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AGENDA
Overview of BDO Consulting
What is Forensic Accounting?
Fraud Statistics
My experience
Audit vs. Forensic Accounting
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Overview
BDO Consulting
o Insurance Claims Services
o Forensic Insurance & Recovery
o Forensic Technology Services
o Investigative Due Diligence
o Post Acquisition Disputes
o Dispute Advisory Services
o Financial Reporting Disputes &
Monitorships
o Global Forensics & Investigations
o Practice Growth & Management
o Healthcare Advisory
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Forensic Accounting
What is it?
Integration of accounting, auditing, and investigative skills to:
o Investigate, analyze, and evaluate financial evidential matter
o Investigate suspected theft, fraud, or embezzlement
o Calculate economic damages and asset recovery
o Assess and resolve financial statement and accounting irregularities
Forensic accounting encompasses Litigation Support and Investigative
Services.
“Many accountants think it is simply fraud investigation, and it’s not. It is really much
more than dealing with the numbers. It’s no longer just basic fraud work.”
–Bruce Dubinsky, Forensic Accounting Partner at Dubinsky & Company, PC
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Characteristics:
o Analytical
o Detail-oriented
o Ethical
o Responsive
o Insightful
o Persistent
o Intuitive
o Skeptical
o Functions well under pressure
o Evaluative
Forensic Accounting
Characteristics and Skills of a Forensic Accountant
Skills:
o Effective oral communicator
o Ability to simplify information
o Strategic thinker
o Ability to identify key issues
o Auditing skills
o Investigative ability
o Research skills
o Problem solving skills
o Analyze and interpret financial statements*
o Testifying abilities*
o Fraud detection*
o Asset tracing*
o E-discovery*
Source: AICPA Characteristics and Skills of the Forensic Accountant
6. Introduction to Forensic Accounting
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5% of all revenues lost annually as a result of fraud
Total loss caused by the cases exceeded $6.3 billion
dollars
Asset misappropriation accounted for 83.5% of cases vs.
financial statement fraud, which accounted for 9.6%
16.6% of frauds originated in the accounting
department (more than any other business unit)
Forensic Accounting
2016 Fraud Statistics
Source: ACFE Report to the Nations 2016
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Forensic Accounting
At BDO
Services Offered:
o Corporate Investigations
o Due Diligence
o Anti-Corruption Compliance &
Investigations
o Forensic Technology Services
o Financial Reporting Disputes
o False Claims Act
o Fraud Prevention
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Forensic Accounting
My Experience at BDO
Exterran:
o Completed first level linear
document review on Relativity
o Required attention to detail
o Demanding hours
o Prompted many questions
Lindsay Park:
o Use of excel
o Opportunity to work with an intimate
team
o Opportunity to visit a client site
o Experience juggling more than one
project at a time
OMSO:
o Chase redaction and HSBC
metric testing
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Auditing:
o Is recurring
o Has a broad scope
o Is opinionated
o Is non-adversarial
o Adheres to GAAP and auditing
standards and techniques
o Is based on a presumption of
professional skepticism
Forensic Accounting :
o Is nonrecurring
o Is specific
o Is factual
o Is potentially adversarial
o Follows varied methodologies
depending on the scope
o Is based on a presumption of proof
Forensic Accounting vs. Audit
What’s the Difference?
Auditing Forensic Accounting
Timing Recurring Nonrecurring
Scope Broad – Financial
statements
Specific – Issues or
transactions
Objective Provide opinion Determine facts
Relationship Non-adversarial May be adversarial
Methodology Follow GAAP, auditing
standards and techniques
Varied, depending on
scope
Presumption Professional skepticism Proof
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Forensic Accounting vs. Audit
How can Audit help?
Nicole Sliger
Consulting Managing Director
o Gives better exposure to how a company
works from the ground up
o Helps a professional understand the
internal control structure of a company
o Allows for a better chance to build
documentation skills
11. Introduction to Forensic Accounting
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BDO Consulting
Thank You
“Exceptional service for
exceptional circumstances.”
Editor's Notes
Currently, Consulting and Advisory services amount to about 10% of the firm’s services, while Audit and Tax make up the remaining 90%
1 – Tony Lendez, Partner
2 – Glenn Pomerantz, Partner
3 – Stephani Giammarco, Partner
4 – Carl Pergola, Partner
5 – Jeffrey Katz, National Co-Leader DAS
6 – Timothy Mohr, Principal, Financial Services
7 – Judith Spry, Partner
8 – Clark Schweers, Principal
When most people hear “forensic”, they think of crime scenes, Criminal Minds, Forensic Files, and the like. Forensic accounting, however simply means “suitable for use in a court of law.” A general definition describes forensic accounting as a “specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation”
Forensic accountants integrate accounting, auditing, and investigative skills to investigate, analyze, interpret, summarize and present complex financial information/evidence in a manner which is understandable and properly supported
Work done by forensic accountants always bares the possibility of being used in court. It is also possible that they could assist in legal proceedings and testify in court, at deposition, at arbitration, or mediation.
Forensic accountants must possess a different skill set than the traditional accountant
The AICPA conducted a survey in which it received responses from attorneys, CPAs, and accounting professors to better understand the perceptions of what it means to be an effective forensic accounting.
All three respondent groups agreed that being analytical is the most essential trait for a forensic accountant to possess, while effective oral communication is the most important skill
Other highly ranked characteristics such as detail oriented and responsive exemplify the need for a forensic accountant to be able to seek out all necessary information, process it, and solve the problem at hand
Each year the governing body of the Association of Certified Fraud Examiners issues Report to the Nations based on their research into the costs, schemes, perpetrators and victims of occupational fraud. This years’ report contains an analysis of 2,410 cases of occupational fraud that were investigated between January 2014 and October 2015
The report is extensive but here are a few high level numbers to note:
A typical organization loses 5% of all revenues annually as a result of fraud.
More than 23% of the cases in this study resulted in a loss of at least $1 million
Asset misappropriation is the most common form of fraud committed, but causes the smallest median loss ($125,000). Financial Statement fraud occurs in less than 10% of cases, but causes the largest median loss ($975,000)
Over 75% of the fraud cases studied were committed by individuals working in the accounting, operations, sales, executive/upper management, customer service, purchasing and finance departments
Other interesting facts:
Owners and executives are the top perpetrators, being that their high level of authority allows their fraud scheme to be harder to detect – cause an average of 703,000$ in loss
Detection of fraud is typically through tips, mgmt review, internal audit and by accident!
Employees, customers and anonymous are typically the majority of source of tips (Over 40% were detected by tips)
Top 5 fraud schemes Corruption, Billing Schemes, Check Tampering, Non-Cash (stealing inventory and other assets), Skimming
Fraud hotlines are the most effective way to detect fraud
Corruption and Billing Schemes pose the greatest risks to organizations
This comparison shows at a high level how forensic accounting differs from traditional auditing
An auditor’s job is ultimately not to uncover fraud while conducting their audit, but to express an opinion on a company’s financial statement
An auditor is required to follow GAAP, which requires a good amount of professional judgment
An auditor needs to obtain reasonable assurance that the financial statements are free of material misstatement
Forensic accountants, on the other hand, have a much more narrow focus on specific issues
FAs need to obtain a complete understanding of the facts and circumstances, regardless of materiality – sometimes there is more at stake than just the money, like reputation
FAs could analyze all journal entries, or possibly only a few specific general ledger accounts or line items on the financial statements, completely dependent upon the issue at hand while auditor’s examination is on a test basis
I spoke with Nicole Sliger, a Managing Director in the Consulting practice here at BDO about her previous experience in audit, how she made the switch to consulting, and how the two professions compare.
Nicole began her career with an internship in Audit at E&Y in NJ. She graduated with an accounting degree and ended up with a full time offer from E&Y, where she stayed for four years. At E&Y, Nicole did a rotation in forensic accounting and ultimately transferred into the practice. A lot of her time in the practice was spent traveling, but she was looking for a more physically stable position.
She fell into BDO Consulting and started as a manager, working on internal investigations and document review. Now, after nearly 15 years of experience, Nicole is a Consulting Managing Director here at BDO.
Nicole believes that experience in Audit can be of great help to a forensic accountant.
As an auditor you’re going through all documents from the beginning, and learning the internal control structure of a company
Such as good writing skills, cross referencing, tick marking work papers
