| |
| |
| Preface | |
| |
| |
| Acknowledgements | |
| |
| |
| |
| Fraud: An Introduction | |
| |
| |
| Fraud: What Is It? Fraud: Prevalence, Impact, and Form | |
| |
| |
| Fraud in Historical Perspective | |
| |
| |
| Types of Fraud | |
| |
| |
| Root Causes of Fraud | |
| |
| |
| A Historical Account of the Auditor's Role | |
| |
| |
| Auditors Are Not Alone | |
| |
| |
| Deterrence, Auditing, and Investigation | |
| |
| |
| Conceptual Overview of the Fraud Deterrence Cycle | |
| |
| |
| First Look Inside the Fraud Deterrence Cycle | |
| |
| |
| Auditing and Investigation | |
| |
| |
| |
| Psychology of the Fraudster | |
| |
| |
| Calculating Criminals | |
| |
| |
| Situation-Dependent Criminals | |
| |
| |
| Power Brokers | |
| |
| |
| Fraudsters Do Not Intend to Harm | |
| |
| |
| Kinds of Rationalization | |
| |
| |
| Auditors' Need to Understand the Mind of the Fraudster | |
| |
| |
| Conclusion | |
| |
| |
| |
| The Roles of the Auditor and the Forensic Accounting Investigator | |
| |
| |
| The Patrolman and the Detective | |
| |
| |
| Complexity and Change | |
| |
| |
| Auditor Roles in Perspective | |
| |
| |
| Not All Good People | |
| |
| |
| Each Company Is Unique | |
| |
| |
| Role of Company Culture | |
| |
| |
| Estimates | |
| |
| |
| Choices | |
| |
| |
| What Auditors Do | |
| |
| |
| Bedrock of an Effective Audit | |
| |
| |
| SPADE | |
| |
| |
| Auditing Standards Take a Risk-Based Approach to Fraud | |
| |
| |
| Management Override | |
| |
| |
| Regulatory Reaction to Fraud | |
| |
| |
| Financial Benefits of Effective Fraud Management | |
| |
| |
| Conclusion | |
| |
| |
| |
| Auditor Responsibilities and the Law | |
| |
| |
| Appendix: Summary of PCAOB Matters Involving Detection of Fraud | |
| |
| |
| |
| When and Why to Call in Forensic Accounting Investigators | |
| |
| |
| Today's Auditors Are Not Forensic Accounting Investigators | |
| |
| |
| Auditors Are Not Authenticators | |
| |
| |
| Auditors Have Limited Exposure to Fraud | |
| |
| |
| Auditors Are Not Guarantors | |
| |
| |
| Historically, Audits May Have Been Predictable | |
| |
| |
| Potential Trigger Points of Fraud | |
| |
| |
| Reliance on Others | |
| |
| |
| Conclusion | |
| |
| |
| |
| Internal Audit: The Second Line of Defense | |
| |
| |
| What Do Internal Auditors Do? Internal Audit Scope of Services | |
| |
| |
| The Handoff to Forensic Accounting Investigators and Legal Counsel | |
| |
| |
| Perception Problem | |
| |
| |
| Complex Corporate Fraud and the Internal Audit | |
| |
| |
| WorldCom and the Thornburgh Report | |
| |
| |
| Case Studies: The Internal Auditor Addresses Fraud | |
| |
| |
| Reporting Relationships: A Key to Empowering Fraud Detection | |
| |
| |
| Tomorrow's Internal Auditor, Tomorrow's Management and Board | |
| |
| |
| |
| Teaming with Forensic Accounting Investigators | |
| |
| |
| Forensic Accounting Investigators' Cooperation with Internal Auditors | |
| |
| |
| Forensic Accounting Investigators' Cooperation with External Auditors | |
| |
| |
| Objectives of All Interested Parties | |
| |
| |
| How Should the Investigation Objectives Be Defined? Who Should Direct the Investigation and Why? Ready When Needed | |
| |
| |
| Where to Find Skilled Forensic Accounting Investigators | |
| |
| |
| |
| Anonymous Communications | |
| |
| |
| Typical Characteristics of Anonymous Tips | |
| |
| |
| Federal Statutes Related to Anonymous Reporting and Whistle-Blower Protections | |
| |
| |
| Receipt of an Anonymous Communication | |
| |
| |
| Initial Understanding of Allegations | |
| |
| |
| Determine Whether Any Allegation Requires Immediate Remedial Action | |
| |
| |
| Development and Implementation of the Investigative Strategy | |
| |
| |
| Disclosure Decisions | |
| |
| |
| Prioritize the Allegations | |
| |
| |
| Interviewing Employees | |
| |
| |
| Follow-Up Tip | |
| |
| |
| Conclusion | |
| |
| |
| |
| Personal Privacy and Public Disclosure | |
| |
| |
| Introduction | |
| |
| |
| Data Privacy: Providing Context | |
| |
| |
| Data Privacy in the United States | |
| |
| |
| Data Privacy in the European Union | |
| |
| |
| Navigating the Legal Differences Between the U.S and the EU | |
| |
| |
| Elsewhere around the Globe | |
| |
| |
| Public Disclosure | |
| |
| |
| Conclusion | |
| |
| |
| |
| Building a Case: Gathering and Documenting Evidence | |
| |
| |
| Critical Steps in Gathering Evidence | |
| |
| |
| Whose Evidence Is It? Evidence Created by the Forensic Accounting Investigator | |
| |
| |
| What Evidence Should Be Gathered? Important Considerations regarding Documents and Working Papers | |
| |
| |
| Conclusion | |
| |
| |
| |
| Independence, Objectivity, Skepticism | |
| |
| |
| Accountant's Independence | |
| |
| |
| SEC Final Rules for Strengthening Auditor Independence | |
| |
| |
| SEC Regulation of Forensic Accounting Services Consulting versus Attest Services | |
| |
| |
| Integrity and Objectivity | |
| |
| |
| Professional Skepticism | |
| |
| |
| Trust but Verify: A Case Study | |
| |
| |
| Loose-Thread Theory of Auditing | |
| |
| |
| Further Thoughts on the Loose-Thread Theory | |
| |
| |
| |
| Potential Missteps: Considerations When Fraud Is Suspected | |
| |
| |
| Confronting Suspects | |
| |
| |
| Dismissing the Target | |
| |
| |
| Assumptions | |
| |
| |
| The Small Stuff Could Be Important | |
| |
| |
| Materiality: More on a Key Topic | |
| |
| |
| Addressing Allegations | |
| |
| |
| The Case of the Central American General Manager | |
| |
| |
| Exercising Skepticism | |
| |
| |
| Case Outcomes | |
| |
| |
| |
| Potential Red Flags and Fraud Detection Techniques | |
| |
| |
| Types of Fraud Revisited | |
| |
| |
| Fraud Detection: Overview | |
| |
| |
| Laying a Foundation for Detection | |
| |
| |
| Interpreting Potential Red Flags | |
| |
| |
| Importance of Professional Skepticism | |
| |
| |
| Revisiting the Fraud Triangle | |
| |
| |
| Identifying and Evaluating Risk Factors | |
| |
| |
| Information Gathering | |
| |
| |
| Analytic Procedures | |
| |
| |
| Analytic Techniques | |
| |
| |
| Assessing the Potential Impact of Fraud Risk Factors | |
| |
| |
| Evaluating Controls | |
| |
| |
| Unpredictable Audit Tests | |
| |
| |
| Observation and Inspection | |
| |
| |
| Financial Statement Fraud: Detection Techniques | |
| |
| |
| Revenue Recognition | |
| |
| |
| Corruption | |
| |
| |
| Summary | |
| |
| |
| |
| Investigative Techniques | |
| |
| |
| Timing | |
| |
| |
| Communication | |
| |
| |
| Early Administrative Matters | |
| |
| |
| Predication | |
| |
| |
| What Should You Know before You Start? A Word about Insurance | |
| |
| |
| Exceptions and Other Considerations | |
| |
| |
| Considerations on International Assignments | |
| |
| |
| Accounting Issues | |
| |
| |
| Data Analysis | |
| |
| |
| Document Review | |
| |
| |
| Conclusion | |
| |
| |
| |
| Corporate Intelligence | |
| |
| |
| Definition of Corporate Intelligence | |
| |
| |
| Evolution of Corporate Intelligence | |
| |
| |
| Today's Business Need | |
| |
| |
| Legal and Regulatory Drivers of Corporate Intelligence | |
| |
| |
| Cost Drivers of Corporate Intelligence | |
| |
| |
| Negotiation Drivers of Corporate Intelligence | |
| |
| |
| Basic Deployment and Consumption of Corporate Intelligence | |
| |
| |
| Customary Data Fields Necessary to Fulfill Corporate Intelligence Remits | |
| |
| |
| Analysis and Reporting of Findings | |
| |
| |
| Coordination and Selection of Management and External Advisors for Intelligence-Gathering | |
| |
| |
| Timing of Deployment | |
| |
| |
| Limitations of and Inherent Barriers to Corporate Intelligence | |
| |
| |
| Legal Parameters and Operating Constraints vs | |
| |
| |
| Enabling Legislation | |
| |
| |
| Ethical Debates Surrounding Corporate Intelligence | |
| |
| |
| Summary | |
| |
| |
| |
| The Art of the Interview | |
| |
| |
| Difficulty and Value of Obtaining an Admission | |
| |
| |
| Planning for the Interview | |
| |
| |
| Types of Interviews | |
| |
| |
| Others May Wish to Attend Interviews | |
| |
| |
| Interview Process | |
| |
| |
| Documenting the Interview | |
| |
| |
| Use of Subterfuge | |
| |
| |
| Summary | |
| |
| |
| |
| Data Mining: Analysis of Structured and Unstructured Information | |
| |
| |
| Definition and Benefits of Data Mining | |
| |
| |
| Structured vs | |
| |
| |
| Unstructured Data | |
| |
| |
| Planning | |
| |
| |
| Methods of Data Acquisition | |
| |
| |
| Structured Data Analysis | |
| |
| |
| Unstructured Data | |
| |
| |
| Advanced Data Analysis Tools | |
| |
| |
| Conclusion | |
| |
| |
| |
| Report of Investigation | |
| |
| |
| Types of Reports | |
| |
| |
| Importance of Adequate Preparation | |
| |
| |
| Standards of Reporting | |
| |
| |
| Written Report of Expert Witness Opining for the Plaintiff on a Civil Fraud Claim | |
| |
| |
| Affidavits | |
| |
| |
| Informal Reports | |
| |
| |
| Giving a Deposition | |
| |
| |
| Mistakes to Avoid in Reporting | |
| |
| |
| Working Papers | |
| |
| |
| Relationship Review | |
| |
| |
| Substantive Working Papers | |
| |
| |
| Each Working Paper Should Stand on Its Own | |
| |
| |
| Testimony Binder | |
| |
| |
| Interview Memorandums | |
| |
| |
| |
| Supporting a Criminal Prosecution | |
| |
| |
| Key Considerations | |
| |
| |
| Referral Considerations | |
| |
| |
| Plea Agreements | |
| |
| |
| Filing a Civil Lawsuit | |
| |
| |
| |
| Working with Attorneys | |
| |
| |
| In the Company of Lawyers | |
| |
| |
| Confidentiality Requirements | |
| |
| |
| Forming the Investigative Team | |
| |
| |
| Documentation | |
| |
| |
| Civil Litigation | |
| |
| |
| Interviewing | |
| |
| |
| External Audit Firm | |
| |
| |
| Working for or Interacting with Law Enforcement or Government Agencies | |
| |
| |
| Disagreements with Counsel | |
| |
| |
| Conclusion | |
| |
| |
| |
| Financial Reporting Fraud and the Capital Markets | |
| |
| |
| Targets of Capital Market Fraud | |
| |
| |
| Securities Investment Model | |
| |
| |
| Some Observations on Financial Fraud | |
| |
| |
| Summary | |
| |
| |
| |
| Financial Statement Fraud: Revenue and Receivables | |
| |
| |
| Improper Revenue Recognition | |
| |
| |
| Revenue Recognition Detection Techniques | |
| |
| |
| Analytical Procedures to Identify or Explore Potential Revenue Red Flags | |
| |
| |
| Improper Allocation of Value in Multiple-Element Revenue Arrangements | |
| |
| |
| Improper Accounting for Construction Contracts | |
| |
| |
| Related-Party Transactions | |
| |
| |
| Revenue and Receivable Misappropriation | |
| |
| |
| Inflating the Value of Receivables | |
| |
| |
| Extended Procedures | |
| |
| |
| Round-Tripping | |
| |
| |
| Improperly Holding Open the Books | |
| |
| |
| Consignments and Demonstration Goods | |
| |
| |
| Summary | |
| |
| |
| |
| Financial Statement Fraud: Other Schemes and Misappropriations | |
| |
| |
| Asset Misstatements | |
| |
| |
| Understatement of Liabilities and Expenses | |
| |
| |
| Backdating Share Options | |
| |
| |
| Off-Balance-Sheet Transactions | |
| |
| |
| Two Basic Accounting Models | |
| |
| |
| Cookie Jar Reserves | |
| |
| |
| Improper and Inadequate Disclosures | |
| |
| |
| Materiality | |
| |
| |
| Disbursement Schemes | |
| |
| |
| Invoice Schemes | |
| |
| |
| Check Tampering | |
| |
| |
| Expense Reimbursement Schemes | |
| |
| |
| Payroll Schemes | |
| |
| |
| Fraud in an Economic Downturn | |
| |
| |
| Unauthorized Trading | |
| |
| |
| Mortgage Fraud | |
| |
| |
| |
| Ponzi Schemes | |
| |
| |
| Ponzi Scheme Origin and Development | |
| |
| |
| Recent Spotlights | |
| |
| |
| Insights into Ponzi Schemes - Passing Trend or Lasting Reality? Accountant's Challenges | |
| |
| |
| Regulatory Bodies and Task Forces | |
| |
| |
| Bankruptcy Implications | |
| |
| |
| Summary | |
| |
| |
| |
| Money Laundering | |
| |
| |
| Relationship between Fraud and Money Laundering | |
| |
| |
| Counter-Terrorist Financing | |
| |
| |
| Varying Impact of Money Laundering on Companies | |
| |
| |
| The Five-Point Program for AML-Regulated Businesses | |
| |
| |
| AML and Forensic Accounting Investigation | |
| |
| |
| Legal Arrangements Lending Themselves to Anonymity | |
| |
| |
| Auditing and Money Laundering | |
| |
| |
| Relationship between Fraud Investigation and AML | |
| |
| |
| |
| Foreign Corrupt Practices Act | |
| |
| |
| Background | |
| |
| |
| Recent Enforcement Trends | |
| |
| |
| U.K. Bribery Act 2010 | |
| |
| |
| The Role of the Forensic Accountant | |
| |
| |
| Red Flags | |
| |
| |
| Reporting | |
| |
| |
| Conclusion | |
| |
| |
| |
| Construction Projects | |
| |
| |
| The Nature of the Construction Industry | |
| |
| |
| Contract Pricing Strategy | |
| |
| |
| Standard Form Contracts | |
| |
| |
| Issues in Analysis | |
| |
| |
| Change Orders | |
| |
| |
| Financial Damages | |
| |
| |
| Under-Bid | |
| |
| |
| Inflation | |
| |
| |
| Analysis of Claims | |
| |
| |
| Summary | |
| |
| |
| |
| Contract Compliance | |
| |
| |
| Effective Integrated Internal and External Contract Compliance Program | |
| |
| |
| The Role of the Forensic Accountant | |
| |
| |
| Government Contracting | |
| |
| |
| Risk and Compliance | |
| |
| |
| Recovery | |
| |
| |
| Crisis Management/Litigation Support | |
| |
| |
| |
| Other Dimensions of Forensic Accounting | |
| |
| |
| Environmental Issues | |
| |
| |
| Intellectual Property | |
| |
| |
| Insurance and Business Interruption | |
| |
| |
| Marital Dissolution | |
| |
| |
| Shareholder Litigation | |
| |
| |
| Business Valuation | |
| |
| |
| Business Combinations | |
| |
| |
| Cybercrime | |
| |
| |
| |
| Corporate Remediation | |
| |
| |
| What is Remediation? | |
| |
| |
| What is Driving Corporate Remediation? | |
| |
| |
| Why is Remediation Necessary? | |
| |
| |
| How to Remediate | |
| |
| |
| Role of the Forensic Accountant | |
| |
| |
| Recent Cases | |
| |
| |
| Remediation Going Forward | |
| |
| |
| Index. | |