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Title A guide to forensic accounting investigation.
Imprint Hoboken, N.J. : Wiley, 2011.
Edition Second edition / [Thomas W. Golden ... [and others].

Subject Forensic investigations -- Auditing.
Fraud investigation -- Auditing.
Alt Name Golden, Thomas W.
Golden, Thomas W. Guide to forensic accounting investigation.
Description xxvi, 622 pages : illustrations ; 26 cm
Edition Second edition / [Thomas W. Golden ... [and others].
Note Rev. ed. of: Guide to forensic accounting investigation / Thomas W. Golden, Steven L. Skalak, Mona M. Clayton. 2006.
Bibliography Note Includes bibliographical references and index.
Summary "Recent catastrophic business failures have caused some to rethink the value of the audit, with many demanding that auditors take more responsibility for fraud detection. This book provides forensic accounting specialists--experts in uncovering fraud--with new coverage on the latest PCAOB Auditing Standards, the Foreign Corrupt Practices Act, and on options fraud, as well as on fraud in China and its implications. Auditors are equipped with the necessary practical aids, case examples, and skills for identifying situations that call for extended fraud detection procedures"-- Provided by publisher.
ISBN 9780470599075 (hardback)
0470599073 (hardback)
OCLC # 460061974
Table of Contents
ch. 1 Fraud: An Introduction1
 Fraud: What Is It?2
 Fraud: Prevalence, Impact, and Form3
 Fraud in Historical Perspective4
 Types of Fraud5
 Root Causes of Fraud6
 A Historical Account of the Auditor's Role7
 Auditing: Ancient History7
 Growth of the Auditing Profession in the Nineteenth Century8
 Federal and State Securities Regulation before 19349
 Current Environment11
 Auditors Are Not Alone14
 Deterrence, Auditing, and Investigation16
 Conceptual Overview of the Fraud Deterrence Cycle17
 Corporate Governance17
 Transaction-Level Controls18
 Retrospective Examination18
 Investigation and Remediation19
 First Look Inside the Fraud Deterrence Cycle19
 Corporate Governance19
 Transaction-Level Controls20
 Auditing and Investigation22
ch. 2 Psychology of the Fraudster25
 Calculating Criminals26
Case 1 "It Can't Be Bob"27
 Situation-Dependent Criminals27
 Power Brokers28
 Fraudsters Do Not Intend to Harm28
Case 2 "For the Good of the Company"29
Case 3 Personal Catastrophes29
Case 4 An Educated, Upstanding Citizen30
 Kinds of Rationalization33
 Auditors' Need to Understand the Mind of the Fraudster33
ch. 3 The Roles of the Auditor and the Forensic Accounting Investigator37
 The Patrolman and the Detective38
 Complexity and Change41
 Auditor Roles in Perspective42
 Not All Good People44
 Each Company Is Unique45
 Role of Company Culture45
 What Auditors Do50
 Fraud versus Error50
 Reasonable Assurance51
 Bedrock of an Effective Audit55
 Professional Skepticism55
 Knowledge and Experience56
 Independence and Objectivity56
 Auditing Standards Take a Risk-Based Approach to Fraud58
 Management Override60
 Regulatory Reaction to Fraud60
 Financial Benefits of Effective Fraud Management61
ch. 4 Auditor Responsibilities and the Law63
 Appendix: Summary of PCAOB Matters Involving Detection of Fraud77
ch. 5 When and Why to Call in Forensic Accounting Investigators79
 Today's Auditors Are Not Forensic Accounting Investigators80
 Auditors Are Not Authenticators80
 Auditors Have Limited Exposure to Fraud81
 Auditors Are Not Guarantors82
 Historically, Audits May Have Been Predictable83
 Potential Trigger Points of Fraud84
 Reliance on Others91
ch. 6 Internal Audit: The Second Line of Defense95
 What Do Internal Auditors Do?96
 Internal Audit Scope of Services98
 The Handoff to Forensic Accounting Investigators and Legal Counsel99
 Perception Problem101
 Complex Corporate Fraud and the Internal Audit102
 WorldCom and the Thornburgh Report102
 Case Studies: The Internal Auditor Addresses Fraud103
 No Segregation of Duties---and a Very Nice Car104
 Odd Transportation System105
 A Tragic Circumstance105
 How Many Lunches Can You Buy?106
 Making the Numbers Look Right106
 How Not to Earn a Bonus107
 A Classic Purchasing Fraud108
 The Loneliness of the Internal Auditor109
 Hitting the Jackpot in the Gaming Industry110
 Reporting Relationships: A Key to Empowering Fraud Detection111
 Tomorrow's Internal Auditor, Tomorrow's Management and Board113
ch. 7 Teaming with Forensic Accounting Investigators115
 Forensic Accounting Investigators' Cooperation with Internal Auditors117
 Internal Audit's Position and Function117
 Resource Models118
 Working Together119
 Forensic Accounting Investigators' Cooperation with External Auditors120
 Client History120
 The External Auditor in Today's Environment121
 Objectives of All Interested Parties122
 Forensic Accounting Investigators' Objectives122
 Objectives of Other Parties to the Investigation123
 How Should the Investigation Objectives Be Defined?125
 Who Should Direct the Investigation and Why?126
 Ready When Needed127
 Where to Find Skilled Forensic Accounting Investigators127
 Internal Audit127
 Engaging External Forensic Accounting Investigators128
 Accounting and Auditing Firms129
ch. 8 Anonymous Communications133
 Typical Characteristics of Anonymous Tips134
 Federal Statutes Related to Anonymous Reporting and Whistle-Blower Protections135
 Receipt of an Anonymous Communication139
 Initial Understanding of Allegations140
 Determine Whether Any Allegation Requires Immediate Remedial Action141
 Development and Implementation of the Investigative Strategy142
 The Investigation Team142
 Disclosure Decisions143
 Prioritize the Allegations144
 Interviewing Employees145
 Follow-Up Tip149
ch. 9 Personal Privacy and Public Disclosure151
 Data Privacy: Providing Context152
 Data Privacy in the United States153
 Relevant Sector-Specific Privacy Protections154
 Breach Notification157
 Electronic Discovery157
 Data Privacy in the European Union158
 The United Kingdom162
 Navigating the Legal Differences Between the United States and the European Union162
 Works Councils and Whistle-Blowers163
 Cross-Border Data Transfers163
 Elsewhere around the Globe165
 Latin America166
 Asia Pacific167
 Public Disclosure168
 The Freedom of Information Act168
 Other U.S. Federal Governmental Agency Information171
 U.S. State Disclosure Laws172
 International Disclosure Laws172
ch. 10 Building a Case: Gathering and Documenting Evidence175
 Critical Steps in Gathering Evidence176
 Considerations at the Time of Retention176
 Document Retention Considerations177
 Planning Considerations177
 Creating a Chain of Custody178
 Whose Evidence Is It?182
 Evidence Created by the Forensic Accounting Investigator183
 Working Papers183
 What Evidence Should Be Gathered?185
 Investigations of Vendors185
 Investigations of Foreign Corrupt Practices Act Violations185
 Investigations of Improper Related-Party Activity185
 Investigations of Employee Misappropriations186
 Investigations of Specific Allegations186
 Investigations of Financial Statement Errors186
 Important Considerations Regarding Documents and Working Papers186
ch. 11 Independence, Objectivity, Skepticism191
 Accountant's Independence192
 SEC Final Rules for Strengthening Auditor Independence192
 SEC Regulation of Forensic Accounting Services193
 Consulting versus Attest Services196
 Integrity and Objectivity198
 Independence Standards for Nonattest Services198
 Professional Skepticism199
 Trust but Verify: A Case Study200
 Trust but Verify: Exploring Further203
 Loose-Thread Theory of Auditing207
 Further Thoughts on the Loose-Thread Theory210
ch. 12 Potential Missteps: Considerations When Fraud Is Suspected213
 Confronting Suspects213
 Dismissing the Target216
 The Small Stuff Could Be Important221
 Materiality: More on a Key Topic223
 Addressing Allegations224
 The Case of the Central American General Manager225
 Exercising Skepticism228
 Case Outcomes229
ch. 13 Potential Red Flags and Fraud Detection Techniques231
 Types of Fraud Revisited232
 Fraud Detection: Overview233
 Laying a Foundation for Detection236
 Assessing the Risk of Fraud236
 Fraud Risk Factors237
 A Word on Information Technology238
 Interpreting Potential Red Flags238
 Importance of Professional Skepticism240
 Revisiting the Fraud Triangle243
 Incentive and Pressure244
 Rationalization and Attitude246
 Identifying and Evaluating Risk Factors248
 Discussion among Audit Team Members249
 Information Gathering251
 Other Sources254
 Analytic Procedures254
 Current Company Data versus Company Data from Prior Periods257
 Company Data versus Company Budgets, Forecasts, or Projections257
 Company Data versus Industry Data or Comparable Company Data or Both258
 Company Financial Data versus Company Operational Data258
 Company Data versus Auditor-Determined Expected Results258
 Analytic Techniques258
 Assessing the Potential Impact of Fraud Risk Factors260
 Evaluating Controls261
 Addressing the Identified Fraud Risks263
 Unpredictable Audit Tests263
 Observation and Inspection264
 Financial Statement Fraud: Detection Techniques266
 Revenue Recognition267
ch. 14 Investigative Techniques271
 Early Administrative Matters272
 Responding to Regulatory Action273
 Difficulties in Financial Reporting and Information and Disclosure274
 Issues Involving Customers or Vendors274
 Matters Relating to the Foreign Corrupt Practices Act274
 Anonymous Tips274
 Conflicts of Interest275
 What Should You Know before You Start?275
 Gaining an Understanding275
 Gathering and Securing Information277
 A Word about Insurance281
 Exceptions and Other Considerations282
 Considerations on International Assignments283
 Accounting Issues285
 Data Analysis286
 Document Review286
 CPA Services288
 How to Read a Check288
 Airline Tickets290
ch. 15 Corporate Intelligence293
 Definition of Corporate Intelligence293
 Evolution of Corporate Intelligence294
 Today's Business Need297
 Legal and Regulatory Drivers of Corporate Intelligence297
 Federal Sentencing Guidelines: Due Diligence and Vicarious Liability298
 Anticorruption and Counterfraud Laws and Regulations299
 Anti-Money Laundering and Financial and White Collar Crime Legislation301
 Cost Drivers of Corporate Intelligence301
 Reduced Monetary Penalties302
 Cost of Failed Corporate Actions and Strategic Relationships302
 Negotiation Drivers of Corporate Intelligence303
 Basic Deployment and Consumption of Corporate Intelligence304
 Background Information and Questionnaire Process305
 Customary Data Fields Necessary to Fulfill Corporate Intelligence Remits306
 Analysis and Reporting of Findings307
 Coordination and Selection of Management and External Advisors for Intelligence Gathering307
 Timing of Deployment308
 Limitations of and Inherent Barriers to Corporate Intelligence308
 Misguided Assumptions Regarding Database and Electronic Research309
 Marginal Treatment of Corporate Intelligence Advisors309
 Pressures on Corporate Intelligence Teams310
 Legal Parameters and Operating Constraints versus Enabling Legislation310
 The U.S. Economic Espionage Act310
 Telephone Records and Privacy Protection Act of 2006: Anti-Pre-Texting Legislation311
 Privacy Laws and Initiatives311
 Enabling Legislation and Regulation313
 Ethical Debates Surrounding Corporate Intelligence313
ch. 16 The Art of the Interview317
 Difficulty and Value of Obtaining an Admission318
 Planning for the Interview319
 Types of Interviews321
 The Information-Seeking Interview321
 The Admission-Seeking Interview322
 Others May Wish to Attend Interviews325
 Interview Process326
 Documenting the Interview330
 Use of Subterfuge331
ch. 17 Data Mining333
 Definition and Benefits of Data Mining334
 Structured versus Unstructured Data335
 Develop Preliminary List of Analyses336
 Understand Availability of Data337
 Understanding Available Data Sources337
 Defining Data Sets to Target for Acquisition338
 Considering Data Availability Challenges339
 Methods of Data Acquisition340
 Structured Data Analysis341
 The Data Collection Stage341
 The Assessment Stage342
 The Preparation Stage344
 The Analysis and Reporting Stage346
 Unstructured Data352
 Types of Unstructured Data352
 Collection of Unstructured Data355
 Analysis of Unstructured Data357
 Advanced Data Analysis Tools358
 Data Visualization359
 Concept Searching359
 Technological Advances in IT Systems and Communications Technology361
 Advances in Data Mining and Fraud Detection Technologies361
ch. 18 Report of Investigation363
 Types of Reports364
 Importance of Adequate Preparation364
 Standards of Reporting365
 AICPA Consulting Standards365
 ACFE Standards367
 The Written Report of Investigation368
 Basic Elements to Consider for Inclusion in a Report of Investigation369
 Summarizing Your Findings371
 Written Report of Expert Witness Opining for the Plaintiff on a Civil Fraud Claim371
 Informal Reports374
 Giving a Deposition376
 Be Prepared376
 It's Your Deposition377
 Objectives of a Deposition in Civil Litigation377
 You Are Being Measured377
 Reviewing Your Deposition Transcript378
 Other Considerations379
 Mistakes to Avoid in Reporting380
 Avoid Overstatement380
 Avoid Opinion380
 Identify Control Issues Separately from Investigative Findings of Fact380
 Use Simple, Straightforward Language Focused on the Facts381
 Avoid Subjective Comments381
 Working Papers382
 Signed Engagement Letter382
 Relationship Review384
 Substantive Working Papers384
 Each Working Paper Should Stand on Its Own384
 Testimony Binder386
 Interview Memorandums386
ch. 18 Supporting a Criminal Prosecution388
 Key Considerations390
 Deterrent Effect of Appropriate Response390
 U.S. Sentencing Commission Guidelines390
 Expense and Possible Outcomes392
 Referrals for Prosecution May Attract Public Attention392
 Referral Considerations393
 Refer the Matter to State, Local, or Federal Prosecutors?394
 Prosecutors Must Prioritize Cases394
 Forensic Accounting Investigator May Increase the Success of a Referral395
 Reputational Benefits396
 Plea Agreements397
 Filing a Civil Lawsuit397
ch. 20 Working with Atterneys388
 In the Company of Lawyers399
 Confidentiality Requirements400
 Forming the Investigative Team401
 Civil Litigation408
 External Audit Firm409
 Working for or Interacting with Law Enforcement or Government Agencies412
 Disagreements with Counsel413
ch. 21 Financial Reporting Fraud and the Capital Markets417
 Targets of Capital Market Fraud418
 Securities Investment Model419
 Overview of Financial Information and the Requirement to Present Fairly420
 Overview of Fraud in Financial Statements423
 Accounting Irregularities as an Element of Financial Fraud426
 Some Observations on Financial Fraud429
 Fraud from Within429
ch. 22 Financial Statement Fraud: Revenue and Receivables433
 Improper Revenue Recognition435
 Revenue Recognition Detection Techniques438
 Analytical Procedures to Identify or Explore Potential Revenue Red Flags440
 Side Agreements441
 Liberal Return, Refund, or Exchange Rights442
 Channel Stuffing444
 Bill-and-Hold Transactions445
 Early Delivery of Product447
 Partial Shipments449
 Contracts with Multiple Deliverables449
 Improper Allocation of Value in Multiple-Element Revenue Arrangements450
 Up-Front Fees451
 Improper Accounting for Construction Contracts452
 Related-Party Transactions453
 Revenue and Receivable Misappropriation455
 Fictitious Sales458
 Possible Red Flags for Fictitious Receivables459
 Inflating the Value of Receivables460
 Extended Procedures461
 Improperly Holding Open the Books464
 Consignments and Demonstration Goods465
ch. 23 Financial Statement Fraud: Other Schemes and Misappropriations467
 Asset Misstatements467
 Inventory Schemes467
 Investment Schemes471
 Recording Unrealized Declines in Fair Market Value474
 Manipulating Cash Balances474
 Recording Fictitious Fixed Assets475
 Depreciation and Amortization475
 Hanging the Debit476
 Software Development Costs476
 Research and Development Costs476
 Start-Up Costs477
 Interest Costs477
 Advertising Costs477
 Understatement of Liabilities and Expenses478
 Backdating Share Options479
 Off-Balance-Sheet Transactions480
 Two Basic Accounting Models481
 Cookie Jar Reserves482
 Improper and Inadequate Disclosures483
 Disbursement Schemes485
 Invoice Schemes486
 Check Tampering489
 Expense Reimbursement Schemes490
 Payroll Schemes491
 Fraud in an Economic Downturn492
 Unauthorized Trading492
 Mortgage Fraud494
ch. 24 Ponzi Schemes495
 Ponzi Scheme Origin and Development495
 Basic Framework of a Ponzi Scheme496
 Types of Ponzi Schemes496
 Spotting a Ponzi Scheme: Common Attributes497
 Recent Spotlights497
 Ponzi Schemes in the United States497
 The Bennett Funding Group, Inc.498
 Thomas J. Petters498
 Bernard Madoff499
 Stanford International Bank500
 Global Ponzi Schemes500
 Albanian Ponzi Schemes501
 Hoffland Finance502
 Forum Filatelico and Afinsa Bienes Tangibles502
 Cash Plus503
 Insights into Ponzi Schemes: Passing Trend or Lasting Reality?503
 Why Are They Popping Up More Now?505
 Ten Red Flags that You May Be Investing in a Ponzi Scheme505
 Lessons Learned506
 Accountant's Challenges507
 Regulatory Bodies and Task Forces508
 Regulatory Response508
 Bankruptcy Implications509
 Clawback Rules510
ch. 25 Money Laundering511
 Relationship between Fraud and Money Laundering511
 Counter-Terrorist Financing514
 Varying Impact of Money Laundering on Companies515
 The Five-Point Program for AML-Regulated Businesses516
 Written Compliance Program516
 Minimum Standards of Customer Due Diligence516
 Activity Monitoring and Reporting518
 Record Keeping518
 Impact of Money Laundering on Financial Statements520
 AML and Forensic Accounting Investigation521
 At the Request of the Regulator521
 At the Request of the Institution521
 Review of Transactions and Records522
 Decision Making522
 The AML Reporting Process522
 Corporate Culture and AML Corporate Governance523
 Legal Arrangements Lending Themselves to Anonymity523
 Auditing and Money Laundering524
 Relationship between Fraud Investigation and AML525
ch. 26 Foreign Corrupt Practices Act527
 Antibribery Provision527
 Books and Records Provision529
 Internal Control Provision529
 Recent Enforcement Trends530
 Larger Penalties530
 Cases against Individuals531
 Open Investigations and Self-Reporting532
 Use of More Creative Methods in Resolution of Criminal Charges (NPA, DPA)533
 Imposition of a Monitor533
 Cooperation with Foreign Regulators and Other U.S. Regulatory Bodies534
 Increased Scrutiny over the Acts of Others535
 U.K. Bribery Act 2010536
 The Role of the Forensic Accountant537
 Corruption Risk Assessments537
 FCPA Compliance Programs537
 Conduct Transnational Forensic Investigations538
 Provide Enhanced Due Diligence and Business Intelligence541
 Design and Conduct Global Anticorruption Training542
 Assist Independent Anticorruption Program Monitoring Agents542
 Red Flags542
 Cash Payments542
 Unusually High Commission542
 Freight Forwarders and Custom Clearing (C&F) Agents543
 Payments Directed by Third Parties543
 Overseas Payment Arrangements544
 Delegate Travel544
 Politically Connected Third Parties544
 Business in Red Countries545
 So-Called Facilitation Payments545
ch. 27 Construction Projects547
 The Nature of the Construction Industry547
 A Typical Construction Project548
 Contract Pricing Strategy550
 Fixed Price Contracts550
 Cost-Plus Contracts551
 Unit Price Contracts551
 Guaranteed Maximum Price Contracts552
 Time and Materials Contracts552
 Turnkey Contracts553
 Private Finance (DBFO, BOT, PFI, PPP)553
 Standard Form Contracts554
 The Construction Litigation Team555
 Bar Charts and Critical Path Analysis556
 Affected Plan Method557
 As-Built Method557
 Plan V As-Built Method558
 Time Impact Analysis558
 Issues in Analysis559
 Change Orders560
 Provisional Sums561
 Financial Damages561
 Loss of Profit565
 Increased Cost of Working566
 Finance Charges and Interest566
 Analysis of Claims567
ch. 28 Contract Compliance571
 Effective Integrated Internal and External Contract Compliance Program572
 Contract Portfolio Risk Assessment573
 Consistent Business Partner Communication573
 Incorporate Contract Terms that Improve Compliance574
 Robust Outside Contract Examination Program576
 The Role of the Forensic Accountant576
 Government Contracting578
 Risk and Compliance578
 Crisis Management and Litigation Support581
ch. 29 Other Dimensions of Forensic Accounting585
 Environmental Issues586
 Intellectual Property586
 Insurance and Business Interruption587
 Marital Dissolution588
 Shareholder Litigation588
 Business Valuation589
 Business Combinations589
ch. 30 Corporate Remediation593
 What Is Remediation?593
 What Is Driving Corporate Remediation?594
 Why Is Remediation Necessary?597
 How to Remediate599
 Role of the Forensic Accountant603
 Recent Cases605
 Remediation Going Forward607

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