November 2019 Foodman CPAs & Advisors Website and JD Supra

The current environment of increasing change, economic pressures, globalization, technology, corporate governance, compliance and the complexity of financial transactions are driving forces behind fraud initiation.   In addition, economic despair, a single unfavorable event, illness, negative cash flows or deteriorating creditworthiness are also drivers for committing fraud; as well as greed, which can lead to fraud, and which continues to trigger and generate bankruptcy filings.

Fraud can be difficult to detect.  Although at times, signs of fraud are evident, there are times when they are not.  The evidence of fraud might be buried in thousands of pages of documents, business records and complex webs of business structures.  Tracing the movement of funds and assets is critical to successful fraud resolution.  One has to “look beyond the numbers”, “follow the money” and simplify the information.   

Forensic Accountants trace cash flows to look for patterns of fraud and the concealment of assets

Forensic accountants have the ability to develop financial profiles and perform a “lifestyle analysis” that is able to assist with identifying fraud.  A forensic accountant’s skill set provides for the detection and identification of red flags earlier in the fraud process.  Some red flags of fraud are:

• Complex corporate structures
• Increases in insider financial activity
• Information that is not recorded, missing or incomplete.
• Significant cash transactions
• Lack of adequate books and records
• Inaccurate financial statements
• Missing Assets
• Sales of assets
• Excessive salaries to executives and loans to corporate officers
• Failure to make payments to vendors

Detection and Prevention are problem activities performed by a forensic accountant

History shows that taking a proactive approach by bringing in a forensic accountant early instead of waiting for “something” to happen is a way to minimize fraud losses and protect a reputation.     

A forensic accountant actively participates in:

  1. Personal Injury Claims
  2. Business Interruption
  3. Criminal Investigations
  4. Shareholder and/or Partnership Disputes
  5. Employee Embezzlement
  6. Probate Matters
  7. Fraud Investigations
  8. Internal Controls
  9. Matrimonial Matters
  10. Business Losses
  11. Professional Negligence
  12. Mediation
  13. Arbitration
  14. Business Valuation
  15. Commercial Damage Assessment

Don’t be a victim of your own making

An experienced forensic accountant is “an experienced investigator”.  Forensic Accountants:  

 Investigate and analyze financial evidence
 Communicate their findings in the form of reports, exhibits and collections of documents
 Assist in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence
 Help Corporations and Financial Institutions improve risk management, internal control frameworks and help implement fraud control measurements