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INTRODUCTION

INTRODUCTION. The series of accounting scandals in the early years of the 21 st century led to the profound changes and transition in the accounting profession, laws and regulations. Among these developments was the emergence of forensic accounting.

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INTRODUCTION

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  1. INTRODUCTION The series of accounting scandals in the early years of the 21st century led to the profound changes and transition in the accounting profession, laws and regulations. Among these developments was the emergence of forensic accounting. The term “forensic” means “suitable for use in a court of law”. Forensic accounting is the study of financial fraud and misconduct. All of the larger accounting firms, police departments, government agencies, insurance companies etc. have specialist forensic accounting departments. Accounting Forensic accountant Investigative skills Auditing

  2. HISTORICAL BACKGROUNDworldwide, SHERLOCK HOLMES, was considered to be the first forensic accountant. Kautilya was the first person to mention the 40 ways of embezzlement in his book “Arthashastra”. Birbal used various tricks to investigate various crimes.

  3. WHAT CHARACTERISTICS A FORENSIC ACCOUNTANT SHOULD POSSESS? ETHICAL ANALYTICAL MIND DETAIL-ORIENTED INQUISITIVE INTUITIVE

  4. FUNCTIONAL AREAS OF FORENSIC ACCOUNTING

  5. TYPES OF FRAUD TYPES MANAGEMENT FRAUD SCHEMES EMPLOYEE FRAUD SCHEMES EMBEZZLEMENT BY MANAGEMENT CYBER CRIME SKIMMING LAPPING SHELL COMPANY GHOST EMPLOYEES

  6. PROCEDURE OF FORENSIC ACCOUNTING PERFORM CONFLICT CHECK INITIAL INVESTIGATION PLANNING STAGE MEET WITH CLIENT PLAN AN AUDIT EXECUTION STAGE COLLECT INFORMA-TION PERFORM AN ANLYSIS REPORTING

  7. HOW FORENSIC ACCOUNTING DIFFERS FROM FINANCIAL ACCOUNTING?

  8. IN INDIA • To be a certified forensic accountant, you need to pursue a certificate course in Forensic Accounting Professional (CFAP) and undergo CFAP examination. • Eligibility criteria:- Bachelor degree along with three years experience in the similar field. • Institutes :- 1. The Institute of Chartered Financial Analyst of India University (I.C.F.A.I), West Tripura. 2. India forensic, Pune. IN FOREIGN COUNTRIES • Thorough knowledge of GAAP • In US:- bachelor degree with a few years of experience. • To pass CPA examination, created by American Institute of Certified Public Accountants (AICPA) • Master degrees:-1.American College of Forensic Examiners International provides Cr.FA • 2.Association of Certified Fraud Examiners provides CFE. • Association of Certified Fraud Specialists has designation of CFS.

  9. CASE STUDY SUNBEAM CORPORATION LTD. is an AMERICAN brand that has produced electronic home appliances since 1910. Its products have included the Mixmaster Mixer, the Sunbeam CG Waffle Iron, Coffee master and automatic T20 Toaster. In 1997, SUNBEAM a company that manufactures small appliances followed a practice called “BILL and HOLD”. This is, when a company records sales of its products as profits for the current quarter, while waiting to deliver the product. Sunbeam sold huge amount of its products to other companies at discount, but kept the items in warehouses. On paper, the company appeared to have had high sales; however Sunbeam’s warehouses were full of unsold products. This practice was uncovered by a financial analyst at investment firm Paine Webber, who downgraded the value of sunbeam’s stock. Bill and Hold is not illegal, but Sunbeam’s shareholders felt deceived and filed law suits. Sunbeam’s accounting firm Arthur Andersen performed an audit and reported that Sunbeam’s books were accurate and in accordance with federal guidelines. However the board was unsatisfied and hired “Deloitte & Touch” to review Arthur Andersen’s audit. This follow up uncovered proof that the numbers had been manipulated. The Securities and Exchange Commission investigated Sunbeam, and its CEO, “ALFRED DUNLOP” paid $ 5,00,000 in fines and was banned for serving as an officer in a public company.

  10. CONCLUSION The scandalous tricks of Harshad Mehta, Ketan Parekh, Sanjay Seth etc. are still new in our brains. Thus forensic accounting in India has come to limelight only recently due to rapid increase in white collar crimes and the belief that our law enforcement agencies do not have sufficient expertise or time needed to uncover frauds. All of the larger accounting firms, as well as, many medium sized and boutique firms have recently created forensic accounting departments. Because forensic accounting is relatively a new area of study, a series of working definitions and sharing of corporate experiences should be undertaken and encouraged to ensure a common understanding. While the forensic accounting and auditing practice had commenced in the US as early as 1995, the seed of this specialization has yet to take off in India. Welcome to the exciting world of forensic accounting, a relatively new and rapidly growing profession dedicated to investigating complex financial crimes and fraud.

  11. With Inputs from : • Amandeep Kaur • Class: M.Com Sem III • Roll No : 4051

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