Forensic Accounting in Practice Twana Bethea
BUS 508
May 21, 2013
Dr. Phyllis Praise

Abstract
Forensic Accounting is the application of the skills and training of a chartered accountant to disputes and investigations. Fraud is usually hidden in the accounting systems of organizations and that’s where forensic accountants play a critical role. Forensic accountants are contacted by companies when they need to figure out where a fraud was committed in their company. The accountants interview witnesses, analyze evidence such as email traffic between all parties involved. They will also freeze bank accounts if needed. They are hired to find out what happen and who was involved. If the case goes to trial they can be called to testify. The key skill of the forensic accountant is communicating complex financial transaction or data in a concise manner using images, graphs and languages that can be easily understood by non-accountants, the judiciary, and juries. With the growing complexity of business related investigations, Forensic Accounting professionals are increasing and the need is as well for investigations of business and financial issues.

Forensic Accounting Practices
Forensic Accounting has been in exist for many years, today there have been an increase in the need for this type of profession. Forensic accounting is the practice of integration of accounting, auditing and investigative skills. The accountings provide a court with an accounting analysis on the basis for discussion, debate, and dispute resolution. They are trained to look beyond the numbers and deal with the reality of the situation. Most accountants work in major accounting firms and are needed for investigating mergers and acquisitions, and in tax investigations, economic crime investigations, all kinds of civil litigation support, specialized audits, and even in terrorist investigations.
A Forensic accountant must have an open mind and consider all alternatives, scrutinize the details and see the scope of things. They also must be able to listen effectively and communicate clearly and concisely. Being able to simplify information helps their investigative ability to synthesize the results of their discovery. The characteristics of curiosity, persistence, creativity, discretion, organization, confidence, and sound professional judgment should be posse by a forensic accountant. A forensic accountant is certified in Public Accountant and Fraud Examiner. Fundamental forensic knowledge includes: * Professional responsibilities and practice management * Laws, courts and dispute resolution * Planning and preparation * Information gathering and preservation * Discovery * Reporting, experts and testimony

The education and training of forensic accountants is affected by an understanding of the underlying essential traits, characteristics and core skills appropriate or necessary for the field. The accountant must be analytical, this is critical to the forensic accountant’s ability to provide value –added services in engagements that involve or call for more than just auditing skills and problem solving abilities. Another skill would be intuitive, intuition and judgment may reflect the knowledge and accountant has. The perception of a forensic accountant is similar to a detective. Interpersonal skills are important but problem solving skills is important to the success of an accountant. Communication skills must also play an important factor in the success of a forensic accountant. This skill is very important when representing verbally a position in a court of law. They must also posse written communication because this is also relevant in court of law and with preparing reports, documentations, and submission to the court in regards to a case. This country’s court system has evolved over the years as the venue where most business disputes, claims, or conflicts can be settled. In the courtroom the expert witness must use technical skills necessary to document a position, and the personal traits to present and defend successfully that position from a potentially hostile environment. While the expert witness attempts to interpret a set of facts in a manner that is beneficial to his or her client; honesty, objectivity and fairness must be paramount in his or her thought process.
Forensic accountants become experts in the detection, prevention and deterrence of fraud and are often called upon to testify in a court of law with respect to: * Criminal activities engaged by perpetrators * Fraudulent financial transaction * Calculating and quantifying losses and economic damages * Disagreements relating to company acquisitions * Business valuations
He or she may be hired by an attorney to investigate the financial trail of persons suspected of engaging in criminal activity. Information provided by the accountant maybe used to obtain a conviction in a court of law. They also maybe engaged in bankruptcy court when submitted information may contain information about an employee suspected of taking assets. In addition they maybe called to testify in court as an expert witness and assist in the preparation of written summaries in court. Knowledgeable litigators understand that forensic accountants can be among the most important witnesses to take the stand, especially in high-stakes, complex litigations.
Forensic accounting encompasses 2 main areas in litigation support, investigation, and dispute resolution. Litigation support represents the factual presentation of economic issues related to existing or pending litigation. In this capacity, the forensic accounting professional quantifies damages sustained by parties involved in legal disputes and can assist in resolving disputes, even before they reach the courtroom.
Investigation is the act of determining whether criminal matters such as employee theft, securities fraud, identity theft, and insurance fraud have occurred. He or she may recommend actions that can be taken to minimize future risk of loss. They like to grasp the substance of the situation.
Recent major corporate scandals have prompted business owners to turn to Forensic Accountants for proactive fraud check-ups. These specialists are looking for financial statement fraud or theft of assets. To uncover financial statement fraud, the forensic accountant often analyzes the financial statements by using ratio analysis and certain data-mining techniques such as Benford’s Law, a procedure used to determine that data has been altered.
Occupational fraud committed by employees usually involves the theft of assets. Embezzlement is the fraud that has been often committed for the last 30 years. The forensic accountant couples observation of the suspected employees with physical examination of assets, invigilation, inspection of documents, and interviews of those involved.
In a recent dispute between high-tech companies, a forensic accountant confronted an allegation that one party had fraudulently breached an agreement to jointly develop certain products. The major issue was if the plaintiff had the financial capability to fulfill its end of the bargain. After a through look at the plaintiffs finances, creditworthiness, and attempt to obtain funding, the forensic accountant was able to credibly testify that the firm lack the resources needed to perform its obligations. (Tucker, 2011)
In 1996, a city manager in California Contra Costa County became suspicious when a local disposal service company asked for help keeping afloat. The local company wanted to raise customer rates and needed approval. The company had recently stated that they wanted to lower rates. The city manager hired a forensic accountant to uncover the truth. After examining it was found that there was illegally siphoning money from the disposal company and inflated the business cost to justify the rate increase.
In 1997, Sunbeam, a company that manufactures small appliances, followed a practice called bill and fold. On paper the company appeared to have high sales; however the products where in the warehouse and never shipped out. Shareholders felt deceived and filed a lawsuit, because the company’s auditor said everything was fine when he or she conducted an audit. A forensic accountant came in and found that the numbers were manipulated. The Securities and Exchange Commission investigated the Sunbeam. The CEO was terminated and forced to pay millions to settle investment laws.
One part of business where crime is increasing is in Finance. Financial misconduct is the single most damaging type of crime in business. The examples of this would be Enron Corporation and WorldCom incorporated. Only when a forensic team came in, the company was able to remove and prosecute their offenders.
All business managers should have a working knowledge of Forensic Accounting because financial misconduct could strike a business and the consequences could affect all areas of a business. Many businesses have gone out of business because of poor and dishonest bookkeeping. Forensic accounting is more than accounting and detective work. The modern day Forensic Accountant is a lawyer, accountant, and investigator.

Reference
Freeman,S. (n.a.). How Forensic Accounting Works. Retrieved from science.howstuffworks.com
Forensic Accounting Information. Retrieved from www.forensic-accounting-information.com
Mercer,M.(2010).Five Golden Rules in the courtroom for a Forensic Accountant.
The Basic of Forensic Accounting for business managers. Retrieved from www.essortment.com
Tucker,A.(2011). The Numbers Tell a Story. Retrieved from www.callawyer.com