Journal of Forensic & Investigative Accounting
D. Larry Crumbley
Louisiana State University
Department of Accounting
3106A Patrick Taylor Hall
Baton Rouge, LA 70803
430 S. Michigan Avenue
Chicago, IL 60605
Volume 2: No. 3, Special Issue, 2010
Table of Contents
- Theodore E. Christensen
- Daniel Gyung H. Paik
- Christopher D. Williams
Keywords: Fraud investigations, SEC disciplinary actions, market reactions.
- Jerry L. Turner
- Carol E. Vann
- Katherine Barker
- Nicole Forbes Stowell
- Charlie Polansky
- Daniel Kieffer
CPAs who understand how the bankruptcy law has changed and the basic elements and types of bankruptcy fraud schemes being perpetrated have an advantage in being able to guide clients through the bankruptcy process, to help them steer clear of common pitfalls, and to avoid being made a party to any fraudulent activities themselves. Additionally, the bankruptcy law changes provide opportunities for CPAs to become bankruptcy “experts” and in doing so to provide the best possible services for a variety of clients.
- Christie L. Comunale
- Rebecca L. Rosner
- Thomas R. Sexton
- Anna M. Rose
- Jacob M. Rose
- Mark Dibben
- Kenneth R. Henry
- Ronald M. Lee
- Alexey N. Nikitkov
- Darlene Bay
- Yuh-Jiuan Parng
- Chung-Jen Fu
- Hsi-Cheng Li
Brook T. Schaub
A Personal Look at Recovering the Truth
A friend of mine who has a master’s degree in computer science builds simulation laboratories for major government contractors. One simulation included a ten foot display depicting the working parts of a particular piece of military hardware in its design stage. In the display, each gear was clearly demonstrated and its movement traced to the interlocking pieces. The simulation followed the military hardware projectile as it headed downrange, over mountains, took a left at a truck, and flew into the second floor window to the target. Needless to say, it was impressive technology.
Despite her advanced knowledge of technology, when the flash card on her digital camera became corrupted, and her niece’s first birthday pictures disappeared, she asked me for help. While I was reformatting the flash card, she was thoroughly convinced the pictures had been irreversibly lost. A few minutes later, the forensic software I was using recovered all the pictures of a one-year old enjoying her first birthday cake. A long discussion of “How did you do that?” soon followed. Computer forensics was outside her knowledge base, even with her intense background in computer technology.
When I entered the private sector of computer forensics, the Federal Rules of Civil Procedure outlined the policies and procedures for the retention and archiving of data, e-mail, voice messages and similar electronic records. In my work, I found that companies and law firms were content to pay for data recovery as it related to litigation cases but seldom for data investigation. Why? Because few understand the difference between the two processes.
Let me explain. Data recovery typically encompasses the retrieval of archived data. Data investigation, on the other hand, is true computer forensics and involves searching through billions of deleted 1s and 0s on a hard drive to find the “smoking gun” that can help a client continue to fight or decide to settle a case. Data investigation in civil litigation typically involves the search of archived data for key words relating to the dispute and can account for a large part of the investigation.
One of the first cases I worked on in the private sector related to the difference between data recovery and data investigation in a civil litigation case. The dispute involved a property claim and palimony agreement of two individuals who both held high-level positions at the same company. When I entered the investigation, a considerable amount of time and money had already been spent by the client on “computer forensics,” which amounted to data recovery and, therefore, no conclusive evidence to assist the case.
I was asked to examine a computer not yet reviewed using data investigation methodologies. My examination revealed spoliation of the computer’s files, which implicated the company’s IT manager as part of the plot to delete and scrub the data files. The investigation findings included the exact time and date in which the IT manager scrubbed, or removed the data files. These time and date stamps indicated that the IT manager scrubbed the files the same evening it was documented that he spent the night at the petitioner’s home…an interesting case finding. In this situation, the IT manager knew how to delete and scrub data, but he did not know that computer forensic technology would be able to uncover his actions.
The use of data investigation methodologies can uncover more than just changed time and date stamps, and can be used for more than civil litigation. The following examples showcase the variety of evidence computer forensics can uncover and the many different situations where data investigation can be utilized:
- A rapid settlement without further litigation costs was reached when the data investigation of a company proved that employees with non-compete clauses in their contracts had downloaded the company’s strategic plan, customer lists and pricing strategies onto a CD one day before resigning.
- A sexual harassment case was successfully defended by a company when deleted e-mails containing attachments in violation of the company’s acceptable use policy were recovered from the petitioner’s account. Other deleted e-mails also helped the company’s case; some of the recovered e-mails had been deleted more than four years prior to the recovery.
- A deleted e-mail containing the words, “I’m not going to jail over this!” was recovered while performing computer forensics for a fraud case. This e-mail would not have been found or recovered using only the key words provided by the attorneys. A good computer forensics investigator will use his experience, as well as information from the client, to create a preliminary plan for the analysis.
- Computer forensics can assist in divorce litigation. Through computer forensics, a plot discovered in a common chat file indicated that one respondent was concealing assets through a third party whom he had a romantic relationship. In another case, the character of one party was quickly tarnished in a custody battle when copies of e-mails that were submitted to the court as exhibits and purported to be genuine were found to be questionable and fraudulent.
Businesses and individuals can benefit from understanding data investigation methodologies and what they are capable of uncovering. Data investigation should not be viewed in the same light as data recover, but instead, should be viewed separately as an investigation to locate evidence supporting or disputing a claim relating to civil or criminal litigation, divorce, human resources or other types of issues.
In any litigation, a sound plan on how to use electronic discovery is important. Determine if the case requires only the recovery of archive data or the use of computer forensics. A plan to investigate data must be fluid, as each new piece of evidence may lead the case in a different direction. One single e-mail, deleted years ago, may lead to a quick settlement and less litigation costs for the client, as uncovered evidence may eliminate the need for valuable resources to be dedicated elsewhere.Most importantly, companies need to understand the extent of information that can be recovered and investigated through computer forensics. Like my friend’s pictures, data that is seemingly lost forever can be recaptured. To recover lost documents efficiently and effectively, it may be useful to enlist the help of an IT specialist. A computer forensic examiner, on the other hand, may be more valuable in data investigation to uncover documents that could be important to proving or disputing a claim. With the help of the right person, lost photographs of a child eating birthday cake and deleted e-mails that could help solve a case are not gone forever…they are just waiting to be recovered. * Brook Schaub is a retired police sergeant from St. Paul Minnesota. He has taught computer and Internet forensic to law enforcement in Louisiana for the National Law Center for Children and Families, and spent months in Louisiana after Hurricane Katrina reuniting children as a consultant for the National Center for Missing & Exploited Children. He also was deployed to Baton Rouge by NCMEC for Hurricane Gustav.
The deadline for submitting a paper for the 2nd Annual AAA Forensic & Investigative Accounting section’s mid-year meeting is January 15, 2011. The research conference will be held in New Orleans, March 25/26, 2011 at the Astor Crowne Plaza.
The conference will start on Friday March 25 at 1:00 and conclude Saturday, March 26 at noon. Authors will be given early notice of acceptance when possible.
Paper submissions, related to all areas of forensic and investigative accounting, are encouraged. A special effort will be made to provide opportunities for doctoral students and assistant professors. Papers accepted and delivered at the conference may be considered for publication in the Journal of Forensic and Investigative Accounting, provided that the author(s) adequately address the comments of the reviewers and Editor. There is no submission fee; however, all submissions must be electronically submitted to D. Larry Crumbley at (firstname.lastname@example.org) in Word or pdf format.
LSU Fraud & Forensic Accounting Conference
The LSU Fraud and Forensic Accounting Conference will be held July 11 and 12, 2011. Some speakers include Jeffrey Aucoin, Will Fleenor, James Koerber, Joe Koletar, Mark Shirley, Elliot Leary, Kelly R. Pope, and Michael W. Hudson, author of The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America. Mark your calendar.
Advertise in the JFIA
Would you like to advertise in this journal? Full page ad is $300. Half page ad is $150. Contact Larry Crumbley (email@example.com). Checks to be made out to Journal of Forensic and Investigative Accounting and sent to Larry Crumbley at 3106A Patrick Taylor Hall, Dept. of Accounting, L.S.U., Baton Rouge, LA 70803.
|Auditing & Assurance Services
T.J. Louwers, et al., 2011, 4th Edition
One of the best coverage of fraud in an auditing textbook, with the updated Apollo Shoes Casebook, the only stand-alone fraud audit case on the market (available on the book’s website, www.mhhe.com/louwers4e).
Auditing and Accounting Cases
This soft cover book gives you and your students up-to-date auditing coverage along with cases that focus on issues at companies where a financial statement fraud actually occurred. Revised to include AS 5, this flexible casebook contains 45 cases focusing on specific auditing issues directly impacted Sarbanes-Oxley, using the actual companies – Enron, WorldCom, Qwest, Sunbeam – that have become synonymous with the capital markets crisis in confidence.
|Government and Not-for-Profit Accounting
M.H. Granof and S.B. Khumawala, 2011, 5th Edition
John Wiley & Sons
111 River Street
Hoboken, NJ 0730-5774
An excellent book for someone wishing to become a government forensic accountant. However, the index contains no cites to fraud, but does include some ratio analysis.
Known for its accessible writing style and straightforward, concept-based presentation, this book, with the latest GASB pronouncements and cross-referenced with the newly launched FASB’s Accounting Standards Codification system. By emphasizing concepts, rather than rules and procedures, this text ensures an understanding of how and why issues are resolved either similarly or differently in the business sector. Updated references, added chapters, and new examples will give today’s accountants and students an even stronger grasp of the specialized information they will need to succeed.
Key features include
| International Accounting
T. Doupnik and H. Perera, 2009, 2nd Edition
1221 Avenue of Americas
New York, NY 10020
Some believe that as the U.S switches from rule based to principle based accounting, there will be much more fraud. This book does not have a single cite to fraud in its index.
The authors do provide a broad overview of accounting across borders, particularly on the accounting issues related to international business activities and foreign operations. Key features include
Preventing and Detecting Employee Theft and Embezzlement: A Practical Guide
From implementing prudent hiring policies and practices through collecting receipts, making deposits, writing checks, paying employees, and evaluating the adequacy of insurance coverage, this essential book covers the major financial areas commonly found in most small businesses, and provides you with easy steps to follow in preventing and detecting embezzlement.
With checklists at the end of each chapter, you can literally start protecting your business right away. This practical guide takes a closer look at:
| Handbook of Energy Audits
Al Thumann, W.J. Younger, T. Niehus, 8th Edition
Fairmount Press, Inc.
700 Indian Trail
Lilburn, GA 30047
This best-selling handbook is the most comprehensive and practical reference available on energy auditing in buildings and industry. This latest edition includes revisions throughout, covering ASHARE Level 1 and 2 energy audits, as well as a new chapter on water conversion. Topics include energy assessment and computer software that will guide you in planning and carrying out a thorough and accurate energy audit of any type of facility, including electrical, mechanical and building system analysis. Clear, easy-to-follow instructions guide you through accounting procedures, rate of return and life cycle cost analysis. Also covered is information on understanding your utility bill and using that knowledge to trim your energy costs. Loaded with forms, checklists and handy working aids, this book is must-reading for anyone responsible for conducting or overseeing a facility energy audit.
Guide to Computer Forensics and Investigations
Bill Nelson, et al., 2008, 693 pp.
25 Thomson Place
Boston, Mass. 02210
The third edition teaches readers how to conduct a high-tech
investigation, from acquiring digital evidence to reporting
their findings. Coverage includes how to set up a forensics lab,
how to acquire the necessary tools, and how to conduct an
investigation and subsequent digital analysis. The comprehensive
coverage and detailed know-how led to the book being listed as
recommended reading by the FBI Forensics Communications, the
United States Certified reading room. The book features free
downloads of several forensics software programs so that
students can become familiar with the tools of the trade.
Features of this book:
Investigation and Prevention of Financial Crime
Peter Gottschalk, 2010, 254 pp.
Ashgate Publishing Company
101 Cherry Street
Burlington, VT 05401-4405
So long as there are weaknesses that can be exploited for gain,
companies, other organizations, and private individuals will be
taken advantage of. This theoretically-based but hugely
practical book focuses on what is generally seen as financial or
economic crime: theft, fraud, manipulation, and corruption.
The author considers how, in some competitive environments, goals can ‘legitimise’ all kinds of means, and how culture can exert a role in relation to what is seen as acceptable or unacceptable behavior by individuals. He addresses important topics including organized crime, money laundering, cyber crime, corruption in law enforcement agencies, and whistleblowing, and provides expert advice about strategies for the use of intelligence to combat financial crime. The uniqueness of his approach to the subject lies in the way he is able to explain intelligence and intelligence processes in the wider context of knowledge and knowledge management. The numerous case studies throughout the book illustrate the 'policing' of financial crime from an intelligence, knowledge management and systems perspective.
Law enforcers, lawyers, security personnel, consultants and investigators, as well as those in auditing and accountancy and with responsibilities for containing risk in banks, other financial institutions and in businesses generally, will find this book an invaluable source of practical guidance. The book also will be of interest to advanced students and researchers in criminology and police science.
Behavior, Truth and Deception: Apply Profiling and Analysis to the
Michael R. Napier, 2010, 374 pp.
6000 Broken Sound Parkway, NW
Boca Raton, FL 33487
This hands-on volume, drawn from years of experience
interviewing suspects, reveals the targeted subject interviewing
process (TSI). This technique combines all known tactics learned
from criminal personality profiling and investigative analysis
into an effective strategy for interviewing a suspect. The book
describes the skill sets and essential elements that directly
contribute to a successful interrogation and outlines an
interview plan using these analytical and profiling concepts.
Topics discussed include:
• Origins of offender motivation
• An analytical methodology for criminal investigative analysis
• Indirect personality assessment before the suspect interview
• Interview and interrogation techniques, including verbal strategies and nonverbal communications
• Interviews in rape cases
• Analysis of 911 calls made by a potential suspect
• Homicidal behavior
• Child molesters and stalkers
• Cultural considerations
• Tips for making interviews withstand legal challenges
A blend of insight from seasoned law enforcement professionals and behavioral experts, this volume helps investigators get under the skin of the suspect, expose deception, and bring out the truth. Employing crime scene scenarios to demonstrate concepts, the book includes a victim questionnaire capturing offender behavior, form templates, and a glossary, making this a one-stop reference for law enforcement professionals and others charged with solving crimes and bringing offenders to justice.
Michael Sheetz, 2007, 152 pp.
John Wiley & Sons
111 River Street
Hoboken, N.J. 07030
The core duties of a computer forensics expert are to identify
sources of documentary or other digital evidence, preserve the
evidence, analyze the evidence, and present the findings. This
book offers attorneys, managers, and accountants complete,
non-technical information about the role that computers play in
financial crimes and fraud examination. The book has a
three-part structure: Part I introduces readers to the science
of computer forensics; Part II examines the role that computers
play in the commission of financial crimes, frauds, and
corporate espionage; Part III explains the role that computers
play in uncovering, investigating, and prosecuting instances of
financial crimes. Coverage includes:
• Basic Principles of Forensic Examination
• Data Verification and Encryption
• Role of the Computer Forensic Expert in Fraud Examination
• Occupational Crime and the Role of Computer Forensics
• Securities Fraud and the Computer
• The Computer as an Investigative & Organizational Asset
• Legal Dimension of Computers and Fraud Examination
• Managing the High-Tech Assignment