In this paper, we are going to be looking at different practices utilized in forensic accounting. This will be accomplished by focusing on: five skills a forensic accountant needs to possess, their role, legal responsibilities and two cases. Once this occurs, is when we demonstrate the current and future responsibility of professionals inside the world of corporate finance.
Forensic Accounting in Practice
Over the last several years, forensic accounting has been playing an important part in helping to detect and prevent fraud. This was in response to a number of high profile cases involving a host of abuses. To fully understand the role of the industry in achieving these objectives requires focusing on: five skills a forensic accountant needs to possess, their function, legal responsibilities and two cases. Together, these different elements will illustrate the significance of forensic accounting in mitigating potential risks and enhancing transparency. (Riley, 2011)
Determine the most important five (5) skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations.
The five different skills that a forensic accountant must possess include: auditing, finance, research, understanding select areas of law and investigative techniques. In the case of auditing, these tactics must be used to carefully examine a corporation's records. This helps to prevent and detect fraud. These tools will ensure that a firm is efficiently operating its business by reducing illegal activities and increasing transparency. (Pedneault, 2012)
Finance is when actuaries are carefully tracking where the money is being spent. In any firm, this will highlight potential red flags. As this allows them to monitor and determine where all the funds are going. This relates to the operation of a corporation, by establishing procedures for detecting when this is happening. As far as research is concerned, these individuals must have the ability to dig through the most mundane pieces data. This provides actuaries with a track record of all activities. These practices can be used to help improve a firm's operations by providing it with the personnel who will find these facts. (Pedneault, 2012)
Understanding select areas of law are when accountants must identify if illegal activity is occurring. This requires knowing different financial regulations and how they apply to the firm. These areas will focus the direction of the investigation. This improves a business's operations by keeping executives in compliance with all regulations and determining when someone has breached them. (Pedneault, 2012)
Investigative techniques are when actuaries know how to examine, gather and look for evidence. This means studying various sources of data in the process. These skills help to identify areas where wrongdoing was committed. This assists firms in quickly realizing when they have a problem and go after the root causes. In the future, this prevents fraudulent activities from spreading. (Pedneault, 2012)
Describe the role of a forensic accountant within a courtroom environment.
In a courtroom, the forensic accountant has a responsibility of showing where the fraud occurred in plain English. This means laying out for the jury and the judge the role of different parties and how this contributed to illegal activities. It is at this point when everyone can understand the full context of the case. (Singleton, 2010) (Golden, 2011)
Analyze the legal responsibility a forensic accountant has while providing service to a business.
The legal responsibility of a forensic accountant is to determine when fraudulent activities have taken place and report them to stakeholders. Moreover, they play a role in establishing different safeguards which are preventing this from happening. The combination of these factors, is illustrating how they are at the forefront of protecting the accuracy of the financial information provided by the firm and its practices. (Singleton, 2010) (Golden, 2011)
Research two (2) cases where forensics accountants have provided vital evidence in a case. Summarize the cases and the importance of the forensic accountant's role during each case.
Two cases where forensic accountants have provided crucial evidence are with Enron and the Bernard Madoff scandals. In the case of Enron, no one knew who was responsible or the role of different individuals. This was shocking as the company had reported false information about their earnings and it was the 6th largest corporation in America (based upon market share). Forensic accountants played a role in determining where the fraud took place and the perpetrators. This led to the convictions of Ken Lay, Andrew Fastow and Jeff Skilling. (Fox, 2004)
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