skills that a forensic accountant needs to possess and evaluate the need for each skill.
Over the last several years, the role of forensic accountants has been continually evolving. This is because there have been a number of cases surrounding their ability to identify and prevent possible frauds. As a result, various skills must be utilized in the process that will help to improve the effectiveness of actuaries. These include: good communication, the ability to work well with others, determination, the ability to simplify information and investigative intuitiveness. The combination of these factors is allowing forensic accounts to identify and detect possible fraud. When this happens, the negative impact of these activities can be limited. (Davis, 2011)
Good communication is an important skill because it requires talking with different parties during the process of conducting any kind of investigation. This means collaborating on various ideas and identifying potential red flags. The most effective way to do this is to have open channels of communication. This is when various individuals inside the firm will share with you their knowledge about a host of issues. (Davis, 2011)
The ability to work well with others requires that all forensic accountants serve the role of team member and leader. This is when they are capable of following orders and focusing on helping everyone to reach the larger objectives of the investigation. At the same time, they are taking the lead in looking for possible abuses and insiders (who can help them). When this occurs, they can use this information to advance the inquiry forward. (Davis, 2011)
Determination is when the individual must not let obstacles or frustrations interfere with their investigation. This is because the process is often looking into the activities of powerful and respected individuals. As this is occurring, many people around them will try to frustrate their efforts. When this happens, it is important to keep a certain amount of resolve to overcome these challenges. (Davis, 2011)
The ability to simplify information is when actuaries can take complicated pieces of data and understand what is taking place. This requires having the patience, persistence and knowledge to unravel any kind of fraud. Once this occurs, is the point that they can piece together how various events unfolded and who is responsible. This information can be forwarded onto regulators and prosecutors (who will conduct their own inquiry). (Davis, 2011)
Investigative intuitiveness is when forensics accounts can sense when something is wrong. This is because there are certain red flags that are raising suspicions about potential fraudulent activity. For investigators, these kinds of issues should increase their concerns. When this happens, they can be able to identify and prevent illicit schemes (while they are small). This is the point that investors, employees and other stakeholders will be protected against these kinds of actions. (Davis, 2011)
The combination of these skills will ensure that the operations the firm is following accepted industry practices. This is when they can be able to use them to increase the underlying amounts of transparency. For large firms, this will improve the confidence that stakeholders have in the management's ability to achieve a host of objectives. Once this happens, is when the economy is growing through periods of expansion (with the firm increasing their operations). This requires using resources from the local economy and it is creating of new jobs. (Davis, 2011)
Describe the role of a forensic accountant within a courtroom environment.
Forensic accountants are focused on helping both the plaintiff and defendant to support their cases. This is because they have the expertise to illustrate where potential losses occurred based upon a host of disputes. The most notable include: insider trading, corporate fraud, intellectual property rights / copyright infringement and insurance fraud. (Greier, 2004)
Yet, underneath it all, forensic accounts are focused on three critical areas to include:
Assessing damages: During the process of conducting any kind of investigation, is when these individuals can provide an accurate assessment of the losses. This is where they will demonstrate the impact that these activities are having on the cliental they are working with. (Greier, 2004)
To provide expert witness testimony: During any kind of legal proceedings, forensic accounts have the ability to support or refute the different theories that are introduced. At the same time, they can use their knowledge to introduce theories of their own. This is when they will strengthen the case of their client (based upon the opinions and views that are expressed). (Greier, 2004)
To communicate effectively with different stakeholders: In the courtroom, the forensic accountant has the responsibility for communicating with the judge, legal counsel and the jury. During this process, they will serve a role of translator by helping everyone to understand the key facts and figures. This is when they help to support the claims made by their client. (Greier, 2004)
These factors are illustrating how forensic accountants are playing a vital role in legal proceedings. When this happens, they can be able to use their insights to explain the events that unfolded. This supports the case by utilizing these ideas to show how some kind potential abuses may or may not have occurred. (Greier, 2004)
Analyze the legal responsibility a forensic accountant has while providing service to a business.
Forensic accountants have a legal responsibility to protect the interests of stakeholders at all times. This is because they are considered to be the independent investigator of the firm and the activities it is involved in. When they do not report potential violations, this is a breach of their fiduciary responsibility. (Ramaswamy, 2005) ("Forensic Accountants," 2010)
Moreover, various laws (such as the Sarbanes-Oxley Act) require that these individuals share what they know with regulators. To encourage someone to come forward, there is a provision that protects whistleblowers, which have information they want to provide to investigators. This is the point that the interests of the public will be taken into account vs. those of owners / executives. (Ramaswamy, 2005) ("Forensic Accountants," 2010)
As a result, a forensic accountant is conducting any kind of investigation that will have an effect on them putting the interest of stakeholders first. This means that they are looking at different financial records and possible discrepancies (to determine if there are potential red flags that must be reported). Once this takes place, is when they have a legal obligation to convey these finding to regulators. (Ramaswamy, 2005) ("Forensic Accountants," 2010)
Research two (2) 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.
The first case involves Bernard Madoff. What happened is in 2008, he revealed that he had been running one of the largest Ponzi schemes ever. This when investors will deliver funds to someone who they perceive is a legitimate money manager. To keep the con going, there are larger returns that are provided to early investors (from some of the funds that are collected by the later ones). The situation with Madoff was so disturbing, because he was a respected member of the Wall Street community and had a larger number of high profile clients. (Lile, 2011) ("Forensic Accountants," 2009)
Once it was announced what was occurring, is when there was a sense of confusion among surprised regulators and clients. To investigate and recover funds, a trustee was appointed. His job is to identify who benefited from the fraud and go after them financially. To achieve these objectives, forensic accountants were hired to recreate previous financial statements. (Lile, 2011) ("Forensic Accountants," 2009)
This is providing them with specific insights about where the money went and who were the benefactors. Once this occurred, is the point they moved aggressively after these assets in court. This resulted in the trustee recovering a large number of funds (in order to satisfy some of the claims of the victims). Forensic accounts were vital in helping to determine where the money went and the location of these assets. This helped the trustee to focus his investigation on those areas that can produce the most effective results for the victims. (Lile, 2011) ("Forensic Accountants," 2009)
In this aspect, forensic accountants played an integral part in helping to show what factors allowed the fraud to continue for so long. At the same time, they provide a guide as to who benefited from Madoff's activities and where these assets were located. This helped investigators to go after and recover funds from these individuals. Over the course of time, this is allowing them to give something back to the victims (with $9 billion collected so far). (Lile, 2011) ("Forensic Accountants," 2009)
The second case involves Allen Stanford. He was a respected member of the international banking community, who was known for his philanthropy efforts. However, in 2009 it was revealed that he was the mastermind behind a $7 billion fraud. This involved him establishing a Ponzi scheme to hide any kind of potential losses from investors. (Wright, 2011)…