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Forensic accounting vs fraud examination
- 2. ROLE & IMPORTANCE AND DIFFERENCES FORENSIC ACCOUNTING Vs. FRAUD EXAMINATION
- 3. DEFINITION OF FRAUD FIRST ONE SHOULD UNDERSTAND WHAT A FRAUD MEANS: FRAUD IS NOT AN ACCOUNTING CONCEPT BUT USED IN A LEGAL SENSE. IT IS AN IN TENTIONAL ACT WITH AN INTENT TO DECXEIVE OTHERS WHO SUFFER LOSSES AND THE FRAUD PERPETRATOR ENDS UP WITH MONETARY GAINS. FRAUD IS A DELIBERATE DECEPTION OR CHEATING FOR SECURING UNLAWFUL GAINS THROUGH ILLEGAL MEANS.THUS THERE ARE TWO PARTIES INVOLVES-ONE IS THE PERPETRATOR OR FRAUDSTER AND THE OTHER IS THE VICTIM OF FRAUD. FRAUD IS AMTERIAL FALSE STAEMENT,KNOWING IT TO BE FALSE,WHERE THE VICTIM INCURRS DAMAGES AND FINANCIAL LOSS.THE CRIME MAY BE CIVIL OR CRIMINAL IN NATURE. THUS FRAUD IS MADE BY DECEPTION FOR PERSONAL GAINS.
- 4. INTRODUCTION OF THE CONCEPTS AT THE OUTSET IT MAY BE MENTIONED THAT THOUGH THEY ARE DIFFERENT YET RELATED. A FORENSIC ACCOUNTANT NEED TO BE APROFESSIONAL- CPA,CA,CFFA ETC. A FRAUD EXAMINER MAY NOT BE A PROFESSIONAL BUT AN EXPERIENCED ACCOUNTANT. FORENSIC ACCOUNTING REFERS TO SEVERAL AREAS WHERE AS FRAUD EXAMINATION IS MAINLY FOCUSSED IN RELATING TO ANTI FRAUD MATTERS. THE INCIDENCE OF FRAUD IS SO COMMON THAT ITS OCCURANCE IS NO LONGER REMARKABLE,ONLY ITS SCALE. AS PER STATISTICAN INFORMATION:THE VARIOUS FRAUDS ARE COMMITTED : 1.MANAGEMENTS 55% 2.EMPLOYEES-30% 3.SUPPLIERS 4 % 4.CLIENTS 5% 5.Organised criminals 6%
- 5. DIFFERNCES BETWEEN FORENSIC ACCOUNTING VS.FRAUD EXAMINATION FORENSIC ACCOUNTING FORENSIC ACCOUNTING IS A LEGAL TERM. APPLICATION OF ACCOUNTING TECHNIQUES. NECESSITY DUE TO HIGH RISE IN CRIMES –WHITE COLLAR CRIMES,EMBEZZELMENT ETC FRAUD EXAMINATION FRAUD EXAMINERS ALSO KNOWN AS INVESTIGATORS,ANALYSTS. FRAUD EXAMINERS CO-ORDINATE FRAUD DETECTION & PREVENTION AND DETTERENCE. FRAUD EXAMINERS IDENTIFY WARNING SIGNS AND RED FLAGS THAT INDICATE EVIDENCE OF FRAUD & FRAUD RISK.
- 6. FORENSIC ACCOUNTING FORENSIC ACCOUNTANTS HELP THE GOVERNMENT IN THE ENFORCEMENT OF REGULATORY REQUIREMENTS. MANY BANK FRAUDS ARE INVESTIGATED BY FORENSIC ACCOUNTANTS. FRAUD EXAMINATION INVOLVES OBTAINING STATEMENTS,WRITING REPORTS,TESTIFYING IN COURTS OF LAW. PRIMARY AIM TO INVESTIGATE FRAUDS,DETECT AND SUGGEST PREVNTIVE METHODS.
- 7. FORENSIC ACCOUNTING FORENSIC ACCOUNTANTS ALSO HELP IN PRICE FIXATION,STOCK PRICE MANIPULATIONS. FORENSIC ACCOUNTANTS GO IN DEPTH TO INVESTIGATE WINDOW DRESSING BY MANAGEMENTS. FRAUD EXAMINATION FRAUD EXAMINERS ALSO WORK IN ANY TYPE OF INDUSTRY OR WITH GOVERNMENT IN FRAUD DETECTION. THEY FIND ANY SUSPICIOUS ACTIVITY AND WORK ON FRAUD RISK.
- 8. FORENSIC ACCOUNTING ALSO INVOLVED IN MERGERS & ACQUISITIONS. EONOMIC CRIME INVESTIGATIONS SPECIAL AUDITS ROLE IS TO GIVE PRELIMINRY ADVISE,PREPARE DETAILED REPORT,WITH DOCUMENTARY EVIDENCEAND TESTIFY IN COURTS. FRAUD EXAMINATION FRAUD EXAMINERS WILL COORDINATE WITH THE MANAGEMENT,LAW ENFORCEMENT AGENCIES AND LAWYERS. THEY KEEP UPTO DATE KNOWLEDGE OF THE CRIMINAL ACTIVITY TRENDS AND FRAUD PREVENTION. SHOULD BE IMPARTIAL WITH GOOD ANALYTICAL ABILITY, ”PERCEPTIVENESS” IN DEALING WITH SENSITIVE & DELICATE SITUATIONS.
- 9. FORENSIC ACCOUNTING FORENSIC ACCOUNTING MAY BE SUBDIVIDED BY FOUR CATEGORIES: 1.LITIGATION SUPPORT 2. INVESTIGATIVE & ASSITING IN DISPUTES. 3.FRAUD DETECTION 4.COMPUTER FORENSICS. FRAUD EXAMINATION FRAUD EXAMINERS CAN BE DIFFERENT SPECIALISTS OF A SPECIFIC INDUSTERY WITH FULL KNOWLEDGE OF THAT INDUSTRY FRAUD EXAMINERS CONDUCT INTERVIWES. THEY TRY TO INDENTIFY POSSIBLE SUSPECTS.
- 10. SKILLS REQUIRED FOR FIGHTING FRAUDS UNDERTSANDING THE BUSINESS AND GOOD KNOWLEDGE OF INFORMATION & TECHNOLOGY AS ALL BUSINESSES RUN ON DIFFERENT SOFTWARES AND ERP PACKAGES.SO TO UNEARTH AND INVESTIGATE A FORENSIC ACCOUNTANT OR A FRAUD EXAMINER NEEDS GOOD UNDERTSANDING OF THE SOFTWARE. THEY SHOULD HAVE KNOWLEDGE OF DATA MINING TECHNUQUES,DIGITAL EVIDENCE TOOLS AND ABILITY TO CONDUCT FORENSIC ANALYSIS. MOST IMPORTANT BOTH SHOULD HAVE VERSATILE EXPERIENCE WITH RESPECT TO THE INDUSTRY OF WHERE FORENSIC ACCOUNTING OR FRAUD EXAMINATION IS CONDUCTED. THEY SHOULD BE FULLY CONVERSANT WITH THE LOCAL LAWS GOVERNING THE COMPANY AND LAGAL ANGLE ALSO LIKE PRIVACY LAWS,SECURITIES * STANDARDS
- 11. CASES:FORENSIC ACCOUNTING & FRAUD EXAMINATION ENRON:BIGGEST ACCOUNTING FRAUD –UNWINDED BY FORENSIC ACCOUNTANTS. THE BIG GANSTER OF 20S AND 30S AL CAPONE, WAS BROUGHT DOWN BY A FORENSIC ACCOUNTANT FOR HIS TAX EVASION. SUNBEAM-IS ANOTHER EXAMPLE OF A FORENSIC ACCOUNTING INVESTIGATION THE MANIPULATION OF ACCOUNTS IN THE FORM OF RESTRUCTUREING OF THE COMPANY. PUNJAB NATIONAL BANK RECENET MULTI MILLION CRORES SCAM INVOLVING LOUs –LETTER OF UNDERTAKING-FRAUD-WILL BE INVESTIGATED BY FRAUD EXAMINERS WHO ARE SPECILISTS IN BANKING INDUSTRY. OTHER FRAUDS WERE PERPETRATED: ENRON,ADIDAS,REEBOK,PARMALAT,PONZI SCHEMES,EMBEZZELMENTS OF CASH AND INVENTORIES,SATYAM COMPUTERS,TYCO. (DETAILS OF FRAUD CASES- REF:WWW.FRAUDSDETECTION.COM)
- 12. FRAUD DTECTION METHODS INTERNAL AUDITS FRAUD RISK MANAGEMENT SUSPICIOUS TRANSACTIONS CORPORATE SECURITY WHISTLE BLOWER POLICY TIPS BY ACCIDENT LAW ENFORCEMET AUTHORITIES ROTAION OF PERSONNEL & DIVISON OF ROLES & RESPONSIBILITIES
- 13. AUTHOR: NARAYANARAO.K.B.COM.FCA;CFFE-IFS(PUNE) MEMBER-ASSOCIATION OF CERTIFIED FRAUD EXAMINERS.
- 15. FINAL DESTINATION OF A FRAUDSTER