Solutions Manual For Essentials of Forensic Accounting 1st Edition by Michael Crain, William Hopwood, Carl Pacini

Get all Chapter’s Instant download by email at etutorsource@gmail.
com
Chapter 1 Instructor’s Resource Manual
Chapter 1: The Forensic Accounting

Profession
Chapter Outline
Chapter 1: The Forensic Accounting Profession
Learning Objectives
Introduction
The Essence of Forensic Accounting
Forensic Accounting Versus Traditional Accounting
Forensic Accounting Versus Auditing
The Historical Development of Forensic Accounting
Forensic Accounting Knowledge and Skills
Accounting
Auditing
Investigative
Criminology and Digital Forensics
Accounting Information Systems
Risk Analysis
Communication
Psychology
Information Technology
Problem Solving
Legal
Professional Opportunities in Forensic Accounting
Investigative Services
Fraud Risk Management
Expert Consulting
Expert Testimony
Business Valuation
Other
Professional Organizations and Certifications
AICPA (www.aicpa.org)
ASA (www.appraisers.org)
ACFE (www.acfe.com)
ISACA (www.isaca.org)
NACVA (www.nacva.com)
Organization of This Book
Summary
Review Questions
Short Answer Questions
Brief Cases
Internet Research Assignments
1-1
Get all Chapter’s Instant download by email at etutorsource@gmail.com
Essentials of Forensic Accounting
Learning Objectives
• Explain the nature of forensic accounting services
• Explain the different categories of forensic accounting services
• Elaborate on the different types of knowledge areas and skills required for forensic
accounting
• Explain the different professional opportunities available to forensic accountants
• Discuss three major organizations and credentials important to forensic accountants
Teaching Guidance
Teaching Strategy
This chapter presents an overview of the material presented in the remainder of the chapters. As
such, it represents a very high-level introduction that can serve to pique students’ interest in
forensic accounting. Keeping the discussion light at this time (without discouraging
contributions) can serve to promote their interest in learning the material presented in later
chapters.
Teaching Notes
• Discuss the key elements of forensic accounting: accounting, special skills, law,
evidential matter, and interpretation and communication.
• Compare and contrast forensic accounting with:
o Traditional accounting
o Auditing
• Briefly mention the origins of forensic accounting, focusing on its historical use to
convict Mobster Al Capone (see Case in Point box).
• Briefly cover the knowledge and skills that are beneficial to forensic accountants. Don’t
overemphasize the digital forensics and information technology skills; on most forensic
accounting engagements, a person with these skills will be on the forensic accounting
team or be available to assist the forensic accountant in retrieving and analyzing digital
data.
• Discuss the professional opportunities in forensic accounting, carefully pointing out the
areas that might not be salient to many students such as risk assessment, expert
testimony, and business valuation. Also mention that forensic accountants can be
involved in alternative dispute resolution engagements and that these services will be
discussed in at least two chapters later in the text.
1-2
Too often, students of forensic accounting mistakenly equate forensic accounting with
fraud examination. Point out the distinction between forensic accounting and fraud
examination: Not all forensic accounting engagements involve fraud examination and not
all fraud examinations involve forensic accounting. In other words, these services can be
represented in a Venn diagram in which one circle, forensic accounting, overlaps another
circle, fraud examination. The overlap exists when forensic accounting and fraud
examination occur in the same situation. This is the case when suspected financial
statement fraud is investigated. If the engagement is the establishment of a dispute over
the value of property such as goodwill, no fraud is involved, but the engagement involves
forensic accounting. Catching, by video surveillance, an embezzlement perpetrated by
skimming cash receipts from a cash register is considered a fraud examination activity
that doesn’t involve forensic accounting (but if the primary evidence is comparison of
recorded cash receipts among cash registers, forensic accounting is involved).
• Encourage students to read the profile of Richard Pollack (see Case in Point box).
Mention that Mr. Pollack and his team’s efforts resulted in full recovery of monies
invested by victims of Scott Rothstein.
• Briefly cover the professional organizations that affect the practice of forensic accounting
and/or fraud examination and the credentials offered by each.
• Provide a brief overview of the book:
o Section I: Introduces the forensic accounting profession

o Section II: Provides coverage of relevant legal issues and practices of forensic
accounting
o Section III: Provides coverage of certain areas of forensic accounting such as
fraud, bankruptcy, digital forensics, matrimonial forensics, economic damages,
and business valuation.
• If you have discussed the Certified in Financial Forensics (CFF) credential, state that the
contents of the book are generally consistent with the Content Specification Outline
(CSO) for the CFF examination but expands on the CSO in many places, such as digital
forensics, expert witnessing, practice development, and fraud management.
1-3
Review Question Solutions
Multiple Choice
1.
a. Incorrect. Forensic accountants can provide advice on fraud risk mitigation.
b. Incorrect. Some forensic accountants perform valuations of estates.
c. Correct. Auditors, not forensic accountants, opine on the fairness of financial
statements.
d. Incorrect. Forensic accountants may provide information on the financial impact of
mergers and acquisitions.
2.
a. Incorrect. Although forensic accountants can serve as facilitators when performing
dispute resolution services, they are not to serve as advocators when performing these
serves.
b. Correct. Forensic accountants may serve as mediators and arbitrators.
c. Incorrect. Forensic accountants are not to serve as judge or jury.
d. Answer (b) is correct.
3.
a. Incorrect. Forensic accountants, not client personnel, should extract the data.
b. Incorrect. The given answer does not relate to the extraction of data.
c. Incorrect. There is no need to rely on sampling when all relevant data can be
extracted by means of CAATTs.
d. Correct. Use of CAATTs is recommended when extracting data because of the
potentially large amount of data that must be evaluated to obtain the necessary
data.
4.
a. Incorrect. Internal fraud schemes do not involve weaknesses in accounting
(accounting is a language used to record and present economic events, meaning it is
neither weak nor strong).
b. Correct. The absence (or lack of) adequate internal controls provides an
opportunity for internal fraud schemes to occur.
c. Incorrect. Weaknesses in leadership are only tangentially related to internal fraud
schemes and are not, absent other information, as correct as answer (b).
d. Incorrect. Weaknesses in assessment can occur without resulting in internal fraud
schemes; assessment can be thought of as a part of internal controls, and not
necessarily the most important part with respect to reducing the likelihood of internal
fraud schemes.
5.
a. Incorrect. Knowledge in all areas listed in answers (a), (b), and (c) are important.
b. Incorrect. Knowledge in all areas listed in answers (a), (b), and (c) are important.
c. Incorrect. Knowledge in all areas listed in answers (a), (b), and (c) are important.
d. Correct. Knowledge in all areas listed in answers (a), (b), and (c) is important for
a forensic accountant.
1-4
6.
a. Incorrect. The use of an expert witness is to assist the trier of fact.
b. Correct. The use of an expert witness is to provide assistance to the court (that
is, the trier of fact).
c. Incorrect. As an expert witness, the forensic accountant is not to be an advocate for
the defendant or plaintiff, but rather an advocate for his or her opinion.
d. Incorrect. Use of an expert witness is not primarily to fulfill the court’s obligation of
due diligence.
7.
a. Incorrect. For example, forensic accountants can also be engaged to perform
valuation engagements and to serve as mediators, arbitrators, and trustees.
b. Correct.
8.
a. Incorrect. A basic understanding of the rules of evidence will help forensic
accountants obtain and preserve necessary evidence.
b. Incorrect. A basic understanding of the law applicable to conspiracy crimes helps the
forensic accountant determine the evidence needed to assist the prosecution or
defense.
c. Incorrect. A basic understanding of the court systems is necessary for the proper
preparation of cases (for example, precedent may be determined by certain case law
that only pertains to the district in which the case is being tried and case law that is
properly relied upon may be affected by the court to which the case is appealed).
d. Correct. Enharmonic equivalents is a musical term that means that certain notes
(for example, f-sharp and g-flat) vibrate at the same rate of speed (and thus are
equivalent) even though they are called by different names.
9.
a. Incorrect. For example, forensic accounting sub-specialties include areas such as
investigative services, fraud risk management, expert consulting, expert testimony,
and business valuation.
b. Correct.
10.
a. Incorrect. Auditors, not forensic accountants, use the auditing standards issued by the
AICPA because forensic accountants do not audit financial statements.
b. Incorrect. Forensic accountants are not required to be independent of their clients
(they are, however, required to be objective when performing their duties).
c. Correct. Auditors formulate opinions on financial statements whereas forensic
accountants formulate expert opinions on relevant issues before triers of fact.
The term opinion used in the forensic accounting sense is a term of art in judicial
guidelines on evidence and the law and differs from its use in the accounting
literature.
d. Incorrect. Whereas auditors are required to be licensed by the states in which they
practice, forensic accountants need not be licensed unless they use language (for
example, a CPA) that is restricted by state law.
1-5
We Don’t reply in this website, you need to contact by email for all chapters
Instant download. Just send email and get all chapters download.
Get all Chapters Solutions Manual/Test Bank Instant Download by email at

etutorsource@gmail.com
You can also order by WhatsApp
https://api.whatsapp.com/send/?phone=%2B447507735190&text&type=ph
one_number&app_absent=0
Send email or WhatsApp with complete Book title, Edition Number and
Author Name.
Short Answer Questions

1. The key elements of the definition of forensic accounting are: accounting, special skills,
law, evidential matter, and interpret and communicate.
2. The word “forensic” means “pertaining to the law.”
3. Forensic accounting is typically divided into litigation services and investigative services.
4. Auditing and forensic accounting are governed by different standards: auditing is subject
to the attestation standards and auditing standards promulgated by the AICPA whereas
forensic accounting is subject to the Statement on Standards for Consulting Services.
While forensic accountants may engage in auditing work, it is performed for a purpose
different from that of auditing, which is directed at giving an opinion on financial
statements. Forensic accountants apply specialized skills that differ from those used by
financial statement auditors.
5. The term “forensic accounting” was coined by Maurice Peloubet in 1946 when he
published an article titled “Forensic Accounting—Its Place in Today’s Economy.”
6. The knowledge and skills required in forensic accounting include accounting, auditing,
investigative, criminology and digital forensics, accounting information systems, risk
analysis, communication, psychology, information technology, problem solving, and
legal.
7. Examples of types of financial cases that require investigation include any of the
following: Occupational fraud, determining the value of a spouse’s assets in a divorce
case, investigating public corruption, tracing the sources of funds in a terrorism case,
determining the extent of money laundering in narcotics trafficking cases, ascertaining
the validity of specific representations made by the target of a corporate merger, and
establishing the value of a pension fund.
8. The difference between fact witnesses and expert witnesses is that fact witnesses are only
allowed to testify in court as to what they perceive through their senses (i.e., touch,
hearing, sight, and smell). On the other hand, qualified experts are permitted to give
opinions on relevant issues.
9. The three management activities associated with fraud risk management activities include
fraud prevention, detection, and response.
10. The special skills and knowledge required to conduct forensic accounting investigations
include how to structure and manage investigations, the types of evidence that may be
collected, how to maintain the chain of custody, the legal rights of those under
investigation, how to identify different types of fraud schemes, how to conduct
interviews, and how to detect deception.
11. Yes; communication skills are critical in forensic accounting. Forensic accountants who
serve as experts must write expert opinions that may be subject to intense scrutiny in
depositions and cross-examinations. Oral communication is also very important: forensic
1-6
accountants must be able to explain their opinions on direct examination, which requires
effective presentation skills and the use of simple and convincing exhibits.
12. Areas in which forensic accountants can serve as expert consultants include fraud risk
mitigation, internal dispute resolution systems, the value of an estate, and the financial
impact of bankruptcies, mergers, and or acquisitions. (Other answers, of course, are
possible.)
13. The names of organizations include (but are not limited to) any of the following: The
American Institute of Certified Accountants (AICPA), the American Society of
Appraisers (ASA), the Association of Certified Fraud Examiners (ACFE), ISACA, and
the National Association of Certified Valuators and Analysts (NACVA). The factors that
play a role in determining the organizations to which they belong include education,
training, experience, and areas of professional focus.
14. The names of four credentials that are specific to the forensic practice of valuation are
any four of the following: Accredited in Business Valuation (ABV) of the American
Institute of Certified Public Accountants (AICPA); Accredited Member (AM) and
Accredited Senior Appraiser (ASA) of the American Society of Appraisers (ASA); and
Certified Valuation Analyst (CVA), Accredited Valuation Analyst (AVA), and
Accredited in Business Appraisal Review (ABAR) of the National Association of
Certified Valuators and Analysts (NACVA) (Names of other credentials that are
valuation-specific and which are not named in the chapter may be acceptable.)
15. The skill of problem-solving important in forensic accounting because the cases on which
forensic accountants work are usually puzzles and mysteries that are to be solved.
Forensic accountants must use critical-thinking skills when working on engagements that
involve investigations and litigation and dispute resolution so that they can effectively
match wits with perpetrators who, in many cases, are highly intelligent and seek to
deceive.
Brief Cases
1. The ways to develop a career in forensic accounting can be numerous. A few examples
include seeking employment in a firm, such as a CPA firm, that offers forensic
accounting services or in an internal auditing department of a company; joining
professional organizations such as the AICPA and the ACFE (which has many local
chapters); earning a graduate degree from a program that offers additional courses in
forensic accounting; and earning credentials recognized within the forensic accounting
community.
2. The advantages of starting your career in each of the following ways can include:
• Staff member in a private forensic accounting firm: opportunity to benefit from the
experience of those who have practiced in this area; continuing professional
education offered or paid for by the firm; legal assistance if you are ever charged with
sub-standard practice (as long as it is not reckless or fraudulent); and an
understanding of the quality controls that a firm operates under in case you want to
establish your own firm.
1-7
• Employee in law enforcement: opportunity to benefit from the experience of those

who have practiced in this area; training by the government or local law enforcement
academies; and the acquisition of experience that could enable you, after years of
working for law enforcement, to be hired by firm or company or to begin your own
business.
• Owner of your own fraud investigation firm: more flexibility over working conditions
such as hours worked; opportunity to take more responsibility earlier than would be
experienced in a firm or company.
3. The brief memo to your boss supporting your suggestion that she hire a forensic
accountant to assist with the due diligence work associated with the proposed merger can
include, for example, information such as: Having a forensic accountant on the due
diligence team provides a different perspective than the perspective of, for example, non-
forensic accountants, auditors and attorneys; a forensic accountant has knowledge of
various ways companies can misstate their financial statements; and a forensic accountant
has knowledge of specialized forensic accounting techniques and the skill and ability to
apply these techniques.
4. Answers to this case may vary depending on the respondents’ views and thus the
approaches they use to justify their position. Answers can include, for example,
discussions of the following issues:
• Adherence to a certain level of ethics is required when forensic accountants gather
and preserve evidence that does not support the position of the forensic accountant’s
client. The forensic accountant is to be objective and an advocate for his or her
findings, instead of being an advocate of any one party. To accomplish this objective,
the forensic accountant is to exercise due diligence and be aware that subconscious
bias may influence evidence gathering.
• Abiding conscientiously to the codes of conduct of professional organizations to
which the forensic accountant belongs so that the level of appropriate behavior
expected of forensic accountants occurs is beneficial from the standpoint of
increasing the likelihood that justice exists and the profession is not harmed by the
unethical behavior of forensic accountants. This, in turn, helps society by preserving a
mechanism (the operations of the courts and ADR as well as the functioning of
forensic accountants) that helps maintain order in society.
5. Explaining the limitations of investigating fraud without having an accounting degree can
include, for example, a lack of appreciation of the financial aspects of fraud (including
the possibility of overlooking significant motives, such as the need or desire to obtain
cash), a lack of understanding of the double-entry concept (which can impair the
investigator’s ability to determine the effect on financial statements) and a lack of
familiarity of the proper presentation of financial statements. The types of fraud that
might require an accounting education include frauds of a financial nature -- particularly
those that affect accounting systems and that involve financial statement
misrepresentation.
1-8
6. A brief essay explaining how auditing skills contribute to the work of a forensic
accountant could include, for example, a discussion of the auditing skills of evidence-
gathering, analysis, and evaluation; the exercise of due diligence; and the auditor’s skill
of determining the correct opinion (i.e., conclusion) to issue.
7. A brief memo on what’s involved in forensic accounting could include, for example, a
discussion of the key elements of the definition of forensic accounting, i.e., knowledge of
accounting and the law; use of special skills such as applying specialized procedures to
collect, analyze, and evaluate evidence; and the need to effectively communicate the
results of the evaluation, orally (e.g., as an expert witness) or in written form. The memo
could also contain a description of the two areas of forensic accounting: litigation
services and investigative services.
8. The rule that a person conducting a fraud examination is not to express an opinion
regarding the guilt or innocence of any person or party is important for several reasons:
(1) The responsibility of a forensic accountant who performs a fraud examination is not
to judge guilt or innocence but rather to present evidence that a trier of fact can use to
arrive at a conclusion; in some cases, forensic accountants will be asked their opinions,
e.g., when acting as an expert witness, but forensic accountants are not the final
adjudicators of guilt or innocence, (2) To protect the reputations of innocent persons from
being harmed by the expression of a false statement about them, and (3) To protect the
forensic accountant from retaliation by those the forensic accountant might proclaim as
guilty or innocent.
9. A brief essay containing an explanation of several different types of cases in which a
forensic accountant might serve as a testifying expert could include cases of
embezzlement, matrimonial fraud, financial statement fraud, murder trials in which the
murder was committed to obtain life insurance proceeds, and lawsuits against
manufactures for failure to recall products on a timely basis. (Many other types of cases,
of course, exist.)
10. A brief essay explaining the basic areas of law with which a forensic accountant must be
familiar can include, for example, the laws and regulations applicable laws to the case on
which the forensic accountant is working, rules of evidence, and civil or criminal
procedures. These areas can include laws governing the prosecution of the crimes of
conspiracy, money laundering, and embezzlement.
Internet Research Assignments

1. Answers to this research assignment vary depending on the information provided by the
AICPA when the FVS section site is visited. Benefits usually include a number of
resources, tools and information about forensic accounting and business valuation
services including the online professional library.
2. CS Section 100 says that professional judgment is an essential component of estimating
value.
3. The felonies to which Scott Rothstein pled guilty are
1-9
• Count 1: Racketeering conspiracy (in violation of Title 18, Section 1962 (d))
• Count 2: Conspiracy to commit money laundering (in violation of Title 18, Section
1956(h)
• Count 3: Conspiracy to commit mail fraud and wire fraud (in violation of Title 18,
Section 1349)
• Counts 4 and 5: Wire fraud (in violation of Title 18, Section 1343)
4. Answers will vary to this web research assignment due to the firms chosen and the
extensiveness of the descriptions of services.
5. President Franklin D. Roosevelt issued a proclamation in April 1933 requiring the return
of all gold certificates to the government (Executive Order 6102 - Requiring Gold Coin,
Gold Bullion and Gold Certificates to Be Delivered to the Government). This aided the
investigation because the FBI knew the serial numbers of the certificates that were given
as ransom and thus had a chance at identifying the kidnapper by means of the serial
numbers of certificates in his or her possession. In 1934, a letter was issued by the New
York City FBI office to all banks and their branches in New York City, requesting that
they watch for the ransom certificates. The set of serial numbers was also distributed to
the banks and various employees of businesses such as clearinghouses, grocery stores in
selected communities, insurance companies, gas stations, airports, department stores, and
post offices.
In 1934, an assistant manager of a bank in New York City contacted the FBI to say that a
certificate bearing one of the ransom certificate numbers had been discovered by one of
the tellers in that bank. The bank was able to determine that the certificate had been
received by the bank from a gas station located at 127th Street and Lexington Avenue,
New York City. The gas station attendant had received the certificate as payment from a
man fitting the description of the person who had used other certificates as payments at
other businesses. The attendant became suspicious of the use of the certificate because
the certificates were to have been returned to the government, so he wrote, on the
certificate itself, the license number of the car driven by the man. The FBI was then able
to trace the license number to Bruno Richard Hauptmann, who was subsequently
arrested, charged, and found guilty of the murder of Charles Lindbergh, Jr. He was
executed on April 3, 1936.
6. While answers to this web research question can vary, the role of forensic accounting in
narcotics trafficking investigations can involve tracing money associated with drug
trafficking to identify the source of the funds. Often drug traffickers will use money
laundering to obfuscate the fact that the money was earned by dealing in drugs. Forensic
accountants can identify suspicious financial laundering activity in banks and other types
of companies. They can also help create and implement controls designed to detect
money laundering activities so that companies do not experience injury that can
accompany these activities. In addition, forensic accountants can serve as expert
witnesses when these types of cases are prosecuted or can serve as U.S. Trustees.
1-10
7. Topic areas covered in the CFF exam can be found on the AICPA’s website at
www.aicpa.org. Alternatively, the information can be found by using a search engine and
searching on terms such as “AICPA CFF CSO” (the CSO represents “Content
Specification Outline”; the CSO contains the topics covered on the CFF exam). These
searches can lead to information such as the guide created by the AICPA titled CFF
Content Specification Outline.
8. While answers to this web research question can vary, the role of the forensic accounting
in counter-terrorism work can involve the act of following the money to determine the
sources and uses of the funds so that the source can be eliminated and use of the funds for
terrorism activities curtailed. Without money, terrorism cannot operate. Even though the
trail of money from its source to its use can be complex, a trail (such as transfers) exists
and can be used to stop the flow of funds and to prosecute those who perpetrate terrorist
acts.
1-11
We Don’t reply in this website, you need to contact by email for all chapters
Instant download. Just send email and get all chapters download.
Get all Chapters Solutions Manual/Test Bank Instant Download by email at

etutorsource@gmail.com
You can also order by WhatsApp
https://api.whatsapp.com/send/?phone=%2B447507735190&text&type=ph
one_number&app_absent=0
Send email or WhatsApp with complete Book title, Edition Number and
Author Name.

Solutions Manual For Essentials of Forensic Accounting 1st Edition by Michael Crain, William Hopwood, Carl Pacini

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Solutions Manual For Essentials of Forensic Accounting 1st Edition by Michael Crain, William Hopwood, Carl Pacini

Uploaded by

Copyright:

Available Formats

Get all Chapter’s Instant download by email at etutorsource@gmail.

Chapter 1: The Forensic Accounting

Essentials of Forensic Accounting

Chapter 1 Instructor’s Resource Manual

o Section I: Introduces the forensic accounting profession

Essentials of Forensic Accounting

Review Question Solutions

Chapter 1 Instructor’s Resource Manual

Get all Chapters Solutions Manual/Test Bank Instant Download by email at

Essentials of Forensic Accounting

Short Answer Questions

Chapter 1 Instructor’s Resource Manual

Essentials of Forensic Accounting

• Employee in law enforcement: opportunity to benefit from the experience of those

Chapter 1 Instructor’s Resource Manual

Internet Research Assignments

Essentials of Forensic Accounting

Chapter 1 Instructor’s Resource Manual

Get all Chapters Solutions Manual/Test Bank Instant Download by email at

You might also like