Page 171 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes 2. Forensic accountants use their expertise in 2. Auditors also manage financial records and
accounting to determine when illegal internal information to verify accuracy of
transactions and activity have taken place. employees and technology-based practices.
3. Forensic accountants, however, will look at 3. Auditors try to look at a representative
nearly every transaction in their area of sample of transactions, working under the
inquiry, checking to whom money was sent assumption that if a few transactions follow
and whether there was adequate generally accepted accounting principles,
documentation for a transaction or series of then all similar transactions likely follow
transactions. They are also much more those principles.
proactive and skeptical in their confirmation
of financial transactions.

14.7 Forensic Accounting Process

Zysman (2005) outlined the following steps in executing Forensic Accounting engagement;

1. Meet with the client to obtain an understanding of the important facts, players and issues
at hand.
2. Perform a conflict check as soon as the relevant parties are established.
3. Perform an initial investigation to allow subsequent planning to be based upon a more
complete understanding of the issues.
4. Develop an action plan that take into account the knowledge gained by meeting with the
client and carrying out the initial investigation and which will set out the objectives to be
achieved and the methodology to be utilized to accomplish them.
5. Obtain the relevant evidence: This may involve locating documents, economic information,
asset, a person or company, another expert or proof of the occurrence of an event.
6. Perform the analysis: This may involve:
calculating economic damages
summarizing a large number of transactions
performing a tracing of assets

performing present value calculations utilizing appropriate discount rates
performing a regression or sensitivity analysis
utilizing a computerized application such as spread sheet, data base or computer
model

utilizing charts and graphics to explain the analysis
7. Prepare the report. Often a report will be prepared which may include sections on the
nature of the assignment, scope of the investigation, approach utilized, limitation of scope
and findings and/or opinions. The report will include schedules and graphics necessary to
properly support explain. Joshi, (2003) stated that the job demands reporting, where the
accountability of the fraud is established and the report is considered as evidence in the
court of law or in the administrative proceeding.

Self Assessment

Fill in the blanks:
10. …………. work to ensure their organization is running efficiently and that mismanagement
of funds, waste of resources, or fraudulent activities are not occurring.

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