If It Weren’t For You Meddling Kids...
- Det. Mike
- Aug 25, 2019
- 3 min read
Updated: Sep 5, 2019
It was time to choose a stream for the 11th and 12th grade, a section of our class chose science, but commerce pulled me closer. Among this group, there began a conversation which started like this “Chartered accountants are famous for money laundering, they learn how to manipulate records and earn money”. Being a naive sixteen-year-old hearing this sounded really fascinating. But now as the years have passed it is sad to remember that we as young kids had a totally different idea about a certain profession because of not what they learnt as subjects, but instead of the basic ethics that they chose not to have. Accountants are viewed a bit differently these days.
Major scandals such as Enron, WorldCom, and Bernard Madoff certainly have tarnished the image of the accountant, but the forensic accountant is getting a lot of respect. British Chancellor of the Exchequer, on October 10, 2006, said that “What the use of finger-prints was to the 19th century and DNA analysis was to the 20th, forensic accounting will be to the 21st century”.
“What the use of finger-prints was to the 19th century and DNA analysis was to the 20th, forensic accounting will be to the 21st century”.
After interrogation of many failed terrorists, it was found that most of the funding they received from their supporters were through various accounting frauds. Several news reports of the 9/11 attacks determined that a number of the lawbreakers used debit cards that had been set up by cash largely untraceable brought into the country. There were even some transactions with no moving money, that were still traceable.
The job of a forensic accounting involves auditing, economics, law, finance and information system. Terry McCarthy, audit partner with Green & Seifter, once compared the job of a forensic accountant and the CSI saying “Instead of finding the trajectory of a bullet. You’re trying to find out how a transaction occurred.”
As the number of such heinous crimes rise, the question arises “What on earth is the auditor doing?” An audit is performed by an internal or external auditor, who must adhere to a certain set of standards established by the American Institute of Certified Public Accountants. i.e auditors just make sure that the respective companies are free from errors and all necessary information is disclosed according the guidelines they follow. On the other hand forensic accountants deal with cases relating to embezzlement, money laundering, Ponzi schemes and they convert their findings into an understandable form for the court, when the business suspect somebody is misappropriating funds from their business. During these engagements, they analyze the financial information, interview employees, and help them implement effective internal controls for their businesses. Unfortunately, many of the smaller businesses don’t have adequate internal controls in place and employees take advantage and misappropriate assets. Very often they uncover that the fraud was performed by a long-time trusted employee or someone in a management position.
The incidence of frauds are so common that its occurrence is no longer remarkable, only the scale at which it takes place.
Despite the vast experience that forensic accountants have, they are faced with situations where there are no records for the frauds. Just like a CSI agent observes their suspects’ daily schedule, a forensic accountant should be aware of the lifestyles of employees of companies as well. The lifestyle of a taxpayer or employee may give clues as to the possibilities of unreported income, the approach of looking at events, transactions, and environments in their covert aspects. They believe that fraud auditing is like an iceberg with many of the behavioral aspects of the fraud. In today’s climate all accountants external, internal, corporate and the forensic accountant must develop forensic competencies. But before all of this they must learn about ethics. Employees often take out the values of ethics from their pockets to fill it with paper of value.
If you can manipulate the news, a judge can manipulate the law. A smart lawyer can keep a killer out of jail, a smart reporter could ruin your reputation. But smart accountants could put you behind bars if they tried hard enough.
“And I would have gotten away with it too if it weren’t for you meddling kids”
References
"The Difference Between Forensic Accounting and Auditing", Veronica Larriva, 2016. https://ficpasyoungandlicensed.com/2016/04/04/the-difference-between-forensic-accounting-and-auditing/
"So What Is Forensic Accounting?", D. Larry Crumbley, April 4, 2016. https://www.coursehero.com/file/8005390/Article-So-What-Is-Forensic-Accounting/
Good read! Corporates have to conduct periodical IS system audits (in addition to financial audit) and implement additional controls based on audit recommendations to minimise the risks. Loopholes/weakness in the Information system controls are often used in these instances of fraud. Corrupt minds invent new ways of defrauding and findings of Forensic Accountants should help Corporates to baseline their existing controls in light of the new findings and methodologies adopted in defrauding.
Forensic competencies must be developed in modern scenario where incidence of
fraud is no longer remarkable, but the scale at which it takes place is.
Dude that's a cool background GIF!
Good satire way of covering an important topic. The value of accontants well explained, thier role is very pivotal in the modern world, to sharpen ethics and reputation of every organization.
Let's hope and wish we have more smart accountants with hgh level of ethics and good morale .