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Forensic Accountants as Fraud Buggers - Case Study Example

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This paper presents analytical analysis of the skills that a forensic accountant needs to posses for effectiveness in meeting the obligations of this profession. The paper also elaborates on the roles that a forensic accountant is mandated to play in courtroom proceedings involving accounting cases such as fraud and embezzlement of resources…
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Forensic Accountants as Fraud Buggers
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? Forensic Accountants as Fraud Buggers Forensic Accountants as Fraud Buggers Introduction A forensic accountant is a significant individual who applies techniques and concepts in accounting within legal problems related to accounting. This paper presents analytical analysis of the skills that a forensic accountant needs to posses for effectiveness in meeting the obligations of this profession. The paper also elaborates on the roles that a forensic accountant is mandated to play in courtroom proceedings involving accounting cases such as fraud and embezzlement of resources. Furthermore, this paper gives a description of the legal responsibilities of forensic accountants within business organizations or companies. More importantly, the paper illustrates forensic accounting by the use of two forensic accounting cases in which forensic accountants were involved in demonstrating accounting problems within companies. Important Skills of a Forensic Accountant A forensic accountant must be equipped with investigative skills. These skills are important in gathering, evaluating and analyzing accounting data and audited information from business organizations (Ramaswamy, 2010). It is through these skills that a forensic accountant will be able to determine possible discrepancies and loopholes within audited accounting data and information (Carnes & Gierlasinski, 2001; DiGabriele, 2008). The effectiveness of a forensic accountant is measured by the ability to apply investigative skills to interpret accounting information and financial evidence to back misappropriation of resources within a business organization or company (Fleming, Pearson, Riley & Richard, 2008). Fraudsters within companies and business organizations often devise methods of embezzlement or fraud that are hard to detect. It is in this regard that a forensic accountant must have effective investigative skills to detect accounting problems which would not be determined by ordinary auditing and accounting approaches (Bawaneh, 2011). Investigative skills also allow a forensic accountant to adhere to the ethics and regulations that govern investigations of criminal cases. Computing or technical skills are required for an effective forensic accountant. This is due to the fact that contemporary companies and business environments have adopted and implemented information technology methods in accounting and finance (Fleming, Pearson, Riley & Richard, 2008). Through computing skills, a forensic accountant is able to retrieve, analyzed and report financial evidence in electronic formats (Topping, 2008). More importantly a forensic accountant must be able to apply computer software and applications and other computer assisted tools to detect fraud or embezzlement of resources within companies (Fleming, Pearson, Riley & Richard, 2008). Modern business organizations are characterized by what is referred to as white collar crime in which technology is used to defraud or embezzle resources and hide evidence. It is in this sense that computing skills of a forensic accountant become significant (Carnes & Gierlasinski, 2001). Litigation skills area also required for effective forensic accountants. These skills are significant in the role of a forensic accountant as an arbitrator or mediator in legal accounting problems. These skills are also important because they enable forensic accountants to be effective experts and credible consultants who could be used by companies to detect and report fraud or embezzlement of resources. Through litigation skills, forensic accountants are able to evaluate damages and losses and find ways of resolving disputes among the disputants (Topping, 2008). Other important skills of a forensic accountant include analytical and forensic skills. Effective forensic accountants must have analytical skills that will empower them to determine the importance of the gathered financial evidence in reporting fraud (DiGabriele, 2008). Through analytical skills, forensic accountants analyze and professionally report accounting and financial crimes to the relevant authorities for legal action against those involved (Fleming, Pearson, Riley & Richard, 2008). More importantly, forensic accountants must have forensic skills. These skills involve ability to understand the professional and organizational responsibilities which emanate from cases of financial crime within companies or business environments (Bawaneh, 2011; Carnes & Gierlasinski, 2001). Moreover, forensic skills are crucial for forensic accountants because they define their ability to plan, prepare, discover report and testify on financial crimes in an effective and professional manner (Ramaswamy, 2010). Role of Forensic Accountants in Court Room Proceedings Within court rooms, forensic accountants are obliged to apply their skills and knowledge effectively in executing their responsibilities during court proceedings on cases of financial crime (DiGabriele, 2008). The most important role of forensic accountants within the court room is to present evidence on financial crime (Fleming, Pearson, Riley & Richard, 2008). This means that a forensic accountant must be able to demonstrate to the court the adequacy or sufficiency of financial evidence in determining whether there was financial crime within the company or organization being investigated (Topping, 2008). In this regard, credibility and authenticity of financial evidence must be demonstrated by the forensic accountant before a verdict is reached by the court. Moreover, forensic accountants act as expert witnesses within the courtroom (Fleming, Pearson, Riley & Richard, 2008). Furthermore forensic accountants recommend other witnesses and hence assist attorneys in the identification of witnesses. Therefore the role of a forensic accountant within the courtroom enables the court to reach a verdict that is beyond any form of doubt (Carnes & Gierlasinski, 2001). Legal Responsibilities of Forensic Accountants in Business Organizations Forensic accountants play various legal responsibilities within business organizations. These responsibilities include appraisal of financial information within the organization with a view of determining possible cases of fraud or embezzlement (Ramaswamy, 2010). Moreover, forensic accountants play a legal role of being unbiased in the summarizing and presentation of financial data and information in cases of suspected financial crime (Fleming, Pearson, Riley & Richard, 2008). More significantly, forensic accountants are obliged to utilize their skills and knowledge effectively within the legal system while adhering to the applicable rules and ethics of professional conduct (Topping, 2008). Furthermore, forensic accountants play a role of investigating financial information and evaluating for legal action. In this regard, it is the responsibility or the forensic accountant to present findings on financial crime within organizations to the relevant authorities such as the police department, courts and investigative agencies (Bawaneh, 2011). Financial crime within organizations is often faced with legal opposition from those accused of possible fraud or embezzlement of funds. In this sense, apparent that it is the forensic accountant’s legal responsibility to comment and provide expert opinions on the assertions and allegations of the opposing parties during a financial crime investigations (Carnes & Gierlasinski, 2001). In relation to this is the legal responsibility of the forensic accountant to ensure that a business organization company is able to disclose financial crime and present it to the legal system for prosecution of the parties involved. Therefore forensic accountants are endorsed with the responsibility of helping organizations to successfully pursue justice. Through the legal responsibilities, organizations are able to prevent financial crimes for the fear of the legal consequences. It is therefore arguable that forensic accountants play a legal responsibility of preventing organizations from fraud and embezzlement of funds. Forensic Accounting Cases and Fraud Enron and WorldCom are two significant cases in which company executives were involved in financial fraud which was later disclosed through effective forensic accounting. In these two companies, the top executives exaggerated the financial statements of the companies with an aim of concealing the fraud that they had staged against the investments of the shareholders (Carnes & Gierlasinski, 2001). These companies went against the legal provisions of the financial reporting and auditing. This was due to the fact the executives of these companies allocated themselves huge compensations and concealed them through exaggerated figures within the financial records. It took effective application of forensic accounting skills and knowledge to analyze and identify the fraud that was going on within these companies. These cases reveal that forensic accountants are mandated to play the role of saving companies from fraud and failure. More significantly, the cases of Enron and WorldCom demonstrate that it is through the roles of forensic accountants that the shareholders and investors of companies are prevented from the financial loss which emanates from fraud and embezzlement of funds by the executives of the company (Bawaneh, 2011; Fleming, Pearson, Riley & Richard, 2008) The Enron and WorldCom cases were characterized by violation of ethics of financial auditing. This is due to the fact that the auditing firms which reviewed the financial records of the companies were not independent or professional. This is because they failed to report evident fraud within the companies in return for huge auditing fees and compensation. It is through these cases that it is evident that financial fraud within companied could be hard to detect especially when there is lack of credibility and independence of the auditor as provident by the law. Therefore it is becomes important for forensic accountants to employ their skills and knowledge effectively in investigating financial auditing records with a view of determining their credibility and possible concealment of fraud by the auditing report. Conclusion In the light of the above discussions and case illustrations, it is therefore evident that forensic accountants are important personalities within organizations and legal systems. This is due to their role in analysis, appraisal and reporting possible cases of fraud within organizations. In order for this to be possible, forensic accountants are mandated to effectively serve their legal and professional duties through application of relevant knowledge and skills for attainment of justice and prevention of future cases of fraud. References Bawaneh, S. S. (2011). Forensic Accountants in the Digital Age. Interdisciplinary Journal of Contemporary Research in Business, 3(3), 75-86 Carnes, K. C., & Gierlasinski, N. J. (2001). Forensic accounting skills: Will supply finally catch up to demand? Managerial Auditing Journal, 16(6), 378-382 DiGabriele, J. A. (2008). An empirical investigation of the relevant skills of forensic accountants. Journal of Education for Business, 83(6), 331-338. Fleming, A. S., Pearson, T. A., & Riley, Richard A., (2008). West Virginia University: Forensic accounting and fraud investigation (FAFI). Issues in Accounting Education, 23(4), 573-580. Ramaswamy, V. (2010). Corporate Governance and the Forensic Accountant. CPA Journal, 75(3), 68-70. Topping, M. (2008). Litigation and the role of the forensic accountant. Credit Control, 29(2), 4-8. Read More
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