Forensic Accounting


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Forensic Accounting

  1. 1. Nabendu Maji Bharati Vidyapeeth University Institute Of Management And Entrepreneurship Development, Pune MBA (G) – B Roll No. 73 [email_address]
  2. 2. <ul><li>What is Forensic Accounting? </li></ul><ul><li>Other Terminology. </li></ul><ul><li>What does a Forensic Accountant do? </li></ul><ul><li>Types of assignments a Forensic Accountant perform. </li></ul><ul><li>Typical approach to a Forensic Accounting. </li></ul><ul><li>Stage to Forensic Accounting. </li></ul><ul><li>Applications and Consequences. </li></ul>
  3. 3. <ul><ul><li>The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting. </li></ul></ul><ul><li>In other words: </li></ul><ul><ul><li>The identification, interpretation, and communication of the evidence of economic transaction and reporting events. </li></ul></ul><ul><ul><li>Forensic accounting  is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. &quot;Forensic&quot; means &quot;suitable for use in a court of law&quot; </li></ul></ul>
  4. 4. <ul><li>Forensic Investigation </li></ul><ul><li>The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law.  A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline . </li></ul><ul><li>Forensic Audit </li></ul><ul><li>An examination of evidence regarding an assertion to determine its correspondence to establish criteria carried out in a manner suitable to the court.  An example would be a Forensic Audit of sales records to determine the quantum of rent owing under a lease agreement, which is the subject of litigation. </li></ul>
  5. 5. <ul><li>A Forensic Accountant is often retained to analyse, interpret, summarize and present complex financial and business related issues in a manner which is both understandable and properly supported. </li></ul><ul><li>Forensic Accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organizations. </li></ul>
  6. 6. <ul><li>A Forensic Accountant can be of assistance in various ways, including: </li></ul><ul><li>Investigative Accounting </li></ul><ul><li>Investigating and analysing financial evidence. </li></ul><ul><li>Review of the factual situation and provision of suggestions regarding possible courses of action. </li></ul><ul><li>Assistance with the protection and recovery of assets. </li></ul><ul><li>Co-ordination of other experts, including: </li></ul><ul><ul><li>Private investigators; </li></ul></ul><ul><ul><li>Forensic document examiners; </li></ul></ul><ul><ul><li>Consulting engineers. </li></ul></ul><ul><li>Assistance with the recovery of assets by way of civil action or criminal prosecution . </li></ul>
  7. 7. <ul><li>Litigation Support </li></ul><ul><li>Assistance in obtaining documentation necessary to support or refute a claim. </li></ul><ul><li>Review of the relevant documentation to form an initial assessment of the case and identify areas of loss. </li></ul><ul><li>Assistance with Examination for Discovery including the formulation of questions to be asked regarding the financial evidence. </li></ul><ul><li>Attendance at the Examination for Discovery to review the testimony, assist with understanding the financial issues and to formulate additional questions to be asked. </li></ul><ul><li>Review of the opposing expert's damages report and reporting on both the strengths and weaknesses of the positions taken. </li></ul><ul><li>Assistance with settlement discussions and negotiations. </li></ul><ul><li>Attendance at trial to hear the testimony of the opposing expert and to provide assistance with cross-examination. </li></ul>
  8. 8. <ul><li>Criminal Investigations </li></ul><ul><li>Shareholders' and Partnership Disputes </li></ul><ul><li>Business Interruption / Other Types of Insurance Claims </li></ul><ul><li>Business/Employee Fraud Investigations  </li></ul><ul><li>Business Economic Losses </li></ul><ul><li>Professional Negligence </li></ul>
  9. 9. Meet with the client Perform a conflict check Perform an initial investigation Develop an Action Plan Obtain the relevant evidence Attendance at Court Prepare the report Perform the analysis
  10. 10. <ul><li>Planning Stage </li></ul><ul><li>Meet with the Client </li></ul><ul><ul><li>Obtain an understanding of issues at hand </li></ul></ul><ul><ul><li>Perform preliminary assessment of work to be done and prepare tentative schedule </li></ul></ul><ul><li>Perform a Conflict Check </li></ul><ul><ul><li>Ensure that the firm does not have conflicts of interest </li></ul></ul><ul><li>Perform an Initial Investigation </li></ul><ul><ul><li>Preliminary investigations examination of available information </li></ul></ul><ul><ul><li>Allows auditors to identify likely trouble areas and assess the work to be done </li></ul></ul><ul><li>Plan the Audit </li></ul><ul><ul><li>It Should identify objectives to be achieved and plan audit methodology to be used </li></ul></ul>
  11. 11. <ul><li>Execution Stage </li></ul><ul><li>Collect the Relevant Information </li></ul><ul><ul><li>In depth interviews with client’s staff </li></ul></ul><ul><ul><li>Examination of hard-copy & electronic info </li></ul></ul><ul><ul><ul><li>Electronic info is often best source for forensic auditors </li></ul></ul></ul><ul><ul><ul><li>Specialized computer forensic auditors are sometimes called in, depending on the audit </li></ul></ul></ul><ul><ul><li>Off-site computers & servers, hard-copy info , etc. are also examined </li></ul></ul>
  12. 12. <ul><li>Perform the Analysis </li></ul><ul><ul><li>Highly dependent on specifics of the engagement </li></ul></ul><ul><ul><li>Often involves: calculating economic damages and sensitivity analysis , tracing of assets </li></ul></ul><ul><li>Prepare the report </li></ul><ul><ul><li>It contains the details of the engagement , the scope, any limitations and a detailed summary of the findings </li></ul></ul><ul><ul><li>Reports are generally confidential and often used in court proceedings </li></ul></ul><ul><ul><li>Review Process & report to the client. </li></ul></ul><ul><ul><li>Identify those involved and quantify amount of fraud . </li></ul></ul><ul><ul><li>Present findings to the client and court </li></ul></ul>
  13. 13. <ul><li>Satyam Fraud Case </li></ul>