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Today’s Topics

Today’s Topics. Why Studying Conversion is Important Sources of Information The Role of Net Worth Calculations Miscellaneous Articles and Cases Interviewing Techniques Types of Questions Shenanigan #2 Ethics for CPAs in Industry. Role of Conversion Analysis.

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Today’s Topics

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  1. Today’s Topics • Why Studying Conversion is Important • Sources of Information • The Role of Net Worth Calculations • Miscellaneous Articles and Cases • Interviewing Techniques • Types of Questions • Shenanigan #2 • Ethics for CPAs in Industry FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-1

  2. Role of Conversion Analysis • Helps determine the extent of the fraud • Serves as a facilitation for confession FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-2

  3. Sources of Information(Study pages 247-255) • Variety of sources • Federal government sources • State government sources • Local government sources • Financial institution records • Public databases • Internet sources Don’t try to memorize the details of these sources. Know how to use some of them. FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-3

  4. Net Worth Method • For use in estimating “Funds from Unknown Sources” • Calculation: • Assets - Liabilities = Net Worth • NWc - NWP = Net Worth Increase • NWI + Living Expenses = Income • Income - Known Sources = Unknown Sources FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-4

  5. General Interview Guidelines • Be aware of the “crisis cycle” • Remain a people person • Engage rather than challenge • Conduct the interview as close to the event as possible • Plan for the interview • See text for demeanor (p.274) & language (p.274) FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-5

  6. Types of Questions • Introductory • Informational • Assessment • Closing • Self Admission-use carefully FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-6

  7. Interview Facilitators • Expectation fulfillment • Recognition • Altruism • Sympathy • Newness • Catharsis • Sense of meaning • Availability of rewards Don’t try to memorize the details of this list. Know how to use some of them. FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-7

  8. Interview Inhibitors • Time demands • Ego threats • Etiquette • Trauma • Forgetfulness • Time-line confusion • Logic confusion • Unconscious behaviors Unwilling Don’t try to memorize the details of this list. Know how to use some of them. Unable FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-8

  9. Fraud Reporting • WFO Suggestion: • Summary • Chronology • Interview & Procedural Summaries • Admission information • Loss Assessment FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-9

  10. Shenanigan #2-Recording Bogus Revenue • Technique #1: • Lack of economic substance • Technique #2: • Loans recorded as revenue • Technique #3: • Investment income as operating revenue • Technique #4: • Supplier rebates as future revenue • Technique #5: • Post merger deferred revenue FORENSIC ACCOUNTING - BA124 – Spring 2007 Slide 9-10

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