Index

Abetting, 46–47

Accounts receivables, 16

Aiding, 46–47

American Institute of Certified Public Accountants (AICPA), 4

Analytical procedures, 25–27

Antifraud role, 8

antifraud education, 105–106

of board of directors, 83–87

forensic accountants, 97–99

of external auditors, 91–97

of internal auditors, 88–91

of management, 87–88

market, 100–101

correction mechanisms, 101–103

policies and practices, 76–82

private-sector investigators, 99

public-sector investigator, 99

of regulators, 103–105

of short sellers, 97

standard setters, 100–101

Artificial neural networks (ANNs), 28

Asset misappropriation, 15–18

accounts receivables, 16

cash schemes, 16

employee fraud and theft, 17–18

fixed assets schemes, 16

inventory, 16

Association of Certified Fraud Examiners (ACFE), 10, 71, 149

Association of Chartered Certified Accountants (ACCA), 114

Audit risk (AR) model, 37

Benford’s law, 27

Big Data, 29, 122–125

Block-chain technology, 150

Board of directors, antifraud role of, 83–87

Brainstorming sessions, 21–22

computer-mediated technique, 21

mind-mapping, 21

open-ended technique, 21

strategic reasoning, 21

Bribery, 149

Cash schemes, 16

Certified Forensic Accounting Credential (CFAC), 2

Certified Fraud Examiner (CFE), 2, 98, 115

Certified in Financial Forensics (CFF), 2

Certified Public Accountants (CPA), 2

Certified Valuation Analyst (CVA), 2

Challenges in forensic accounting, 113–138

Big Data, 122–125

corporate governance challenges, 125–128

data analytics, 122–125

digital forensics, 120–122

forensic accountants, 115–137

antifraud program and plan, 134–135

enterprise risk management (ERM), 135–136

financial fraud investigation, 115–120

internal control reporting, 132–133

XBRL-generated financial reports, 136–137

investment decisions by investors, 126

power-sharing, 127

sustainability reporting and assurance, 130–131

whistleblowing, 128–130

Collusion, 146–147

Committee of Sponsoring Organizations (COSO), 56–57

Committee of Sponsoring Organizations of the Treadway Commission (COSO), 8, 41

Computer-mediated brainstorming, 21–22

Concealed liabilities, 9, 11–12

Conditions, corporate structure, and choice (3Cs), 66

Conspiracy, 146–147

Control risk (CR), 38

Corporate gatekeepers role in FSF, 83–106

antifraud education, 105–106

board of directors, 83–87

external auditors, 91–97

forensic accountants, 97–99

internal auditors, 88–91

management, 87–88

market correction mechanisms, 101–103

market, 100–101

private-sector investigators, 99

public-sector investigator, 99

regulators, 103–105

short sellers, 97

standard setters, 100–101

to narrow expectation gap, 95

Corporate governance

challenges, 125–128

fraud, forensic accountants role in, 55–108. See also financial statement fraud (FSF)

detecting and preventing, 55–108

Cressey, Donald, 3

Cut-off fraud, 10

Cyberattacks, 152–156

Cybercrime, 152–156

Data analytics, 28, 122–125

Demonstrative evidence, 20

Detection risk (DR), 38

Digital forensics, 120–122

Dundas BI, 124

IBM Cognos Analytics, 124

Microsoft SharePoint, 124

Direct evidence, 19

Documents, 3

Dodd–Frank (DOF) Act of 2010, 129

Dundas BI, 124

Earnings management, 9, 13–14

Economic, governance, social, ethics, and environmental (EGSEE), 131

Education, antifraud, 105–106

Electronic Data Gathering, Analysis, and Retrieval (EDGAR), 136

Emerging issues in fraud investigation, 143–156

bribery, 149

collusion, 146–147

conspiracy, 146–147

fair value estimation, 145–146

forensic accountants, 144–145

money laundering, 147–148

Ponzi schemes, 149–150

revenue recognition, 144–145

Employee fraud and theft, 17–18

detection, 18

prevention, 18

Enterprise risk management (ERM), 135–136

Error or fraud, 92

Evidence, 18–30

demonstrative, 20

direct, 19

gathering, 18–30

planning and preparation, 20–21

procedures, 20–21

reporting, and court proceedings, 21

identifying, 18–20

real or physical, 20

rules of, 19–20

testimonial, 19

types of, 19–20

Evidence-gathering methods, 21–30

artificial neural networks (ANNs), 28

Benford’s law, 27

brainstorming sessions, 21–22

computer-mediated technique, 21–22

forensic data analytics, 28

mind-mapping, 21–22

open-ended technique, 21

red flag identification, 22–24. See also individual entry

strategic reasoning, 21

Expert system aids, 24–25

Extensible business reporting language (XBRL), 136–137

External auditors, antifraud role of, 91–97

Federal Deposit Insurance Corporation (FDIC), 136

Federal Financial Institutions Examination Council (FFIEC), 153

Federal Rules of Evidence, 45–46

Fictitious revenues, 9–11

Financial Accounting Standards Board (FASB), 144–145

Financial fraud investigation, 115–120

Financial reporting analysis, 26

common size, 26

trend analysis, 27

Financial reporting fraud (FRF), 6–8

accountability element of, 7

Financial statement fraud (FSF), 56–71, 114. See also under corporate gatekeepers role

actions, 119

consequences, 119

elements, 118

The Act, 120

The Concealment, 120

The Conversion, 120

forensic accountants’ role, 59

failures, 60–61

functions, 119

harmfulness, 116–118

occurrences, reasons for, 58

conditions, corporate structure, and choice (3Cs), 66

prevention, detection, and correction, 78–80

reported FSF, 63–66

schemes, 70

Fixed assets schemes, 16

Foreign Corrupt Practices Act (FCPA), 149

Forensic Certified Public Accountant (FCPA), 2

Forensic data analytics, 28

Fraud models, 3–9

economic incentives, 8

fraud diamond, 5

fraud triangle, 4

fraud-on-the-market theory, 101

incentive, 3, 5, 7

opportunity, 3, 5, 7

Pentagon model, 5

rationalization, 3, 6–7

Fraudulent misstatements, 9–14

concealed liabilities, 9, 11–12

earnings management, 9, 13–14

fictitious revenues, 9–11

improper asset valuation, 9, 13

improper disclosure, 9, 12

timing difference fraud, 9–11

valuation, 9, 13

Free of material misstatement, 92

Hermanson, D.R., 4

High-Risk Money Laundering and Financial Crimes Areas (HIFCAs), 148

IBM Cognos Analytics, 124

Improper asset valuation, 9, 13

Improper disclosure, 9, 12

Incentive, 3, 5, 7

Information technology, fraud and, 150–152

Inherent risk (IR), 37

Integrated financial and internal control reporting (IFICR), 132

Internal auditors, antifraud role of, 88–91

Internal control over financial reporting (ICFR), 132–133

Internal controls, 43–44

International Standards Organization (ISO), 152

Interviews, 47–50

Inventory fraud schemes, 16

Investigative risk, 37

Investigative techniques, 44–51

abetting, 46–47

aiding, 46–47

deposition, 44–45

Federal Rules of Evidence, 45–46

interrogation, 49

interviews, 47–50

report, preparing, 50–51

testifying experts, 45

testimony, 44–45

Kedia, B., 7

Management, antifraud role of, 87–88

Market correction mechanisms, 101–103

Market, antifraud role of, 100–101

Matters Under Inquiry (MUI), 104

Microsoft SharePoint, 124

Misstatements, 9–18. See also fraudulent misstatements

fraudulent financial reporting, 9

misappropriation of assets, 9

Money laundering, 147–148

National Money Laundering Strategy, 148

Opportunities in forensic accounting, 3, 5, 7, 113–138

Certified Fraud Examiner (CFE) certification, 115

SEC initiatives, 115

Tennessee Bureau of Investigation (TBI), 115

Pentagon model of financial reporting fraud, 5

Ponzi schemes, 149–150

Private-sector investigators, 99

Processes of forensic accounting, 1–31

Public Company Accounting Oversight Board (PCAOB), 14, 37, 93

Public-sector investigator, 99

Rationalization, 3, 6–7

Real/physical evidence, 20

Reasonable assurance, 92, 94

Red flag identification, 22–24

change in behavior red flags, 23

employee red flags, 23

expert system aids, 24–25

management red flags, 23

regression models, 24

Regression models, 24

Regulators, antifraud role of, 100–101

Risk management, 36–43

audit risk (AR) model, 37

components, 41–42

control risk (CR), 38

detection risk (DR), 38

inherent risk (IR), 37

investigative risk, 37

Roles of forensic accounting, 1–31

documents, 3

forensic accountants, 2–3

witness statements, 3

Sarbanes–Oxley (SOX) Act, 12, 56

Securities and Exchange Commission (SEC), 19

Short sellers in discovering fraud, 97

Skepticism, 95

Special-purpose entities (SPEs), 145

Standard setters, antifraud role of, 100–101

Suspicious Activity Reports (SARs), 148

Sustainability reporting, 130–131

Techniques, forensic accounting, 35–53. See also investigative techniques; risk management

internal controls, 43–44

Testimonial evidence, 19

Thornton, Grant, 121

Timing difference fraud, 9–11

Vehicles of variable interest entities (VIESs), 145

Whistleblowing, 128–130

Witness statements, 3

Wolfe, D.T., 4