Assignment3: Accounting in practice
Radhika Chirumamilla
Dr. Kuchar
08/07/2013
Determine the most important five skills that a forensic accountant needs to possess and evaluate the need for each skill.
A forensic accountant assists organizations and individuals chiefly to provide management support in the form of reviews for fraud detection and litigation support, especially through expert witness testimony. In conducting an investigation, a forensic accountant applies specialized skills and technical abilities including:
Understanding of law and rules of evidence—A forensic accountant is familiar with criminal and civil law and understands courtroom procedures and expectations. Understanding rules of evidence ensures that all the findings and related documentation is admissible in court. A forensic accountant possesses a basic understanding of the legal process and legal issues.
Critical and analytical investigative skills—"An auditor may be a watchdog, but a forensic accountant is a bloodhound!" A forensic accountant must possess a high level of skepticism and the "tenacity of a detective" to thoroughly examine situations for red flags suggesting fraud.
Understanding theories, methods, and patterns of fraud abuse—A forensic accountant thinks creatively in order to consider and understand the tactics a fraud perpetrator may use to commit and conceal fraudulent acts. A forensic accountant thinks like the individual who would manipulate accounting records or misrepresent circumstances to defraud the company.
Well developed interpersonal and communication skills—A forensic accountant clearly and concisely communicates findings to various parties, including those with less knowledge of accounting and auditing. For example, a forensic accountant may be asked to present the investigative methods and conclusions reached to accounting departments, management, boards of directors, government authorities, and courtroom participants (judge, jury, plaintiffs, defendants and attorneys).
Strong organizational skills—The ability to organize and analyze large amounts of financial data and documents is a key quality of a forensic accountant. Managing this task is essential for developing a professional conclusion, expert opinion, or report. Forensic accountants must organize information and establish premises from complex data and documents on which to build their opinion.
2. Describe the role of a forensic accountant within a courtroom environment.
With increasing frequency, forensic accountants assist attorneys in litigation involving matters such as financial frauds, embezzlements, misappropriation of funds, arson for profit, bankruptcy fraud, deceptive accounting practices, professional negligence, and tax evasion.
Such assistance typically takes one of two forms: consulting expert or testifying expert.
Both types of experts provide background information for developing litigation strategy, prepare written opinions, advise on depositions, and respond to discovery requests. Accordingly, they review documents, transactions, and other financial records to: (1) uncover the details of any defalcation, (2) establish responsibility for it, and (3) estimate losses incurred as a result of the defalcation. However, the consulting expert typically is much closer to the matter under dispute and has a much deeper understanding of it than does the testifying expert.
The testifying expert performs many of the same functions as the consulting expert but also provides expert testimony in court. Since many legal disputes become a battle of expert witnesses, it is advantageous to engage an experienced testifying expert with strong professional credentials. After being qualified, the testifying expert must educate the jury by: (1) establishing the facts, (2) interpreting the facts, and (3) commenting on the opposing expert’s facts and opinions .Since the work product of testifying experts is subject to discovery by the opposition, attorneys will not provide them with information they do not want discovered by the opposition.
The Expert Report
In most cases, experts must document their opinions and the evidence underlying them in a written report. Such expert reports may be required for a variety of reasons. First, a written report may be required by the court pursuant to Federal Rule of Civil Procedure 26(2)(B). Second, the expert report may provide the script for the expert’s testimony in court. Third, the expert report may be used to counter a Motion for Summary Judgment2 or to discourage the opposition from demanding a costly deposition of the expert. Finally, a well-written and soundly reasoned report may prompt the opposition to concede during out-of-court settlement negotiations.
3. Analyze the legal responsibility a forensic accountant has while providing service to a business.
Most commonly, forensic accountants are asked to provide expert witness opinions regarding lost profits and or unjust enrichment. They do so within the context of complex commercial litigation matters involving disputes such as breach of contract, fraud, product liability, wrongful competition, construction claims and intellectual property infringement.

Personal Injury Claims: In these cases, the forensic accountant’s role is to investigate the injured party’s financial or economic damages resulting from a loss of earnings or loss of household services. Medical malpractice, wrongful termination and wrongful death cases often require similar analyses and typically culminate in a written report and expert witness testimony. Shareholders and Partnership Disputes: Forensic accountants are often asked to perform a detailed analysis of accounting records to identify, trace and quantify the compensation, benefits or distributions received by shareholders or partners.
Commercial Insurance Claims: Examples of these types of assignments include business interruption, property losses and employee dishonesty (fidelity) claims. After a careful review of the policy to investigate coverage issues and the appropriate method of calculating the loss, the forensic accountant is then able to investigate and analyze the insured’s financial situation to provide a reliable and independent assessment of the loss.

Business/Employee Fraud Investigations: These engagements can involve tracing funds, asset identification and recovery, forensic intelligence gathering, suspect interviews and due diligence reviews.
Matrimonial Disputes: These cases often require a forensic accountant to trace, locate and value assets in order to ensure an equitable division of funds between divorcing parties or to determine the income available for child support. Research two cases where forensics accountants have provided vital evidence in a case. Summarize the cases and the importance of the forensic accountants role during each case.

Lou Erickson was a retired businessman who had spent 30+ years of his career in upper-management positions at Fortune 500 corporations. In 1995 Lou ventured two restaurants in Minnesota and the other in Canada with 8 limited partners with each investing $216,562. They selected MTC company owned by Thomas Burns to manage finances of both restaurants. Thomas Burns had owned and managed a number of successful restaurant franchises located in the Upper-Midwest and Canada.
Despite, strong restaurant traffic, the restaurants failed to generate positive cash flow and were periodically issued “cash calls” that required them to invest more money into the restaurants with the promise that things would improve shortly. Contrary to the provisions of the partnership agreement, the limited partners were not provided financial statements or any financial information to justify the need for the cash calls. MTC, Inc. was contractually responsible for producing the financial statements but consistently stonewalled numerous requests by the limited partners for financial statements. Consequently, the dissident limited partners, led by Lou Erickson, filed a civil lawsuit against Thomas Burns and related parties claiming mail and wire fraud and violations of the Racketeer Influenced Corrupt Organizations (RICO) statute.
Resolving the Legal Dispute
The plaintiffs’ attorneys engaged the professional firm Woodruff & Associates, LLP, and assigned Bill Benson, a certified fraud examiner and retired federal agent, to work as a consulting expert on the case. Mr. Benson organized and examined over 28,000 documents and identified 20 incidents of fraud in a written report to plaintiff’s attorneys. The consulting firm then assigned Winston Woodruff—to serve as the testifying expert for the case. Dr. Woodruff prepared an expert report summarizing and defending his opinion concerning the financial issues under dispute . The rationale for using two different experts in this case is twofold. First, as a consulting expert engaged directly by the attorneys, Mr. Benson’s work product and extensive involvement in the case was protected by the attorney-client privilege and was not discoverable by the defendant’s attorneys. Second, Dr. Woodruff’s extensive academic and professional credentials greatly enhanced his credibility as a testifying expert. Moreover, since Dr. Woodruff was expected to testify in court, his work product and involvement in the case were discoverable by the opposition.
After reviewing the expert report in preparation for pre-trial settlement negotiations the judge declared to the plaintiffs, "You have valid fraud claims, and if this goes to trial, you will win." The financial details of the subsequent settlement were kept confidential, even from the forensic accountants who worked as expert witnesses on the case.

Case 2: In 1996, a city manager in California's Contra Costa County became suspicious when a local disposal service company asked for help keeping itself afloat. Orinda-Moraga Disposal Services wanted to raise rates on its customers and needed the Contra Costa Sanitation District's approval. However, the company had recently stated its desire to lower rates. The wary city manager hired forensic accountant Dan Ray to uncover the truth.
After examining Orinda-Moraga's records, Ray discovered that the company sent checks to nonexistent people at several companies that had fake addresses. The disposal company's owner deposited the checks into an account. He had created these companies to illegally siphon money from Orinda-Moraga, and inflated its business costs to justify the rate increase. Ultimately, Orinda-Moraga's owner and his partner were found guilty in civil and criminal suits.

Use at least five quality academic resources in this assignment. Note: Wikipedia and other websites do not quality as academic resources. http://www.hgexperts.com/article.asp?id=22543 http://www.forensicsolutions.org/publications/EXPERT%20WITNESS%20ARTICLE%20JOFA%20Submission%20Revision.pdf

http://www.forensicaccounting.com

http://www.fbi.gov/news/stories/2012/march/forensic-accountants_030912/forensic-accountants_030912 http://www.aicpa.org/interestareas/forensicandvaluation/resources/practaidsguidance/downloadabledocuments/forensicaccountingresearchwhitepaper.pdf