Articles

Forensic Accounting

Does the thought of examining a crime scene make your heart race? Would finding clues and collecting evidence about how a crime was committed get the adrenaline going? Are you an amateur sleuth? Perhaps you just love watching criminal drama shows like CSI and Forensics Files on TV. Well, I’m sure you’d be surprised to learn that these are some of the qualities required of today’s Forensic Account.

You don’t need to be a real detective to see the potential dangers lurking within the current economic downturn. A miserable housing market and a roller-coaster stock market is fertile ground for potential criminal activities. Let’s not forget the debacles of organizations like Enron and Adelphia Communications. Just in case you need additional evidence of the poor condition of the economy, you need to look no further than the     2008 – 2009 Long Island Economic Survey and Opinion poll of Long Island businesses. The poll, conducted by Albrecht, Viggiano, Zureck & Company PC, Long Island Business News and Dowling College, shows that the confidence rating in our economy is the lowest it has been in the fifteen years the survey has been conducted. 84% of Long Islanders feel we are in a recession and most believe it will last more than a year. The economic pressures on today’s corporate executives are severe as more companies are facing bankruptcy and layoffs. Careers and reputations are at stake and this can lead to an atmosphere of “do whatever it takes” to maintain performance levels, even if that means committing criminal acts.

These criminal acts usually fall under the category of White Collar crime. Though it is often misidentified as a “victimless” crime, White Collar crime is one of significant costs. According to the FBI, White Collar Crime in the United States alone amounts to more than $300 billion annually. The term today generally applies to an assortment of nonviolent crimes usually committed in business situations for financial gain. White Collar offenses include: tax evasion, securities fraud, insider trading, insurance fraud, bribery, money laundering, embezzlement and antitrust violations to name a few. Not all these crimes need to be committed at the office. Computer and Internet fraud, credit card fraud, bankruptcy fraud, healthcare fraud, government fraud can all be perpetrated from the comfort of home.

Enter the investigating forensic accountant. When AVZ conducts forensic audits, we are actively searching for signs of criminal activity. Forensic accountants detect and interpret evidence of both normal and fraudulent accounting introduced into the records of a company’s accounting system and the resultant effect upon the accounts, inventories, and reports thereof. In addition to examining financial statements to determine whether they are accurate and complete, they will request internal organizational databases and records. Because people committing fraud have used their own business skills and acumen to disguise their crimes, forensic accountants must look beyond the numbers and anticipate criminal actions. In addition to accounting expertise, the Forensic accountant must possess a shrewdness to detect subtle clues or suspicious activities that may eventually lead them to the perpetrator.

In addition to their investigative responsibilities, forensic accountants provide litigation support for legal proceedings. Local law enforcement, the FBI and law firms engage the services of forensic accountants to review existing documentation and testimony and explain their financial significance. Forensic accountants will assist in the preparation of pleadings, responses, interrogatories, exhibits, depositions, and direct and cross examinations. A forensic accountant can tell the attorney what additional information may be needed to prove the case and what questions to ask of witnesses. The forensic accountant may also review damage reports and state whether the report was put together accurately and supports the case.

Not all of the techniques used in forensic investigations require a high-tech background and computer savvy. Good people skills, especially the ability to ask the right questions like a good detective, can make or break a case. Gathering evidence and using forensic accounting techniques to follow the paper trail means detecting the subtle clues in a financial sheet. These clues may include new cars, numerous vacations and starting additional businesses without other visible sources of capital. Your detective work will require “out of the accounting box” thinking to ask questions that will allow the investigation to evolve, and innovation in deciding what needs to be done to bring the investigation to a successful close.

If your business is in need of a forensic checkup, be sure to hire an accounting firm with ample experience in this field.