Assignment 3: Forensic Accounting
Due Week 6 and worth 160 points
Using the WileyPlus resources, go to the ?Forensic
Accountants: Fraud Busters? examplee.
Write a six to eight (6-8) page paper in which you:
Determine the most important five (5) skills that a forensic
accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations.
Describe the role of a forensic
accountant within a courtroom environment.
Analyze the legal responsibility a forensic
accountant has while providing service to a business.
Research two (2) cases where forensics
accountants have provided vital evidence in a case. Summarize the cases and the importance of the forensic
accountants? role during each case.
Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student?s name, the professor?s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Analyze the components of the basic financial statements, and conduct trend and ratio analysis to assess a firm?s financial performance.
Use technology and information resources to research issues in contemporary business.
Write clearly and concisely about contemporary business using proper writing mechanics.
the WileyPlus resources, go to the ?Forensic
Accountants: Fraud Busters? example.(see below)
professionals work in a variety of areas in and for business firms, government agencies, and not?for?profit organizations. They can be classified as public, management, government, and not?for?profit accountants.
A public accountant provides accounting
services to individuals or business firms for a fee. Most public accounting
firms provide three basic services to clients: (1) auditing, or examining, financial records; (2) tax preparation, planning, and related services; and (3) management consulting. Because public accountants are not employees of a client firm, they can provide unbiased advice about the firm's financial condition.
While there are hundreds of public accounting
firms in the United States, a handful of firms dominate the industry. The four largest public accounting
firms?Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers (PwC)?collect almost $32 billion annually from U.S. clients alone. In contrast, the Minneapolis?based RSM McGladrey, the nation's fifth?largest accounting
firm, has annual revenues of approximately $1.5 billion.6
Some years ago, public accounting
firms came under sharp criticism for providing management consulting services to many of the same firms they audited. Critics argued that when a public accounting
firm does both?auditing and management consulting?an inherent conflict of interest is created. In addition, this conflict of interest may undermine confidence in the quality of the financial statements accounting
firms audit. The bankruptcies of some high?profile firms increased pressure on public accounting
firms to end the practice. Legislation also established strict limits on the types of consulting services auditors can provide. For example, an accounting
firm that audits a company's books cannot provide any other services to that company, including tax services. As a result, three of the four largest public accounting
firms either sold large portions of their consulting practices or spun them off into separate companies, and they now concentrate on providing auditing and tax services. PwC, for instance, sold much of its consulting business to IBM.
As the ?Hit & Miss? feature outlines, a growing number of public accountants are also certified as forensic
accountants, and some smaller public accounting
firms actually specialize in forensic accounting
. These professionals, and the firms that employ them, focus on uncovering potential fraud in a variety of organizations.
Hit & Miss
Accountants: Fraud Busters
When most people think of accountants, the image that probably comes to mind is that of someone poring over stacks of ledgers or computer printouts, calculator in hand. Although a good deal of accounting
does involve ledgers and printouts, forensic
accountants don't simply accept a company's numbers at face value?they are crime fighters. People who work in this growing field investigate such white?collar crimes as business fraud, improper financial reporting, and illegal investment schemes.
performed in preparation for legal review. Forensic
accountants take the skeptical view, investigating below the surface of an organization's accounting
system to find out what actually happened. They may also testify as expert witnesses if a case goes to trial. The job requires a bachelor's degree in accounting
and CPA certification, with further training in investigative techniques for certification as a certified fraud examiner (CFE) or a certified forensic
When the energy giant Enron Corporation collapsed, forensic accounting
investigations revealed that for several years, company executives had issued false financial statements that exaggerated the company's earnings and thereby increased the firm's stock prices. The statements painted a rosy picture of steady profits that met earnings expectations. In reality, Enron's own investments were doing badly, and its profits were nonexistent. The company was actually losing money. Even after the truth began to leak out and the company's stock prices fell, the executives continued to issue false financial statements in the hope of slowing the fall. In a federal trial, two former executives were convicted of conspiracy, wire fraud, and securities fraud.
Tracy Coenen, a forensic
accountant and the head of Milwaukee?based Sequence Inc., says, ?Some people say I have a nose for fraud. ? The more complicated the puzzle, the better I like it.?
Questions for Critical Thinking
Describe how a shift in the economy has created a new career path for accounting
How might forensic accounting
change the world of business?
Sources: ?Forensic Accounting
,? PricewaterhouseCoopers New Zealand, http://www.pwc.com/nz, accessed June 1, 2010; Tracy L. Coenen, ?Enron: The Good, the Bad, and the Ugly,? Sequence Inc., http://www.sequence?inc.com, accessed June 1, 2010; James A. DiGabriele, ?Applying Forensic
Skepticism to Lost Profits Valuations,? Journal of Accountancy, April 2010, http://www.journalofaccountancy.com; Bob Trompeter, ?Why Do You Need a Forensic
Accountant Hired Gun?? Hutson Resource Group, February 23, 2010, http://hutsonresourcegroup.com; Rick Romell, ?Accountants Who Focus on Fraud,? Milwaukee Journal Sentinel, January 24, 2010, http://www.jsonline.com.
Certified public accountants (CPAs) demonstrate their accounting
knowledge by meeting state requirements for education and experience and successfully completing a number of rigorous tests in accounting
theory and practice, auditing, law, and taxes. Other accountants who meet specified educational and experience requirements and pass certification exams carry the title certified management accountant, certified fraud examiner, or certified internal auditor.
An accountant employed by a business other than a public accounting
firm is called a management accountant. Such a person collects and records financial transactions and prepares financial statements used by the firm's managers in decision making. Management accountants provide timely, relevant, accurate, and concise information that executives can use to operate their firms more effectively and more profitably than they could without this input. In addition to preparing financial statements, a management accountant plays a major role in interpreting them. A management accountant should provide answers to many important questions:
Where is the company going?
What opportunities await it?
Do certain situations expose the company to excessive risk?
Does the firm's information system provide detailed and timely information to all levels of management?
Management accountants frequently specialize in different aspects of accounting
. A cost accountant, for example, determines the cost of goods and services and helps set their prices. An internal auditor examines the firm's financial practices to ensure that its records include accurate data and that its operations comply with federal, state, and local laws and regulations. A tax accountant works to minimize a firm's tax bill and assumes responsibility for its federal, state, county, and city tax returns. Some management accountants achieve a certified management accountant (CMA) designation through experience and passing a comprehensive examination.
Management accountants are usually involved in the development and enforcement of organizational policies on such items as employee travel. As part of their job, many employees travel and accumulate airline frequent flyer miles and hotel reward points. While some organizations have strict policies over the personal use of travel perks, many do not.
Changing federal regulations affecting accounting
and public reporting have increased the demand for management accountants in recent years. As a result, salaries for these professionals are rising.
Government and Not?for?Profit Accountants
Federal, state, and local governments also require accounting
services. Government accountants and those who work for not?for?profit organizations perform professional services similar to those of management accountants. Accountants in these sectors concern themselves primarily with determining how efficiently the organizations accomplish their objectives. Among the many government agencies that employ accountants are the National Aeronautics and Space Administration, the Federal Bureau of Investigation, the Internal Revenue Service, the Commonwealth of Pennsylvania, and the City of Fresno, California. The federal government alone employs thousands of accountants.
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