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The world is currently gripped in a financial crisis that is impacting organizations in countless ways. One notable trend concerns the rise of fraudulent crimes committed by employees and company outsiders. According to the Kroll Global Fraud Report (2008-09), the average company lost $8.2 million to fraud over the past three years, which is up 22% from last year's survey when the figure stood at $6.7 million. Fraud is a serious issue with severe consequences that may worsen if an organization is not prepared to tackle the problem immediately. In addition to possessing a solid response plan, organizations should have a team of investigators that includes a certified forensic accountant who is thoroughly trained and qualified. Forensic accounting is the practice of investigation work, auditing and accounting. These investigatory skills allow forensic accountants to analyze an organization's data—especially financial data—for any discrepancies or evidence of wrongdoing. The world of forensic accounting expands beyond investigating fraudulent activities into other business issues, but may be invaluable when confronted with complex financial issues. If an incident progresses to the courtroom, forensic accountants can also translate intricate business records and financial statements into concepts that can be easily understood by finders of fact. When searching for a forensic accountant, it is important to look for a person who is certified. This certification is important, as there are no specific experience requirements necessary to satisfy before someone may attach the title to their business card or signature line. Certifications to look for include the Certified Forensic Accountant (Cr.FA) accreditation as well as the Certified Fraud Examiner (CFE) accreditation from the Association of Fraud Examiners. Additionally, it is prudent to thoroughly vet the forensic accountant's background and past projects to gauge the depth of the person's experience. Forensic accounting is not limited to business conducted in the United States. In the modern world, many companies operate on a global scale and often confront many challenges when venturing outside of the country. While diverse languages, regulatory issues and other logistical differences present problems, the risk of encountering fraud and corruption is incredibly high and must be addressed. Companies also must ensure compliance with any fraud and corruption laws, including the Foreign Corrupt Practices Act. Companies can use forensic accountants to conduct audits of foreign operations in order to detect whether incidents of wrongdoing or institutionalized corruption are present. The moment a red flag arises, organizations should contact a forensic accountant to conduct a full-scale investigation to dig to the root of a problem and develop preventative measures for future incidents. Forensic accountants can also assess financial and accounting control environments and ensure that the organization's books and records accurately reflect transactions. In addition, forensic accountants can conduct global due diligence investigations and provide intelligence about the management backgrounds, reputations, ethical track records and regulatory compliance histories of prospective business partners. The skill sets of these experienced, specialized professionals are invaluable to companies, especially in today's tense economic environment. A forensic accountant may help an organization efficiently respond to investigations and will increase the likelihood that a company deters future fraudulent behavior. Download Kroll Ontrack's Recent Podcast, "Legal, Economic, and Pragmatic Considerations in Cross-Border E-Discovery" Enhanced E-Discovery Certification Course Propels Litigation Teams to New Heights Meet our representatives at the following events:
Visit www.krollontrack.com/upcoming-events/ for more information on these events and others.
This newsletter was written by Kelly Kubacki and Meridith Socha, Kroll Ontrack Law Clerks, with assistance from Regina Jytyla, Kroll Ontrack Managing Staff Attorney. Ms. Kubacki can be contacted by writing to kkubacki@krollontrack.com.
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From the Investigator's Notebook: Financial Fraud Fallout – Using Forensic Accountants to Aid Investigations
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