Its importance is very high, even if the occurrence is very rare because of continuous tracking of Auditing experts it still expected to get more serious and frequent in some cases, the reason Forensic is also a part of Accounting and is categorized into Litigation Support and Investigation and Dispute Resolution. LITIGATION SUPPORT Litigation support is the presentation of various issues that is related to existing incidents. The Forensic expert will take part in evaluating the loss and damage caused and will also assist in giving solution on the concerns raised even before it reaches the court of Law.
It includes assistance for support or to reject the claims with documented evidences. Also reevaluate all the relevant documents and assisting or suggesting what questions to be asked during the submission of the evidence that are financial and non- financial. It also includes reviewing the testimonials and assist in reviewing the damage reports and reporting the weakness as well as strength of the positions along with assistance in settlement and negotiations. INVESTIGATION AND DISPUTE RESOLUTION This process will determine the criminal matters such as Identity Theft, Employee Frauds, Insurance Frauds and Security Frauds.
The Forensic Accountant also recommends actions to prevent any future loss or damages. Forensic Accountant will help cooperates in preventing frauds to happen and also maintain the compliance with proper actions in place to avoid any future occurrences Role and Importance From 2001, many companies had disclosed financial fraud and its impact on Accounting profession, Business People, Investors and Costumers. Because several companies seeking bankruptcy Federal Government created strict laws for Business as well as for Accounting.
This act sates that the Chief Executive Officers and the Chief Financial Officers are solely responsible or any discrepancy in their financial statement failing in which can lead to huge fines which also include imprisonment. This act had become the most sweeping legislation for the Accounting Profession sine the Securities Act 1933 and the Securities Act of 1934. The CAFE- American Institute of Certified Public Accountants and the Association of Certified Fraud examiners had emphasized the need of education in detecting and prevention of potential accounting Frauds.
This lead to the emergence of Forensic Accounting and Fraud examination to comfort financial abuse. As per the CAFE report organizations SSE up to 6% of all small business annual gross revenue in 2004 on fraud, the reason why Forensic Accounting and Fraud Examination is one of the fastest growing sectors in all field of employment. Forensic Accountant had become an important role in analyzing and presenting complex financial and business in a way, which is both understandable and well supported.
Forensic Accountant develops computer based applications to assist in analyzing and presenting the financial evidence about their findings in the form of reports. They will also support with documents in legal proceedings to testify in court preparing visual ids to support trail evidence. Forensic Accountant can be of assistance by: To Identify important documents which works as evidence when the Forensic Accountant works for the lawyers and for defense and such documents to be submitted before the court. Giving Initial advice and evidences that are available before starting the proceedings.
Detailed Reports to be prepared which is transparent and understandable to non accountant or for anyone who deals with that case irrespective of their favor to the client. Review and advice lawyers on the expert account reports submitted by the other party which will impact the intensity of the evidence. IMPORTANCE OF FRAUD EXAMINER A Fraud Examiner plays a very important role in Forensic Accounting. They should have high level of competence, honesty and integrity. They should be trained well and also need to pass all the relevant examination to become a qualified member of a recognized accountancy body.
Fraud Examiners are generally auditors or accountants who use their skill, knowledge and experience in detecting and document the frauds in the book of auditing. Their attitudes are: 1 . Fraud is possible even though it’s been controlled strongly in the accounting systems. 2. In a Transaction fraud there is more damage in the invisible part than the actual which is visible. 3. Red flags of fraud are discernible if one looks long and deep enough. 4. Fraudsters can be from any level of management or society.
Fraud Examiners requires skills that are equally required for financial auditors along with the knowledge of gathering evidence and document fraud losses for criminal, civil and insurance purposes. They should also know whether the fraud is from Legal, audit, environmental or cultural prospective. It’s an added advantage if they carry knowledge from manufacturing, banking, distribution ND insurance industries. Fraud examiners job consists of detecting, preventing and correcting frauds even though eliminating such things completely is practically not feasible.
The objectives are to determine whether a discrepancy in accounting records is either intentional or accidental by human error or mistake. If it’s accidental then it’s not an actual fraud. But if found intentional or modified for a purpose then further investigation should follow. Fraud Examiners involvement in private sector comprises of financial crime such as misrepresentation of financial facts, arson for profit, investment frauds, bank raids, kick backs, commercial bribery, Fund transfer frauds, credit card frauds also includes scams involved with vendors, contractors and customers.
Fraud examiners should be expertise in applicable legislation, standards which includes criminal and regulatory statutes. These laws along with the increase in the fraud in public companies, abuse in government contract, requires greater requirement of development of discipline in fraud auditing. Principles of Fraud Audits: Fraud Auditing is more like a mindset than a methodology They focus on exceptions, accounting irregularities and pattern of conduct. Fraud auditing is basically learned and understood by experience than with theory or studies.
To become a fraud examiner means think like a thief to find out the loops and tricks to crack things. Accounting frauds are caused major because of absence of control. Frauds are occurred by an individual or by a group of people whose motive is to create monetary benefits with intentions to manipulate the basic policies of a system in their way. As a whole Forensic accounting had become an important part of accounting as its not only required to audit the things but also required to avoid any factors that can involve in manipulation of he actual.
Describe Skills required for Forensic Accountant and Financial Fraud Examination: The need of forensic accountant also had created the requirement of quality and highly skilled performance in their duties. Support and Investigation and Dispute Resolution. A forensic accountant should have higher level of competency and integrity to do his job. And also he must be well trained and educated and should be competent by passing all the relevant examinations and tests to become a member of a recognized accounting body. The minimum requirement for becoming a Forensic accountant is: 1.
He would have the ability to look into large data’s of accounting and management information systems and financial data’s of a corporate and find out the issues and problems as early as possible. 2. He should react to situations promptly and urgently with high commitment whenever required. 3. Should follow strict time lines to finish up things and should be ready to stretch to finish up the work on TAT. 4. He should have the ability to present and communicate complex theories and facts to a transparent and simple presentable manner.
So that even a layman should understand the facts without getting a feeling of superiority. . Most importantly an ability to appear objectives and professional even when Taking part in the process of a court case. Forensic accountant takes a lot of proactive and skeptical approach in examining the Books of Accounting. They don’t make any assumption of management integrity and shows less concerns for the arithmetical accuracy and have nothing to do with the Accounting or Assurance standards but are keen in exposing any possibility of fraud.
Forensic accounting is the application of a specialized knowledge and specific Skills to stumble upon the evidence of economic transactions. The job includes porting when a fraud is established. This report is considered as evidence in the court of law. In addition to the specialized knowledge about the techniques of finding out the Frauds one needs patience and clear mindset. One has to look beyond actual things and situations. He needs to question any document and look for Inconsistencies. He searches for evidence of criminal conduct and assists in determining damages.
He should have the ability to think in any particular field. Doing so will also increases his chances of success. A forensic accountant is an individual who have an array of skills combined. More Han a CA he should also has auditing and investigation capabilities that are required to explain the complexity of litigation in tax and finance. They could find out detailed information of anything in particular from a bulk data and make it presentable in a simple way with supporting documents in the court of law. The importance of the forensic accountant’s role in the detection of fraud is continuously growing.
With combination of skills these financial detectives are today important assets to modern legal teams. In this increasing level of frauds the demand for forensic accountants is bound to substantially increase in the true. There is wide range of skilled activities a Forensic accountant should have: 1 . The expert witness – preparation of formal reports for filing in Court and giving evidence as an expert 2. Litigation Consultancy – working with lawyers and their clients engaged in litigation and assisting with evidence, strategy and case preparation. 3.
Fraud Detection – assisting clients in detecting financial fraud by employees and others and tracing misappropriated funds. 4. Computer Forensics – assisting in electronic data recovery and enforcement of IP rights… Principles of Fraud Audits: the actual. Their attitudes are: yester. 2. In a Transaction fraud there is more damage in the invisible part than the actual which is visible. 3. Red flags of fraud are discernible if one looks long and deep enough. 4. Fraudsters can be from any level of management or society. A Fraud Examiner plays a very important role in Forensic Accounting.
They should have high level of competence, honesty and integrity. They should be trained well and also need to pass all the relevant examination to become a qualified member of a recognized accountancy body. Fraud Examiners are Examiners involvement in private sector comprises of financial crime such s misrepresentation of financial facts, arson for profit, investment frauds, bank frauds, kick backs, commercial bribery, Fund transfer frauds, credit card frauds also includes scams involved with vendors, contractors and customers.
Fraud examiners should be expertise in applicable legislation, standards which includes criminal and regulatory statutes. These laws along with the increase in the fraud in public companies, abuse in government contract, requires greater requirement of development of discipline in fraud auditing. Fraud Auditing is more like a mindset than a methodology auditing is basically learned and understood by experience than with theory or studies. To become a fraud examiner means think like a thief to find out the the actual.
Enlist and explain in brief various types of frauds: Insurance Fraud Insurance is one of the critical areas where major frauds happened. Year on year huge amount of funds flow out to fraudsters through this way. Insurance Industry had become one of the sectors where many frauds happen and get repeated. Even though corporate keeps strict process, still there are different ways it could happen. When customer and the sales person combine together loud make frauds that could make huge outflow of money. The frauds are caused by the customers, sales person, or by the Companies itself.
It could basically starts with frauds by the sales person. Giving wrong information, selling wrong products, non disclosure of facts, misrepresentation of facts, document forgery etc… It goes to the customer side when he is aware of frauds that happen on forgery of his own identity, source of income, wrong family history, misrepresentation of facts, hiding the facts, bouncing of payment cheeses etc for the purpose of getting the claim ore for the purpose of getting tax benefit. When it comes to the company, usually these frauds come in a huge way.
When frauds done by the sales person is been promoted by the company to increase the sale or to show higher profits in the books or to increase the customer data base it becomes the fraud by the company. Credit Card Fraud These frauds are happened based out of credit cards. Usually credit cards are used in online portals for shopping or making payments, purchases done in shopping malls etc. World Wide Web had expanded in a vast way and the chances getting into the hand of fraudsters had become very high now days.
While making purchases online through various websites, even though they are secured an experienced hacker could break into its firewall and get the details like the card number and security passwords or C.V. number. This infect is used by the fraudsters to do purchases or access restricted websites or can also be used for illegal activities. If purchases done in an unknown shops or places which are not secured, fraudsters now a day’s Uses the swiping machines to clone the cards and use the same to withdraw money or use it for illegal activities. ATM Fraud This fraud is somewhat similar to the credit card fraud.
But fraudsters hacks ATM machines to do these frauds. When a consumer comes for cash withdrawal these fraudsters installs camera prior to them so that they could watch the details of the cards and passwords. Then they clone the cards and get the money withdrawn. They may also tamper the card inserting machine to clone cards, these are mainly happening in unarmed or unsecured TAMS. There are events where Tams itself had been theft or tampered to retrieve money from these machines. Tax Frauds This is one of the highest or largest areas of frauds. Somehow a large group of people had been participating in these frauds.
These frauds consist of frauds that can manipulate the income or Tax payments that needs to be done to the government. This happens across all the industry and major happens with Business man. Business people submit their tax info once in a year infant salaried people’s tax gets deducted upfront before they receive their income. Many Business people show low income or not even disclose their income so that they save huge amount of money through not paying tax to the government or even they show huge losses in the book of accounts to nullify the profit to avoid any tax deduction.
Online Fraud These frauds are happened based out of credit cards, Debit cards or Net banking. Usually credit cards are used in online portals for shopping or making payments, purchases done in shopping malls etc. World Wide Web had expanded in a vast way and the chances getting into the hand of fraudsters had become very high now days. While making purchases online through various websites, even though they are secured an experienced hacker could break into its firewall and get the details like the card number and security passwords or C.V. number.
This infect is used by the fraudsters to do purchases or access restricted websites or an also be used for illegal activities. If purchases done in an unknown shops or places which are not secured, fraudsters now a day’s uses the swiping machines to clone the cards and use the same to withdraw money or use it for illegal activities. Explain Chain of Custody: The tracking of physical evidence retrieved from a crime scene till the time it is presented in the court for further assessment is basically called as chain of custody.
This evidence should be presented and described in the court room for the trail. Chain of custody is very much important in the assessment of a trial as he process of movement of the evidences has to be secured and avoid any kind of alteration or damage so as to avoid any defects or alteration that will affect the investigation in any forms. To maintain the parameters the process of chain of custody is followed up by the investigators. The evidences received from a crime scene is safely secured by an investigation officer and is been transferred to Forensic lab for further tests.
It’s required for the Lab in charge to accept the same, sign and date it before proceeding further. The same is followed up each time someone handles this evidence to avoid any mage to the evidence. Further to the Lab verification it’s been transferred to the Police department where they will do the signing and dating of receiving the evidence and store till the time the court calls for a trail. Chain of custody plays an important role in an investigation; it could be called otherwise as a paper trail that involves Transferring, analyzing, custody and transfer of evidence.
This is mainly used for the purpose while certain crime scene involves drugs or any physical content. These evidence had to be secured well from the scene of crime by the investigating officer and the same has to be entered with the data that includes date and time of collection, condition of the evidence at the time of collection, security conditions at the time of gathering the evidence, place at which it is stored, time duration of storage, details and signature of each person that handled the evidence from the time it is collected from the crime scene and till the time it reached the court for trail.
Chain of custody is the one way where the court checks the gentility of evidence. Court may ask this from the person who is trying to introduce evidence in the trail of a crime. These are asked mainly when the evidence is of such manner that it can be altered or defected to change the trail or can alter the investigation in any way. An actual chain of custody requires basically three types of testimony. 1 . Testimony of each person who had handled the evidence from the time it is found from the crime scene till the time it’s been submitted in court. 2.
Testimony that a piece of evidence of what it is, and its content. 3. Testimony from each person that handled the evidence from the crime scene to the court with the updates of the condition of the evidence along with their signature that tastes the exact state of the evidence from the time they receive it till the time they had transferred it to another person. Evidence Custodian: A custodian can be a person appointed by order, a warrant officer, or a commissioned officer. A custodian must be always available to receive and deliver the evidence as per the requirement.
There can be an alternate appointed. At least one of the custodian or alternate has to be available to receive or to release the evidence. In the non presence of the custodian the alternate can do this process on behalf of him but the final decision made will be by the custodian himself. A recovery of a Gun from the crime scene location is an example of Chain of Custody. The gun is been recovered from a crime scene by the investigator and is securely packed and labeled and sent to the forensic lab for further verification.
The forensic lab expert will analyses the evidence for any clues such as fingerprints, model no, and bullets. After this he would securely store the evidence along with the report till the time it’s been asked for further investigation or for the trail in the court. Each person who handles the evidence from the crime scene, investigator officer to the forensic lab experts who handles the evidence and ports has to document their access to the evidence along with date, time and place and the duration along with the condition of the evidence to be entered and documented in the report.
Chain of custody is the one way where the court checks the clarity of evidence. Court may ask this from the person who is trying to introduce evidence in the trail of a crime. These are asked mainly when the evidence is of such manner that it can be altered or defected to change the trail or can alter the investigation in any way.