Document collection and analysis 24. Elements of fraud, pressure, opportunity, and rationalization 25. Environmental and personal red flags 26. Expert witness and expert testimony techniques 27 Financial statement fraud 28. Financial reporting process 29. Finding assets and people 30. Forensic accounting practices 31. Forensic and general accounting 32.Forensic and general accounting 32. Fraud auditing methodology 8

THE NATURE OF FORENSIC AUDITING (contd.) • 33. Fraud perpetrators and their motivations • 34. Fraud prevention and fraud policies • 35. Fraud schemes • 36. Fraud statistics • 37. Fraud symptoms and computer-aided fraud auditing techniques • 38. Fraud symptoms • 39. Fundamentals of fraud • 40. Hidden assets • 41. Internal control evaluation • 42, Interrogation • 43. Interview principles and methods to evaluate deception • 44. Inventory and asset theft • 45. Investigation of financial crimes and legal elements • 46. Kiting 9

THE NATURE OF FORENSIC AUDITING (contd.) • 47. Knowledge of the legal system • 48. Legal elements of fraud • 49. Litigation consulting techniques • 50. Loss prevention investigation • 51. Loss prevention programs • 52. Money laundering • 53 Occupational fraud • 54. Off-book accounting and financial statement fraud • 56. Overview of ethics • 57. Overview of fraud auditing and fraud investigation • 58. Overview of the legal elements of fraud • 59. Payroll and expense reimbursement • 60. Phases of forensic accounting 10

THE NATURE OF FORENSIC AUDITING (contd.) • 61. Principles of ethics and corporate code of conduct • 62. Professional liability • 63. Resolution of allegation of misconduct • 64. Rules of evidence • 65. Skills required of the forensic accountant • 66. Statistical sampling • 67. Tax consequences • 68. Techniques in locating hidden assets • 69. The civil justice system • 70. The criminal justice system • 71. Theft and skimming • 72. Theft act investigative methods • 73. Theory of fraud examination and prevention • 74. Trial and cross-examination 11 • 75. Who commits fraud

the Need / Demand for Forensic Accounting  In 2012, IBISWorld reported revenue in forensic accounting in the United States was expected to grow 6.8% annually from $4.3 billion in 2012 to $6.0 billion in 2017, with a 7.0% increase in forensic accounting revenue expected for 2013 alone.  In 2014, IBISWorld confirmed that over the previous five years, demand for forensic accounting services surged as financial regulation increased and the number of bankruptcies and corporate restructures rose sharply. Businesses turned to the industry for aid in assessing and correcting the damage inflicted during the recession as well as for assistance with litigation. Though internal competition and competition from other industries’ in-house forensic accounting services were forecast to rise over the next five years, growth continue as opportunities arise in niche and emerging markets....

the Need / Demand for Forensic Accounting (contd.)  Today, forensic accounting is now regarded worldwide as one of the “ 20 hot job tracks of the future” and job opportunities abound in law firms, financial organizations, insurance companies, and Government agencies like the FBI, the Internal Revenue Service, and the Bureau of Alcohol, Tobacco and Firearms who constantly investigate everything from money laundering and identity-theft- related fraud to arson and tax evasion.

the Need / Demand for Forensic Accounting (contd.)  The consensus amongst both researchers and practitioners today , is that board members, management and other stakeholders continue to expect assurances that an organization is adhering to industry best practices regarding governance and internal controls and that the organization is on sound financial footing. Increasingly, in light of ongoing financial scandals, new and more stringent legal requirements, and the increasing complexity of financial reporting, this places higher demands on internal audit, and all stakeholders’ awareness for risk management is growing.

the Need / Demand for Forensic Accounting (contd.)  Deloitte Touche for example, in their 2012 survey reported that since their last Internal Audit Fraud Survey in 2010, the mandate and role of Internal Audit functions have continued to evolve, in respect of both fraud risk management and investigation responsibility. Management are still dependent on Internal Audit to provide them with assurance over the anti-fraud controls in place across their businesses, together with the ability to detect and investigate fraud, should it occur. These are important pre-conditions and strong incentives for the inclusion of forensic accounting techniques in internal audit functions.

the Need / Demand for Forensic Accounting (contd.)  The Deloitte report also pointed out that a robust anti-fraud culture is being promoted by senior management with 98% of respondents stating senior management endorse and offer some, or extensive encouragement of a strong approach to fraud risk management. These are important pre-conditions and strong incentives for the inclusion of forensic accounting techniques in internal audit functions.

the Need / Demand for Forensic Accounting (contd.) The Deloitte report also predicted that over the next 12 months, the three key areas of focus in Internal Audit were to be firstly the inclusion (or continued inclusion) of fraud in the scope of reviews undertaken (53%), secondly the increased coverage of fraud risk in the audit plan (40%), and thirdly performing fraud risk assessments (36%). Interestingly, 28% of respondents anticipate the implementation of fraud data mining tools, critical components in forensic accounting. Again, these are important pre-conditions and strong incentives for the inclusion of forensic accounting techniques in internal audit functions.