Journal of Forensic & Investigative Accounting
. . . . . .
Journal of Forensic & Investigative Accounting
D. Larry Crumbley
Louisiana State University
Department of Accounting
3106A Patrick Taylor Hall
Baton Rouge, LA 70803
Volume 4: No. 1, January-June, 2012
Table of Contents
Ponzi schemes have received significant media coverage lately, due
in large part to the Bernard Madoff scandal; however, there is
limited academic research exploring investors’ decision-making
processes when investing in what ultimately is discovered to be a
Ponzi scheme. We conducted semi-structured interviews of 17
investors in a Ponzi scheme to better understand the investors’
decision-making processes, their perceptions of the fraud, and the
mechanics of the fraud. Overall, the interviews reveal a fraud with
the following characteristics: (a) older, educated victims; (b) a
plausible story that traveled by word of mouth among people who knew
each other well; (c) demonstrated returns over several months
(people often watched others get checks for a few months before
investing themselves); (d) low pressure (no urgency to invest); and
(e) a “good guy” promoter who did charitable works. We discuss
avenues for future research.
Fraud, Ponzi scheme, decision-making, investment.
There is a significant amount of research and models on ethical
decision-making processes; however, there is limited research on how
emotions affect ethical evaluations and decisions in an accounting
context. Prior research suggests that emotions may shape ethical
evaluations and choices made by individuals. This study contributes
to the accounting literature by exploring the emotions an accountant
may feel when evaluating earning manipulations. This study finds
that accountants feel regret when evaluating earnings manipulations.
Accounting ethics, ethical decision making, emotions.
Abstract: Using an
experiment, this study examines the impact of industry specialization and
firm size on juror evaluations of blame, findings of negligence, and damage
awards in auditor malpractice cases. The results indicate that jurors
attribute less blame to industry specialist auditors and are less likely to
find them negligent than non-industry specialists auditors. The study
establishes that industry specialization increases the perceived competence
of the auditor reducing the likelihood that jurors will hold it liable for
an audit failure. While firm size was not found to effect evaluations of
blame or negligence verdicts, it did have a significant impact on damage
awards. Significantly greater damages were awarded against larger firms than
against small firms in the experiment. Based on the results of the study,
firms can reduce their litigation exposure by becoming industry specialist
auditors. Additionally, small firms can benefit from the propensity of
jurors to award less in damages.
Industry specialist, audit firm size, auditor litigation, accounting
study examines the probability of fraud estimates of auditors from five
firms to test the need to include multiple firms in empirical forensic
accounting research. We used an older data set as sample sizes of about 500
auditors participating in a four-hour exercise are rare in today’s research
environment. This research tested for differences among firms, staff levels,
and gender to determine whether differences could occur among auditing
firms. While our analysis indicated no difference among firms for managers,
there were significant differences among firms on an overall basis and for
seniors. Finally, we also found a significant difference between male and
female auditors’ probability of fraud estimates. Although there were no
difference between male-and-female seniors’ levels of moral development
(ethical sensitivity), there were significant differences between
male-and-female managers’ levels of moral development. Consequently, our
premise of including multiple firms in empirical forensic accounting
research was supported.
firms, client integrity, red flags, auditors, gender difference.
The forensic accounting profession may
not be equipping its members with the necessary tools to conduct suspect
interviews given their significant ethical, legal, and psychological
challenges. The accounting profession should be at the forefront of
developing an interviewing model by closely examining the leading interview
models utilized by other professions, assessing their relative merits and
deficiencies. The two leading police interview models are the REID and PEACE
models. Psychologists utilize Motivational interviewing techniques to assist
in dealing with patients that are ambivalent to change.
A forensic accountant must be acutely aware of the roles that evidence,
experience, and the interviewer's demeanor play in the interview's outcome.
Academic studies demonstrate that using a humanitarian approach offers a
greater chance to obtain a confession.
There are legal and ethical considerations to consider when a forensic
accountant selects his or her questioning techniques. An interviewer must be
careful when offering promises to a suspect. A skilled interviewer arrives
at the truth, whether the interview results in a confession or not.
Interviewing, REID model, PEACE model, motivational interviewing,
Abstract: Prior research has established that
stock price declines are a significant driver for filing securities class
action lawsuits. There is a continued debate as to the relative importance
of case merit in the decision to file a case and the dispute outcome. The
accounting quality variables as proxies for managerial wrongdoing and test
whether accounting quality is a determinant of lawsuit filing decisions and
if it can distinguish frivolous cases from those with merit. The results show
that accounting quality, measured by accrual reliability, discretionary
accruals, one-time charges, and reporting opacity in relation to R&D and
intangible assets, significantly impact the decision to file a lawsuit and
the magnitude of settlement. These ex ante measures of accounting quality
serve as leading indicators of case outcomes even after controlling for
return performance and hard evidence events such as restatements and SEC
investigations. Findings suggest that accounting data is used by the
legal system as a determinant of lawsuit filings and outcomes.
litigation, earnings management, corporate governance, accounting quality.
Motivated by auditing regulators’ recent interest in related party
transactions (RPTs), this study examines SEC enforcement actions that
involved RPTs. Specifically, we compare fraud cases involving RPTs with
comparable fraud cases that did not involve such transactions. We find that
frauds involving RPTs had a lower impact on financial statements, but were
more likely to involve misappropriation and to involve a top executive (CEO
and/or CFO) in some aspect of the fraud. We also find weaker evidence that
frauds involving RPTs persist for longer time spans. In addition, we provide
a framework to document the types of related party transactions actually
occurring in these fraud cases. Overall, the most frequent types of
transactions in the enforcement actions were loans to related parties and
payments to company officers for goods or services that were either
unapproved or non-existent. Generally, related party transactions are not
necessary as mechanisms for fraud, and their presence need not indicate
fraudulent financial reporting. An
implication is the importance of evaluating related party transactions
within the broader corporate context.
party transactions, fraudulent financial reporting.
Abstract: This study evaluates fraud in China
from the perspective of Chinese Nationals using an explorative, qualitative
approach. This study finds that in order to understand fraud in China,
societal-level influences – including philosophical and religious tradition,
culture, social norms, and societal conditions such as rule of law,
political climate, and socioeconomic factors – must be taken into
consideration. There are significant societal-level factors that influence
fraud in China that have no direct equivalent in the United States, where
the Fraud Triangle Model was originally developed. As societal-level factors
vary across nations, an expanded version of the Fraud Triangle Model has
been provided to enhance usability of the Fraud Triangle Model
internationally. Fraud is a global problem, and the Fraud Triangle Model
should adequately explain fraud in different societies and be well-suited
for international use. Giving credence to societal-level fraud factors can
increase the effectiveness of fraud risk evaluations performed by external
auditors, internal auditors, audit committees, managerial accountants, and
management around the world.
China, international, culture, society, fraud triangle.
Public accounting in
the United States is a profession not only because it is defined as a
profession by statute, but because it also fulfills a significant number of
sociological criteria to be accepted as a profession. The recent increase in
the demand for forensic accountants has resulted in a significant growth in
the number of certifications in forensic accounting and also the number of
corporations issuing certifications in forensic accounting. Forensic
accounting is often referred to as a niche within the public
accounting profession. But forensic accounting exhibits many of the same
characteristics of a profession as public accounting. This article explores
the possibility of forensic accounting as a profession in its own right.
accounting, niche, profession, sociology of professions.
Abstract: This case is based on an actual fraud
related to a litigation support engagement that focused on an accounts
receivable collateral reporting fraud (improper revenue recognition and
asset overstatement) on the part of the management of a services company
against its bank. The litigation support work was for the bank’s legal
counsel. In addition to background and historical financial results, the
case study presents the motivations for the fraud, and the various
techniques used to falsify the accounting records and conceal the fraudulent
nature of the transactions from the bank and the company’s independent
auditors. Specifically, the case requires not only the investigation of
accounting issues as to the proper timing of revenue recognition, but also
auditing questions and fraud investigation techniques.
recognition, collateral reporting fraud, accounts receivable fraud,
litigation support engagement.
Abstract: The purposes of this paper are to: 1)
describe the integration of generalized audit software (GAS)—specifically,
IDEA—in an information systems auditing course, 2) to illustrate the data
mining capabilities of IDEA in two fraud detection cases, and 3) make
recommendations regarding the effective integration of the software in other
auditing or fraud/forensic classes. The first fraud case presented here
illustrates the use of data mining techniques to detect unauthorized users
in the system (Unauthorized Users), and the second illustrates detection of
unauthorized payments (Unauthorized Payments).
Generalized Audit Software (GAS), IS auditing, fraud detection, cases.
aftermath of accounting scandals, financial crimes, and business collapses,
the rapidly growing specialty of forensic accounting continues to define
itself. The need for forensic accountants (FAs) in government, industry, and
public accounting continues to grow. There also is an incredible need within
law firms for the specialized skills of FAs. Litigation often involves
multiple, complex accounting and legal issues that overlap and intertwine.
FAs with broad business backgrounds and forensic experience are a vital
resource to the litigation team and provide valuable insight into financial
“By having a forensic accountant within the firm, we are able to utilize her
financial skills early on as we evaluate new matters. Time requirements for
locating, interviewing, clearing conflicts, and scheduling meetings with
outside experts are minimized,” said Jim Medford, litigation practice area
leader for Smith Moore Leatherwood, a regional law firm with offices across
the Southeast. “With a forensic accountant in-house, we can offer our
clients more sophisticated services and cost savings in one stroke, and
ultimately, that’s what they are looking to us to do,” said Medford.
The skill sets of traditional accountants do not always transition well into
forensic services where strong analytical thinking, as well as oral and
written communication skills are essential. For FAs possessing these skills,
a law firm can offer an exceptionally wide variety of both interesting and
challenging work. By analyzing, interpreting, summarizing, and presenting
financial issues in an understandable format, FAs assist attorneys in
identifying a case’s key issues.
As an agent of the law firm, internal FAs are not required to testify or to
issue expert reports to the opposing side about their findings. They may
communicate freely with attorneys as these communications are not
discoverable by the opponents. When outside financial experts are needed for
testimony, internal FAs assist in finding experts with the requisite skills
and experience. The FA may also assist in preparing experts for trial. In
investigating the financial facts of a dispute, much of the information
needed by the outside expert will already have been obtained, organized, and
summarized by the internal FA.
The law firm-accountant relationship has the potential to grow and can be
mutually beneficial as firms realize the benefits of having an internal FA
and accountants seek creative ways to use their skills and experience inside
a law firm. Working with a law firm as a consulting or testifying expert
provides opportunity for the accountant to develop relationships within the
firm, to understand the firm’s culture, and to find ways that he or she
could benefit the firm. An internal FA can be a powerful resource for law
firms of all sizes, but the FA must persistently demonstrate this
Skilled accountants seeking employment in a law firm need a broad CPA
background: knowledge of accounting principles and applications, auditing,
and tax. A number of organizations offer specialized forensic training and
certifications. The Forensic and Valuation Services section of the AICPA
(American Institute of Certified Public Accountants) introduced the CFF
(Certified in Financial Forensics) in May 2008. This certification requires
that members be licensed as CPAs, pass an examination, have forensic
services experience, and maintain continuing education requirements.
* Tina Harris is an
internal forensic accountant at Smith Moore Leatherwood LLP, and a
member of AICPA Forensic & Valuation Services Section.
Accountants, due to their conservative nature and fear of being ineffective
(or worse) as a courtroom witness, are often reluctant to involve themselves
as expert witnesses in the dispute process, even when they are qualified by
training and experience. This article discusses why such instincts are
understandable but also explains why such instincts should be overcome and the
rewards for doing so. What can be done to deal with issues leading up to and
including testimony, should the CPA decide to venture forth as an expert
A practicing accountant or professor may be contacted by an attorney who
values the wide range of experience and specialized knowledge accumulated
over the years in public practice or teaching/ researching. In most cases,
the accountant/professor is busy with his or her "day job." Although
reasonably substantial fees are often available if the assignment is taken,
the accountant might be concerned that he or she does not have sufficient
time to devote to the dispute or investigation. An experienced accountant
should know that a weak expert report or testimony will subject him to a
painful experience by the other side's attorney. Worse still, any mistakes
or holes in his understanding of the facts or in the expert’s report will
create an embarrassment that will result in a written record that will live
on long past the trial (e.g., the Daubert Tracker).
Depending on the size of the matter, a middle course can be pursued that
minimizes the risk of error while reducing the amount of time the expert
needs to come up to speed, reaching a conclusion on the aspects of the case
on which he will opine, and writing a report. Many mid- sized accounting
firms have Litigation Support groups with reasonable billing rates and
personnel who are ready and willing to assist the testifying expert in every
aspect of his work from discovery through preparation of portions of the
expert report. Since this kind of assistance is the day-to-day business of
these Litigation Support groups, they often have excellent and experienced
personnel who have been through the dispute process for years. They also
are aware of the many pitfalls and can advise the expert accordingly.
After working for a number of years in both public and private accounting,
I (Yasmine Misuraca) have worked for the past ten years in the litigation
support field. I have had the pleasure of working with many eminent
experts, including my co-author, Ed Weinstein for many of those years. I
have been the "back office" for several other experts, some of whom were in
the top tier of accounting experts. What I, and the other members of our
Litigation Support group, bring to the table are organization, accounting
expertise, research capabilities, back office staff, and generally accepted
accounting principles (GAAP), and generally accepted auditing standards (GAAS)
knowledge. Ed and I have worked together on some of the major cases of the
last decade, and I like to think that I have supplied all that I've
discussed below as well as course corrections to both him and the retaining
attorneys when I thought they were wrong in terms of facts or
interpretations. Our continued collegial association testifies to the
effectiveness of the support we provide to the other experts with whom we
Ed was a practitioner who was a partner with a major CPA firm. Ed's first
experience as a witness affected his outlook throughout his professional
career as a CPA, and ultimately his decision to become an expert witness.
This experience occurred during his first year as an audit partner with a
large accounting firm, when he was responsible for the audit of a clothing
retailer. Through a consultation with another accounting firm, Ed realized
that the financial statements of the client were incorrect after providing
an unqualified opinion several weeks earlier. He immediately informed the
appropriate partners and the United States Securities and Exchange
Commission, and the firm withdrew its independent auditors’ report.
However, the client brought suit against the firm, alleging that the accounting
firm should have discovered the error before issuance of the report, and
that the firm was responsible for damages caused by late discovery of the
error. Ed was deposed.
Conservative in nature, Ed was anxious about being deposed, as this was his
first time giving testimony. Facing the unknown can be daunting. During his
deposition, Ed was presented with a small file of price adjustment forms,
taken (or, so said the plaintiff attorney) at random, from a much larger
pile of similar forms. He was asked to review these forms. In earlier
testimony, Ed had stated that the vast majority of price adjustment forms
were mark-up cancellations, with some mark-downs in the mix.
To his surprise, Ed quickly realized that the forms he was now looking at
were all mark-downs. This fact was a complete contradiction to his previous
testimony. Ed's answers to the next series of questions from plaintiff’s
attorney were fuzzy and added to Ed’s distress. Ed's attorney, noticing
that something was wrong, demanded that Ed be allowed to review the entire
pile of forms. Upon doing so, Ed realized that he was being duped. The
small file of documents originally presented to him for review by
plaintiff’s attorney, had been selected to mislead him in testimony.
Apparently, those documents had been culled from the
larger universe by the attorney in order to impeach Ed's previous testimony.
(It was later discovered that this duplicity by the attorney echoed
an even greater deceit by the company's CEO.)
The basic “error” in accounting for the price change forms had been caused
by the president of the retailer to deliberately inflate company
profitability. This falsification of financial results had occurred because
the president had instructed the company controller to incorrectly account
for merchandise price changes as markup cancellations, which did not
properly reflect lower of cost or market value.
Ed came out of this experience unblemished, as did his accounting firm. His
preparation before testifying proved extremely vital to the success. He also
discovered that testimony could be antagonistic and that opposing counsel
had his own agenda, which could be perilous to the witness. Ed overcame his
distress and remained calm and focused. These latter attributes served him
well when he became the testifying partner in a litigation defense matter
for his Big-4 firm, as well as when he began a second career many years
later as a testifying expert accounting witness, after his retirement. He
also realized the importance of having an intelligent, focused, well
prepared and observant attorney at his side. In a second career he did not
have the support of a large staff to support him, and he realized that he
needed a Litigation Support Group so he could be as effective as possible. It was
then that Ed and I formed a team.
Attributes of an Expert Witness
Being an expert witness means being independent and objective, having an
understanding of the facts of the dispute, having a firm knowledge of the
subject matter, being able to think and react quickly, working closely with
attorneys and, at times, being their teacher and challenging their
assumptions. It also means ultimately being alone on the witness stand.
An expert witness also must have good communication skills (oral
and written), a willingness to reason with the other side’s point of view,
and a capability to withstand pressure. Even if the expert’s professional
knowledge is complete and his or her comprehension of the facts is thorough,
the challenges of the environment are considerable, both during deposition
and court testimony. The work is often done under time pressure. Also,
there are times when the expert may disagree with her own client (counsel).
In that respect, this situation is really no different from the auditor -
client relationship. We are reminded of the adage: “If you can’t stand the
heat, stay out of the kitchen.” So, then, why get involved?
Expert witnessing can be a rewarding and an intellectually stimulating
activity. An expert witness is in many respects a problem solver for the
client, even helping to solve problems which have not been considered by the
client. Rewards include the knowledge that, if the expert has done his job
well, he has helped the trier of fact (judge or jury)
to understand complex issues (sometimes even opposing counsel), and
reach an appropriate conclusions.
Litigation Support Role in More Detail
Most expert witnessing assignments dealing with GAAP and GAAS require that
the witness be assisted by a competent litigation support assistant, or
sometimes by a team of assistants. The legal discovery process often yields
voluminous documents. These documents can consist of electronic documents,
memos, letters, emails, accountants’ work papers, charts and graphs, and
In addition to organizing documents obtained in discovery, the Litigation
Support Group also needs to have considerable skills in document management and
organization. Documents and other case related materials are frequently
received electronically. Thus, Litigation Support must have the necessary
computer skills to extract and organize this voluminous information.
Since these documents are largely of an accounting nature, the team must
include experienced CPAs. Sometimes the documents are disorganized.
Litigation Support must read, maintain, and organize the information. This
review and organization of materials received will help in enabling an
expert to review the materials in an organized manner and to identify and
find key documents later in the process. Invariably, the CPA expert also will have to review testimony transcripts of other witnesses. Litigation
Support also will read the testimonies and prepare testimony summaries.
These summaries are used by an expert in writing his or her report and
during testimony preparation. The summaries also may be used by the attorney
when taking deposition of others parties and preparing for trial.
An expert accounting witness must be well versed in both the accounting and
auditing literature, and the expert will have to research these matters, or
delegate a portion of that work to Litigation Support. Since accounting
principles and auditing standards are constantly evolving, only the
principles or guidance in effect at the time of the contested issue should
be referenced. So, prior rules and standards must be understood. It is
helpful if both the expert and Litigation Support have significant practice
experience. This practical experience is essential for certain cases.
Both the expert witness and Litigation Support may assist their client in
preparing materials for use in questioning the opposing side’s expert, both
in deposition and at trial, especially when dealing with GAAP or GAAS
issues. This help can be useful to counsel.
Litigation Support also plays an important role in protecting the expert.
We have both known of instances in which experts crossed the line between
objectivity and advocacy. This over- identification with the client’s
position is dangerous, even if the client’s position is correct. The expert
must always retain an objective attitude. Litigation Support needs to
monitor the development of the expert’s position (as set forth in the
expert’s report) and be alert to circumstances in which the expert may stray
beyond the facts or develop internal inconsistencies. Thus, in order to be
effective, Litigation Support must be confident and assertive enough to set
forth a position at odds with the expert being supported. The authors have,
on several occasions, disagreed as to how strong an opinion could be
formulated (or whether an opinion could be given at all) based on the
Although there may be times when the expert and the Litigation Support Group may
disagree, they always work together as a team. But the expert has the last
word. Because his or her reputation on the line. There are
different models as to how the work is divided. Some experts like to write
reports from scratch and read all case documents. Other experts have
Litigation Support draft sections of the report. In either event, both the
expert and Litigation Support edit report drafts as they are prepared. In
addition, they work together in preparing for testimony to be given at both
deposition and trial. When done well, this effort is truly a collaborative.
Guiding the Attorney
The attorney may retain both the testifying expert and support team, albeit
with separate engagement letters. This separation ensures that Litigation
Support is objective with respect to the expert. Before being engaged, the
expert is typically presented with the attorney’s point of view regarding
the matter being litigated. This process may be done orally, or, more
likely, the expert is given certain materials to review and then questioned
At this initial stage an expert must be comfortable that the position being
advocated by counsel is one with which the expert agrees. While an
accounting expert may choose to take a dispute that he or she knows to be weak,
this acceptance can cause problems because of the differing roles and ethics
of the accounting and legal professions. The best an accountant can do in
a case with major weaknesses is to clarify the depth of the problem from an
accounting perspective for the attorney.
Unless the attorney can repair the weakness (for example, by providing
additional documentation or evidence), one should acknowledge the weakness in
the case, provide that information to the attorney, and walk away.
Ultimately, the weakness will show up and no one’s interest will be served
by false advocacy, which is both unethical and bad business.
We have been involved in disputes where we accepted our attorney's initial
description of the issues, but after assembling and reviewing the evidence
we found we could not agree with our attorney's interpretation and
argument. We informed the attorney and defended our position based upon the
evidence we had reviewed. We then learned that there also was disagreement
within the attorney team retaining us. In order to diffuse the situation, Ed
agreed to write his report going to the limit of what the evidence permitted
him to opine about. He then challenged the attorneys to find additional
evidence in certain specific areas. We agreed that if such evidence could be
obtained, the report’s conclusions would be extended. When no further
evidence supporting the attorney's position was found, they settled case.
In other circumstances, we have found alternative courses of action that
enabled our client to proceed with the case using their strongest arguments
and discarding peripheral ones. It is always advisable when considering
whether to take on an assignment that the potential expert inform the
retaining attorney that the expert opinion will be based on only the facts
and that an accountant's job is to bring light and objectivity to the
In preparation for testimony, sufficient time must be budgeted to prepare
the expert for testimony. Litigation Support works with counsel and the
expert in this preparation. Litigation Support will "grill" the expert in
all relevant aspects of the case anticipating questions likely to be asked
by opposing counsel. Litigation Support also may be tasked with developing
exhibits to be used by the expert at trial.
Although we could direct another entire article to our recommendations with
respect to best practices for testifying at trial, here are some suggestions
drawn from our experiences that are helpful:
Expert witnesses should keep answers as concise and simple as possible.
Remember, the purpose of the expert’s report and testimony is for the use
and benefit of the judge and/or jury. Communication should be focused
accordingly. Expert witnesses may find it useful to use analogies to
explain accounting concepts. For example, Ed likes to use musical notes to
illustrate that if incorrect notes are played, disharmony results.
Similarly, if different accounting principles or numbers are used in
financial statements, a different financial picture is portrayed.
Consideration should be given to using analogies taken from everyday
experiences to which non-accountants can relate, such as sports rules to
explain GAAP rules. Whatever works in helping lay people to understand the
ins and outs of accounting is the reason the expert was retained.
The expert should expect examining counsel to attempt to impeach his or her
testimony. One tactic is to use the expert's own words or prior opinions
against his testimony in the current matter. The expert should not be
surprised by this tactic and can counter the lawyer by stating that the
prior writing was fact specific and not relevant to the current matter.
Whenever the expert publishes anything for trade journals or in any medium
that becomes part of the public record, he should be aware that his opinions
can be used against him in a future proceeding.
Another effective tactic used by opposing counsel is to be extremely
solicitous of the witness at deposition and then attack him ferociously at
trial. Alternatively, at trial through a series of “softball” questions and
a generally friendly demeanor, the opposing counsel creates a false sense of
security in the testifying witness setting up the expert for more difficult,
challenging or even harassing questions.
Opposing counsel may attempt to harass or unnerve the expert by asking
questions about matters not relevant to the dispute. Although, a judge will
usually sustain an objection, this approach is done for its effect on both
the witness and jury. Our advice is to look for an opportunity to refute the
insinuation offered by the offending question.
Some attorneys use hypothetical questions or examples in an attempt to
confuse both the expert and the jury members. The hypothetical questions
can become increasingly complicated and vague in such a way as to appear as
factual evidence. In answering the sequence of hypothetical questions, an
expert should repeatedly point out that her answers are based on
hypothetical and not real facts. At an appropriate point the expert can
point out that the line of questioning regarding the hypothetical example
has strayed too far from the real facts of the dispute to have any usefulness.
Common in cases involving corporate executives, who have allegedly created
erroneous financial statements, is a defense of: “I relied upon my
auditors.” A CPA expert must know how to deal with this situation before
becoming a trial witness. A useful approach is to anticipate this defense,
review the auditors’ work papers and other data, and proactively address (in
the expert report) the role of auditors and management.
Being an expert witness can be challenging and stimulating. Properly
prepared, accounting and auditing professionals can be much more confident
about taking on the responsibility of an expert witness assignment, assuming
time is spent to really understand the facts of the dispute. Just remember
these words of Shakespeare: “To thine own self be true.” Consider those
words in contemplating whether to accept an expert witness assignment. A
CPA contemplating accepting an expert witness assignment must evaluate his
or her own temperament and knowledge of the subject matter and determine
whether she is the right person for the challenge. The prospective expert
witness should not overreach and accept an engagement which exceeds
professional or emotional capabilities. As long as this advice is followed,
an expert witness assignment is rewarding and interesting work and
beneficial to both the legal and economic systems.
* The authors are,
respectively, Director of the Litigation and Corporate Financial Advisory
Services at Marks Paneth & Shron LLP, and retired partner of Deloitte and
Touche LLP and expert witness for the past ten years.
D. Rabon and T. Chapman, 2010, $20, 176 pp.
Carolina Academic Press
700 Kent Street
Durham, N.C. 27701
The authors cover the interview process as
it relates to a fraud investigation, a fraud-related audit,
or inquiry into a reported fraud. Their position is that the
dynamics of fraud itself are inexorably connected to the
subsequent fraud interview and ultimately the outcome of the
investigation. The interview is not an isolated event but
rather a part of the nagare (a Japanese word meaning “flow”)
of the entire fraud dynamic from precursors, to the
commission of the crime, to closure. In the fraud-related
interview, the interviewer connects three different time
periods--the past, the present, and the future. The past
addresses the dynamics of the individual and his or her
subsequent behavior resulting in the commission of the
fraud. The forecasting of future events is sought after
successful outcome of the fraud investigation. In the
present, the interviewer seeks to connect the past and the
future-- the flow, if you will, of all three.
The text utilizes interviews with convicted fraudsters to
allow the reader to gain an understanding as to how
fraudsters deliberate before, during and after the
commission of fraud. This understanding is future enhanced
within the text via application questions, practical
exercises and additional relevant information can be used in
Proli Footwear, Inc., 2nd Edition
An Audit and Fraud Simulation
P.J. Proctor and P.M. Poli, 2011
Prolifootwear.com or Amazon.com
The soft cover book is a team-based
auditing and fraud simulation designed to reinforce auditing
and fraud theory. When used with a traditional auditing
text, this simulation provides a practical, hands-on
team-based experience for the students. Excel templates are
included to assist in the preparation of the audit
The simulation contains nine sections with 12 work modules
for students to analyze and complete as they conduct the
audit of Proli Footwear. This approach gives the students an
excellent opportunity to integrate audit theory and practice
and to be alert for fraudulent red flags. Throughout the
modules students are engaged in solving challenging audit
and fraud problems.
Work modules are designed to stand alone, which gives
flexibility to the instructor to assign specific modules or
the complete audit.
The 3rd Annual Midyear Forensic and Investigative Accounting
The Third Annual Midyear Forensic and Investigative Accounting
Conference will be held March 30-31, 2012, at the Loop Campus of DePaul
University in Chicago, IL. The AAA meeting section is co-hosted by
DePaul University and Roosevelt University. The conference will consist
of keynote speakers, concurrent sessions dealing with a wide variety of
fraud, forensic and investigative accounting topics, panel discussions,
case work, and film previews.
The 9th Annual Fraud and Forensic Accounting Conference
Mark your calendar for July 23 and 24, 2012, for the
Louisiana State University Fraud & Forensic Accounting Conference in
Baton Rouge, LA. For more information about the 2011
conference, go to:
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 (firstname.lastname@example.org). 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.