Five skills that a forensic accountant needs to possess and evaluation the need for each skill
After scandals of Enron, WorldCom, Adelphia and the 9/11 attacks among others, roles of forensic accountants became crucial in corporate governance. Forensic accountants prefer complex fraud investigation as they employ various key skills to discover fraud. Researchers such as Messmer, Harris and Brown have evaluated necessary skills and technical requirements, experience and capabilities of forensic accountants (Messmer, 2004; (Harris and Brown, 2000).
DeGabriele also reviewed relevant accounting texts, practitioners’ opinions, and businesses that seek services of forensic accountants in order to identify key skills that forensic accountants should possess (DiGabriele, 2008). Results of such efforts have identified various categories of such skills as related to knowledge, experience, training, education, and ability to perform. However, users of forensic accountants believe in the ability to perform a task using forensic accountants’ relevant skills. Core skills of forensic accountants must include abilities to conduct computer forensic analysis, fraud prevention, detection and response, forensic analysis, valuation, damages calculation, and financial statement analysis among others.
Forensic accountants must possess litigation skills. Forensic accountant must act as an expert witness and consultant in cases of court proceedings. This skill enables the forensic accountant to conduct thorough investigations, review organizational fraud, damages, and provide information in a manner non-accountant professional such as juries, and judiciary can understand.
Forensic accountants must also possess analytical skills because companies’ frauds are deep within accounting systems. Forensic accountant must identify useful data from huge collections in order to reveal financial crimes. Analytical skills enable forensic accountant critically analyze complex data and simplify such information as a basis for investigation and further presentation.
Computer skills are also significant in the work of forensic accountants. Most documents and financial accounting systems are in electronic formats and software. As a result, forensic accountants must show sufficient knowledge in computer usages when looking for evidence trails in e-mail exchanges and other electronic media. At the same time, forensic accountants must also possess sufficient knowledge in accounting software that can detect white-collar crimes, perform extraction and analysis of data.
Another useful skill is investigative skill. This entails gathering information and performing analysis of audited financial information in order to detect any anomaly auditors may have missed. The investigative skills must cover both paper and electronic files in order to detect discrepancies that normal accounting or auditing systems cannot detect. Investigative skills of forensic accountants must take the forms of those of criminology concerned with fraud, detection and response.
Communication skills are also essential in the work of forensic accountants. Forensic accountants must possess effective communication skills of both oral and written. This is because forensic accountant must get information from suspected criminals and present the same during criminal proceedings, and act as an expert witness in court proceedings. This also implies that forensic accountants must also have sufficient reporting skills. In an organization, forensic accountants encourage dissemination of information regarding effective corporate governance in order to prevent fraud, and other white-collar crimes.
The role of a forensic accountant within a courtroom environment
Forensic accountant acts like expert witness during courtroom proceedings. An expert witness acquires the status through a virtue of qualification, training, knowledge, skills, and experience in a field. The expert witness knowledge is beyond average and can sufficiently be useful where expert opinion is necessary in forensic fields about issues and evidence. Forensic accountant provides expert evidence regarding white-collar crimes during court proceedings. Forensic accountants may also experience rebut of evidence presented in courts. Thus, forensic accountants must defend evidence in order to guard their reputations.
The role of a forensic accountant in a legal proceeding as an expert witness is to perform analyses, evaluation, interpretation, and presentation of organizational technical and complex financial activities in a logical, precise and simplified manner based on verifiable facts.
Forensic accountant as an expert witness in court proceedings must present findings in a manner the juries, and judiciary can understand. Forensic accountant can use diagrams, charts and other simplified forms to present financial information. This is a presentation of a report and evidence in order to assist in a legal process. In this regard, forensic accountant also presents evidence documents that support or rebut claims made in courts.
Forensic accountants also review all information that can provide suitable ground for a case. Thus, forensic accountant must identify situations of possible losses. Forensic accountant must also review and evaluate documents so as to formulate questions that can help resolve financial fraud. As an expert witness, forensic accountant must review testimonies and evidence of witnesses and may review questions for adequate preparation. During cross-examination, the expert witness provides legal assistance. In case parties agree for outside settlement, then forensic accountant participates in discussions and negotiations. Forensic accountant must also review the other party’s testimony, identify areas of strengths and weaknesses, and then provide expert’s opinion.
The legal responsibility a forensic accountant while providing service to a business
Forensic accountants may engage with a business entity in order to provide forensic accounting services. The main role of a forensic accountant in a business is to facilitate corporate governance. Forensic accountants use their strong knowledge, skills, and training in legal and organizational needs of corporate governance to assist in the formulation and implementation of organizational governance policies.
These policies can help organizations create the right mix of management and reliable board of directors, establish suitable roles of the board and the audit team, and ensure that there are fair distributions of power among shareholders, the board, and executives. In addition, forensic accountant must also ensure that an organization has a code of conduct and ethics for employees and their senior executives. An organization can only reinforce positive conducts and ethical behaviors if senior executives demonstrate that the business does not tolerate questionable actions.
Forensic accountants also have the responsibility of preventing fraud in an organization. Forensic accountants have knowledge and skills that they can apply to prevent fraud. Thus, forensic accountant must establish a favorable ethical environment in order to encourage implementation of acceptable practices and corporate governance policies. Forensic accountant also ensures that the business entity has superior accounting systems that provide no loophole for fraud. Such accounting systems must also have capabilities of clear reporting systems of all transactions in an organization. In addition, forensic accountant must establish company procedures that safeguard assets through authorization channels, auditing systems, and well documented records.
Forensic accountants also provide monitoring and evaluation of all business financial systems in order to establish their reliability. This is an act of vigilance in the business. In this regard, forensic accountants must ensure that management teams are in compliance with set procedures and practices of corporate governance. Any information forensic accountants collect during the process is useful for readjustment and formulation of new policies for compliance.
Forensic accountants formulate policies and practices to deter fraud. Still, they must also formulate and establish relevant consequences for any misconduct or fraud. Thus, it is the responsibility of forensic accountants to express organizational views and intentions in cases of fraud and that no employee is an exception from such consequences.
In case fraud occurs in an organization, forensic accountants must take the responsibility of conducting investigation, identify possible risks, consequences of fraud, deal with every fraud thoroughly, and scrutinize all financial dealings of the company to detect all anomalies.
Two cases where forensics accountants have provided vital evidence in a case, summaries of cases and the importance of the forensic accountants’ role
Joseph L. Ford of FBI provides details of cases in which roles of forensic accountants have been crucial in fraud and criminal investigations. In Columbia/HCA Healthcare fraud of 1990s, forensic accountants discovered crucial evidence in the case. He admitted that the work was difficult and time-consuming. Forensic accountants conducted subpoena of the auditors’ work and reviewed all anomalies in the audit. These processes led to discovery of anomalies that led to fraud in HCA. He notes “auditors discovered fraud, but did not recognize its significance” (Ford, 2007).
In addition, auditors questioned some leads but did not pursue the matter. Contrary to this approach, forensic accountants analyze every deal of paper works that can provide a lead. This process begins with auditing the company staff to provide any information that linked their managers to fraud. The case of HCA is crucial since forensic accountants must even establish missing links in the paper work such as DD-55 (the document had conversation details of the fraud among the parties).
Effective collaboration and communication in Columbia/HCA provided the ground work for roles of forensic accountants. The paper works were massive (13,000 boxes) and the team reviewed terabytes of electronic media and e-mails. In all, forensic accountants’ investigative techniques revealed a fraud scheme through several e-mails from the manager marked “SHOW ME THE MONEY” (Ford, 2007). He notes that healthcare schemes are vulnerable to fraud and white-collar crimes and such cases are on the rise in both private and government schemes.
Another significant case is terrorism financing. This is a significant part of FBI, and forensic accountants operation. Joseph L. Ford reveals financial transactions of 9/11 attackers and notes significant points, but importantly the hijackers financial habits were not normal. For instance, he notes that hijackers “spent cash and used debit cards, but never used credit cards” (Ford, 2007). These hijackers’ banks details showed that they lacked “Social Security numbers” (Ford, 2007). As a result, they “opened their bank accounts using passports” (Ford, 2007). Their transaction patterns were small and in non-suspicious manners. The banks’ audit teams failed in “know-your-customer” requirements, and hijackers exploited this loophole.
The 9/11 financial audit and investigations provide significant evidence that link hijackers. There were funds transfers among themselves. However, these were not sufficient evidence. Joseph notes that it is important for investigators to find earlier opportunities through a thorough scrutiny of financial activities of suspects. He further points out that any financial dealing among terrorists has trails, but is complex. However, relying on a global financial system can aid in detections. Forensic accountants can trace transaction patterns, identify assets, and relate fraud and white-collar crimes to suspects.
References
DiGabriele, J. (2008). An Empirical Investigation of the Relevant Skills of Forensic Accountants. Journal of Education for Business , 331-338.
Ford, J. L. (2007). FBI- Forensic Accounting and White-Collar Crime. Web.
Harris, C.K. and Brown, A.M. (2000). The Qualities of a Forensic Accountant. Pennsylvania CPA Journal, 71, 2-3.
Messmer, M. (2004). Exploring Options in Forensic Accounting. National Public Accountant, 5, 9–20.