Fighting Financial Crime with Forensic Accounting

January 2007

IN THIS ISSUE

— Catching Financial Criminals with Forensic Accounting
— Get People Talking: The Art of the Interview
— In the next issue

GREETINGS!

Happy New Year and welcome to the first issue of our newsletter for 2007. In this issue we’ll focus on how forensic accountants can help detect and deter financial crime in your company or that of your client.

As certified fraud examiners and forensic accountants, we can assist your company and your clients in making certain company assets are accounted for and that internal controls work to prevent employee theft or deception.

CATCHING FINANCIAL CRIMINALS WITH FORENSIC ACCOUNTING

By its very nature, accounting is both a routine process (usually taking the form of quarterly and annual audits, tax preparation, etc.) and one based on subjectivity (finding ways to massage the tax code and accounting rules, both in a state and federally, to a client’s advantage.) As a result, when that client is victimized from within by an employee (or by a vendor outside the company), auditors and outside accountants may not be ideally suited to handle the situation. On certain occasions, the fraud in question may have been perpetrated by a company’s internal accounting employees as well.
Enter the forensic accountant, a relatively new breed of professional trained in accounting principles and techniques yet grounded in the realm of adversarial, investigative fraud detection. Forensic accountants can review a company’s books and records to detect irregularities and suspicious patterns that may well lead to identifying the pervasiveness of fraud and, ultimately, provide a chain of evidence indicating who perpetrated the financial crimes that, on average, cost corporations of all sixes an average of 5 percent of their revenues in 2005, according to the Association of Certified Fraud Examiners’ 2006 Report to the Nation. The process of investigating such crimes can be time consuming and potentially costly, but recovering tens of thousands of dollars secreted away by fraud — and putting a company’s employees on notice that such behavior will not be tolerated — make the rewards worth several times the cost.

GET PEOPLE TALKING: THE ART OF THE INTERVIEW

While many financial crime and fraud investigations start with a paper trail, after successfully collecting and analyzing evidence, one question typically remains — “whodunit?” The answer lies in interviews. While documents can indicate potential culpability, very rarely are there “smoking gun” documents that can provide direct evidence of the intent to commit a crime. (Electronic mail messages can sometimes be the exception to this rule.) More often, if documents indicate that a person may be guilty of a crime, that person’s peers, supervisors and vendors — past and present — will hold the key to answering how the potentially responsible party was able to undertake the fraud.
Most people are more willing to provide information than they think, and good fraud examiners and forensic accountants know how to make an interviewee feel at ease while keeping them focused on the details that are critical to any investigation — who did what, when, where, and how they did it. Only by receiving thorough, honest answers to these key questions can your client learn what happened, who did it, and how to stop it from happening again.

IN THE NEXT ISSUE

In the February issue we’ll look at the role competitive intelligence plays in giving your client’s business an edge over its rivals of all sizes.