Forensic Accounting Topics and Issues


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  • CFFA through NACVA (National Association of Certified Valuation Analysts).CFE is through the Association of Certified Fraud Examiners.
  • Forensic Accounting Topics and Issues

    1. 1. FORENSIC ACCOUNTINGAND VALUATION (FVS)SERVICESApril 12, 2012Zachary Reichenbach, CPAWilliam O’Donnell
    2. 2. Overview• Background on Ellin & Tucker, Chartered• Overview of Forensic and Valuation Services • Forensic Accounting • Litigation and Business Valuation• How to Get Into FVS• Our Backgrounds and Experiences• Questions
    3. 3. Who are we? • Mid-Atlantic regional firm established in 1946 • Over 65 years of service • More than 100 employees • Four locations • Headquartered in Baltimore Baltimore Washington, DC Frederick Belcamp 3
    4. 4. What services do we provide?• Services • Industries • Accounting and Auditing • Automotive • Bankruptcy • Construction • Business & Management • Employee Benefit Plans Consulting • Health Care • Business Valuation • Hi-tech/Biotech • Damages & Litigation • Law Firms • Forensic Accounting & • Manufacturing Fraud Investigation • Non-Profits • Mergers & Acquisitions • Professional Services • Tax Service • Printing • Private Investment Funds • Real Estate • Retail • Wholesale Distributions
    5. 5. The Forensic and Valuation Services Group:• Advices clients and provides expert testimony in domestic and international litigation matters • Cases have involved significant damage amounts• Performs numerous investigations of national and international investment schemes, bank embezzlements and fraud in a variety of industries• Analyzes complex financial transactions providing counsel, partnerships and other business entities with the answers they need to resolve legal, regulatory and general business disputes• Respond timely and communicate financial information clearly and concisely in a courtroom setting
    6. 6. Typical FVS Casework FraudBusiness Investigation/ DomesticValuations Examination Disputes Damages OtherSale Deception Hidden Assets Commercial Loss fromPurchase Intentional Hidden Income Patent Shutdown ofShareholder Manipulation of Infringement Business Disputes Records Personal Injury Operations Wrongful Fire losses Death Misappropriation Wrongful of Funds Termination Breach of Contracts Transaction Analysis Asset Tracing over Time 6
    7. 7. Who engages the FVS Group?• Public and Private Entities• US and International• Attorneys• CPA Firms• Banking Institutions• Trust and Wealth Managers• Insurance Companies• Government and Law Enforcement Agencies
    8. 8. Forensic Accounting
    9. 9. Definition of Forensic Accounting• The term Forensic Accountant refers to an accountant who performs an orderly analysis, investigation, inquiry, test, inspection or examination in an attempt to obtain the truth and develop an expert opinion.• What does this mean? • Applies accounting skills to legal matters in a wide range of issues • Addresses a past event • Uses financial information • Produces information about finances • For use in judicial proceedings
    10. 10. Roles of Forensic Accountants Expert Witness for Litigation (e.g. Damages) Expert WitnessTransitional Business for Valuation Advice (e.g. Transaction) Forensic Accounting Event Fraud Analysis
    11. 11. Fraud, Forensic and Anti-Trust• Civil fraud investigations • Asset and transaction tracing• Criminal fraud investigations • Accountant malpractice • Director and officer negligence• Securities fraud investigations and self dealing• Money laundering • Contract compliance• Transaction tracing • Investment advisor malpractice• Internal corporate investigations • Corporate veil piercing• Sarbanes-Oxley compliance • Application of accounting principles• Misappropriation of corporate • Accounting controls and assets and corporate procedures reviews opportunities • Regulatory compliance and tax evasion
    12. 12. Why are Forensic Accountants needed?• Fraud prevention • Examine current internal controls for weaknesses • Implement changes to strengthen internal controls• Suspicion of fraud • Investigate any allegations of fraud• Fraud has already occurred • Determine the extent of the loss • Follow the paper trail and expose how the fraud occurred • Testify in court• Litigation support • Business valuations • Calculation of loss and damages • Estimate any unreported/over-reported income
    13. 13. Litigation and Business Valuation
    14. 14. Litigation Support• Commercial Litigation Services include assisting legal counsel and their clients with commercial disputes and litigation at every stage of the litigation process• Commercial Damages • Calculation of Lost Profits • Calculation of Loss in Value
    15. 15. Commercial/IP Litigation & BankruptcyServices• Discovery and Fact Finding • Patent infringement• Damage Analysis and • Trademark infringement Quantification • Trade secret misappropriation• Settlement Negotiations or Mediation • Copyright infringement• Expert Reports and Expert • Trade dress Witness Testimony • Bankruptcy Analysis,• Lost Profits Investigation, Turn-Around, and Restructuring Support• Loss of Business Value• Increased Cost Claims
    16. 16. Business Valuation Services• Valuations of closely held business interests including corporations, partnerships, and limited liability companies• Valuations of securities and fractional interests including debt, preferred stock, SAR’s, and restricted publicly held stock• Valuations of intangible assets and intellectual property• Valuations of stock options, warrants, and stock grants• Valuations of ESOP interests• Valuations for recapitalization and freeze transactions• Fairness opinions• Fair value determination for financial statement purposes
    17. 17. How to Get Into FVS and Gain Experience
    18. 18. Skills Required Accounting Skills Legal Skills FVS Finance Skills Skills Economic Skills
    19. 19. Where to Start?• Accounting vs. Finance Backgrounds • Accounting Background • Auditing experience • Understanding of financial statements • Understanding of financial analysis • Workpapers and supporting documents • Finance Background • Financial Analyst Experience • Understanding the macro and micro level economic factors • Understanding financial markets • Understanding of cash flow • Risk and return analysis • Time value of money
    20. 20. What is an Auditor? What is a ForensicAccountant?Auditor Forensic Accountant• An independent third-party • An accountant who performs who examines and verifies a an orderly analysis, Company’s financial and investigation, inquiry, test, accounting records as well as supporting documents to inspection or examination in express an opinion on the an attempt to obtain the Company’s financial truth and develop an expert statements opinion• Auditor’s report provides credibility to a Company’s financial statement
    21. 21. Designations and Certifications: Experience, education and professional competence of the forensic accountant is crucial for the proper management of an engagement• Certified Public Accountant (CPA)• Chartered Financial Analyst (CFA)• Certified Forensic Financial Analyst (CFFA)• Certified Fraud Examiner (CFE)• Tax Degree (MST)• Courtroom Experience• Written and Verbal Communication Skills• Ongoing Continuing Professional Education
    22. 22. Our Experiences and Backgrounds
    23. 23. Questions