Table of Contents

• Jurisdiction: United States

Table of Contents

Chapter 1 Introduction.......................................................................................1

I. The Uniqueness of a Forensic Accountant.............................................................2

II. The Roles of a Forensic Accountant.......................................................................3

III. Why Forensic Accountants, Managers and Lawyers Need This Book..................5

IV. Conclusion..............................................................................................................8

Chapter 2 Red Flags and the Development of a Fraud Investigation....................9

I. Organizing a Fraud Investigation...........................................................................11

A. Planning....................................................................................................................11

B. Execution..................................................................................................................11

II. Indicia of Fraud: The Warning Signs.....................................................................12

A. External Market/Industry Factors......................................................................... 13

B. Borrowing Base Reports ......................................................................................... 14

C. Operations ................................................................................................................ 15

D. Annual Audit Problems .......................................................................................... 16

E. Financial Reporting, Internal Controls and Other Accounting-Related Issues .. 17

F. Management Transgressions and Sins .................................................................. 23

G. Sales Cycle Red Flags .............................................................................................. 24

H. Third-Party Documentation Concerns................................................................26

III. False Positives: Signs of Financial Distress............................................................27

IV. Conclusion..............................................................................................................29

Chapter 3 Types of Fraud in an Operating Business and Preventative Measures ..31

I. The Team.................................................................................................................33

II. How Is Fraud Detected?.......................................................................................... 33

A. Analyze Cash Flow .................................................................................................. 34

B. Review Employee Files ........................................................................................... 35

C. Inspect Company Credit Card Usage ................................................................... 35

D. Note Changes in Lifestyle or Bad Habits.............................................................. 36

E. Evaluate Management Expectations ..................................................................... 36

III. Types of Fraud in Operating Businesses................................................................37

A. Asset Misappropriation..........................................................................................37

B. Corruption...............................................................................................................39

C. Financial Statement Fraud ..................................................................................... 40

IV. Fraud Issues Detected Within Small Companies..................................................41

A. Segregation of Duties..............................................................................................41

B. Misappropriation Despite Segregation ................................................................. 42

V. Fraud Issues Detected Within Large Privately Held Companies..........................42

VI. Preventative Measures............................................................................................43

A. What Is the Fraud Diamond?.................................................................................43

B. How to Reduce the Risk of Fraud..........................................................................44

C. Insuring Against Fraud ........................................................................................... 45

VII. Limitations of a Fraud Investigation......................................................................46

VIII. Conclusion.............................................................................................................46

Chapter 4 Forensic Accounting and Fraud Detection: The Increasing Role of Data Analytics.................................................................................47

I. Why Data Analytics?..............................................................................................48

II. Analytics and Forensic Accounting: Upping the Detection Game with Risk Engines.... 49

III. Applying Data Analytics to Fraud Detection.........................................................50

A. Visual Analytics.......................................................................................................50

B. Transactional Data Analytics.................................................................................51

C. Text Analytics........................................................................................................... 52

D. Link Analysis............................................................................................................ 53

E. Predictive Analytics ................................................................................................ 53

F. Social Network Analytics ....................................................................................... 53

IV. Conclusion .............................................................................................................. 54

Chapter 5 The Role of the Forensic Accountant in Fraudulent Transfer Litigation 55

I. Identification of Fraudulent Transfers...................................................................57

A. Freeze Evidence and Assets.................................................................................... 57

B. Red Flags of Potential Fraudulent Transfers........................................................58

II. The Need for a Database.........................................................................................59

A. The Importance of a Database...............................................................................59

B. Building the Database ............................................................................................. 59

C. Use of Database as a Reference..............................................................................59

III. Collecting Data.......................................................................................................60

A. Records of Debtor Obtained from Debtor or On-Site Collection....................60

B. Documentation and Information Maintained by Third Parties........................62

C. Documentation and Information Maintained by...