Forensic Accounting – Our Approach to Fraud Review

Sep 22, 2020 | Accounting & CFO Services, Blog

Fraud can be uncovered out of nowhere and affect any business at any time. If you are a business in the United States and suspect embezzlement or fraud in your organization, or are facing litigation, our forensics accounting practice will help you uncover the facts. Our forensic accounting specialists are equipped to help in both criminal and civil cases to uncover the what, where, why, who and how and how of any financial discrepancies. We are discrete and our investigation team members are certified in financial forensics. Our forensic specialists can also leverage their expertise to strengthen your financial processes and checks and balances to reduce the risk of future misconduct.

Read on to learn about our fraud review process and how we can help your organization retain or regain its integrity.

What is forensic accounting?
Simply put, forensic accounting is the methodical seeking of evidence supporting fraudulent accounting with the aim of obscuring wrongdoing, or misappropriation of assets. Suspected fraud can be both discovered by your internal accounting staff, pointed out by a vendor, or during a random audit.

Financial fraud is not the same as an accounting error leading to an audit; it is predicated on being able to prove that an act was intentional, and the responsible party or parties stood to benefit in some way or infringe on another’s legal rights.

Forensic accountants are unique from standard CPAs in that they specialize in conducting investigations (often involving interviews) along with the use of data analysis and computer skills specific to uncovering discrepancies in financial data. Bank statements, credit statements, journals, ledgers, databases, business records, emails and memos are just some of the places a forensic accountant will dig for answers.

The forensic accounting team’s role is to investigate and present evidence in a court of law as an expert witness. However, they are not in a legal position to make judgements on what they uncover.

 

 

Examples of financial fraud

Fraud comes in all shapes and sizes, and there’s no shortage of stories of economic damage to the tune of millions or billions in misappropriated dollars that can be found across the web. Consider the story of accountant Michael Plume, who was asked by a probate clerk to manage a family business after the death of its owner, and quickly uncovered embezzlement. Taken to the extreme, you can read a high profile case of embezzlement by Robert Maxwell, a European publisher who looted £460m from the pension fund of one of his businesses, among other financial crimes. This latter case took over 10 years worth of investigation to resolve, and in the end the pensioners had to accept only 50% of the original value of their pensions.

Some other interesting cases you can read up on include a scam by William D. Lomow of former disposal company Orinda-Moraga in San Juan Capistrano and his associate – they set up sham companies and billed the district they operated in for their operation, funneling the money to themselves. Another case involved Allen Stanford and James Davis of the Stanford Financial Group of Companies, who over almost a decade misappropriated approximately $1.6 billion via fraudulent reporting.

Our approach to forensic accounting

Planning the investigation, the team will determine the best method to uncover evidence related to the what, where, why, who and how of the suspected fraud:

  • What: Is this a case of fraud, or an unintentional consequence of accounting errors.
  • Where: The location(s) that money was misappropriated from and to.
  • Why: The potential motive for fraud.
  • Who: The person or other entity at fault.
  • How: The way that the fraud was committed.

Our team will work discreetly within your organization to uncover enough material so that either you as the client or the courts can make an informed decision about any financial misconduct. Our investigative skills and methods include:

  • Full transaction, cash, and asset audits.
  • Using computer forensics software to identify deviations in your financial data.
  • Interviewing key team members and others who may be involved in or adjacent to fraudulent activity.
  • Utilizing key observational skills unique to forensics accountants, such as identifying potential perpetrators through the identification of unusual purchases or vacations.
  • Conducting tests on your processes and checks and balances to identify possible avenues for fraud, and provide recommendations on how to fix them.

Our team then compiles a full report that details our methodology and a summary of evidence uncovered in the investigation, to satisfy the requirements of you as the client or litigation support. We tailor versions of the report to satisfy both financial experts as well as laypersons who may not have financial backgrounds and make use of easy-to-interpret graphs, charts, and spreadsheets.

Engage GCG to get to the bottom of your financial discrepancies

Whether suspected fraud has already been identified or you require a third-party audit conducted of your finances and accounting, Greenough Group has the expertise to get it done thoroughly.

If you’re looking for an accounting firm to ensure you can get the answers you need as soon as possible, start a conversation with us today and let us know how we can help.