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explain the concept of ‘forensic accounting’ • discuss the role of…

- - - - table 3.1!!!!!!!
  - - - sAPES 215, a useful source of guidance on the role of the forensic accountant, identifies four key services: LICE
        
        expert witness services;
        
        lay witness services;
        
        investigation services; and
        
        consulting expert services.
        
        expert witness
        
        expert witness image!!!!
        
        Member who is acting as an Expert Witness shall comply with the following:
        (a) The paramount duty to the Court which overrides any duty to the Client or Employer;
        (b) A duty to assist the Court on matters relevant to the Member’s area of expertise in an objective and unbiased manner;
        (c) A duty not to be an advocate for a party; and
        (d) A duty to make it clear to the Court when a particular question or issue falls outside the member’s expertise.
        
        services explanation!!!!
      - there are also non-business crime services
      - Possible consequences of discovery of business crime:
        • Civil action by the business organisation against the perpetrator to recover losses
        • Possible criminal action
        • Possible regulatory or administrative consequences arising from failure by directors and management to establish a robust system and culture for business crime prevention.
  - - - APES 215 has been issued to assist practitioners when undertaking forensic accounting engagements.
        
        An important aspect of our discussion is that one does not need the label ‘forensic accounting specialist’ to be bound by the provisions of APES 215—any accountant who is member of a professional body that has adopted this standard (including CPA Australia), and who is delivering any of the services described in APES 215, is subject to that standard and must comply with its requirements.
  - - - Dishonest activity causing actual or potential financial loss to any person or entity including theft of moneys or other property by employees or persons external to the entity and whether or not deception is used at the time, immediately before or immediately following the activity.
- - - - 4 step image!!!
    - - The essential objectives of the briefing phase are to: IBEA
        • gather and document background facts;
        • identify key issues for investigation and consider what evidence needs to be collected;
        • identify where that evidence might be located; and
        • identify the analytical methodologies that need to be used in the investigation once the evidence has been gathered.
      - The forensic accountant should also identify any tasks that are outside their area of expertise and request assistance with those tasks.
        The forensic accountant should ensure that they obtain clear, unambiguous written instructions from the client or from the client’s instructing legal advisers as to specific allegations to be investigated and reported on.
    - - A properly prepared plan that is understood by all involved in the investigation has a number of key benefits, including that it: RADTOFD
        • ensures proper resourcing of the investigation;
        • avoids duplicating effort through an effective allocation of tasks and accountabilities;
        • ensures information and evidence is available to all members of the team as it is gathered;
        • ensures the investigation is delivered efficiently by setting deadlines;
        • allows for the identification of further required evidence and witnesses to be interviewed;
        • ensures that the investigation addresses the original scope and objectives rather than straying onto other matters that are essentially irrelevant to the client’s needs; and
        • enables time and cost spent on the investigation to be tracked.
    - - Investigator licensing
        
        In Australia, the laws relating to conducting investigations into personal misconduct varies from state to state. In New South Wales, pursuant to the Commercial Agents and Private Inquiry Agents Act 2004, (NSW) s. 4, a person who is engaged to undertake any activity ‘on behalf of a second person (not being his or her employer) … that involves finding a third person, or investigating a third person’s business or personal affairs ’ is required to be licensed. In Victoria, under the Private Security Act 2004, (Vic) s. 3, a person who is engaged to ‘obtain and furnish information as to the personal character or actions of any person or as to the character or nature of the business or occupation of any person ’ is required to be licensed. Corresponding provisions apply in all Australian states for firms that provide these services.
      - Seizing and searching computers
        
        The computer forensic process or ‘methodology’ can be broken into six distinct stages: IPCPAP
        
        identify;
        
        preserve;
        
        capture;
        
        process;
        
        analyse; and
        
        produce.
      - The implications of cloud computing for forensic accountants
        
        The six-stage computer forensic process described earlier breaks down when the investigator is dealing with data stored in the cloud.
        However, the legal system is responding to these new challenges, and investigators, in the right circumstances, are seeking and obtaining court orders requiring access to data stored in the cloud to be provided by the person or entity in control of the data. That works well if the person or persons who have knowledge of the access codes and passwords are available to the investigator but if they are not, the investigator’s options are very limited. In some situations, the investigator may know where the data is stored but navigating through the legal and technical minefield to access a particular server in a particular country can often present major difficulties in securing business records, which may be required as evidence.
      - Social media as a source of information and evidence
        
        The main effect of the increasing use of this technology for forensic accounting is a dramatic increase in the amount of potential information and evidence available to investigators.
      - other:
        
        Recording evidence gathered and ‘chain of custody’
        
        Interviewing and capturing ‘oral’ evidence
        
        Techniques for capturing digital evidence
    - - Asset betterment analysis
        
        The asset betterment analysis records, at specific points of time, the assets and liabilities of a ‘person of interest’ to the investigation from which the forensic accountant will be able to calculate the ‘net wealth’ of the person and changes in their net wealth over time.
        
        The forensic accountant can compare the resulting net wealth across periods and establish:
        • patterns of growth and diminution in net wealth; and
        • periods in which net wealth changes have occurred.
      - By being able to identify the changes in net wealth and the periods in which those changes occurred, the forensic accountant will be able to narrow the investigation and select specific transactions for a closer examination.
      - other:
        
        analytical methods used
        Quantification
        Relationship mapping
        
        Chronology analysis
        funds tracing
        Asset location
    - - The overarching requirement of APES 215 and the expert witness guidelines are generally that the primary duty of the expert witness is to assist the court.
        For example, in the ‘Expert witnesses in proceedings in the Federal Court of Australia—Practice Note CM 7’, the following duties are imposed on an expert witness in Federal Court proceedings:
        
        General Duty to the Court
        
        1.1 An expert witness has an overriding duty to assist the Court on matters relevant to the expert’s area of expertise.
        1.2 An expert witness is not an advocate for a party even when giving testimony that is necessarily evaluative rather than inferential.
        1.3 An expert witness’s paramount duty is to the Court and not to the person retaining the expert (Allsop 2013).
      - Contents of a report on an investigation by a forensic accountant
        • Instructions received (and whether oral or written)
        • Any limitations on the scope of the work performed
        • Details of the member’s relevant experience and training
        
        If any, details of the relationship between the forensic accountant (or the accountant’s employer or firm) and any party to the matter, which could affect the accountant’s views
        • The extent, if any, of reliance on the work of others
        • The opinions formed by the forensic accountant
        • Whether these opinions are provisional rather than ‘concluded’, and if provisional, the reason why they are not ‘concluded’
        • The significant facts on which the opinions are based
        Contents of a report on an investigation by a forensic accountant (cont’d…)
        • Significant assumptions on which the opinions are based (and the reasons for choosing these assumptions)
        • A statement whether any of these assumptions could be likely to mislead
        • The reasons why the accountant reached the opinions, including an explanation of the method of investigation used
        • A list of all the documents and other sources of evidence used
        • Any restrictions on the use of the report
        • For an expert witness report, a statement that the Expert Witness Service has been conducted in accordance with APES 215.