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

FORENSIC ACCOUNTING - BA124 - spring 2007Slide 9-2 Role of Conversion Analysis n Helps determine the extent of the fraud n Serves as a facilitation for confession

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

FORENSIC ACCOUNTING - BA124 - spring 2007Slide 9-4 Net Worth Method n For use in estimating “Funds from Unknown Sources” n Calculation: n Assets - Liabilities = Net Worth n NW c - NW P = Net Worth Increase n NWI + Living Expenses = Income n Income - Known Sources = Unknown Sources

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

FORENSIC ACCOUNTING - BA124 - spring 2007Slide 9-6 Types of Questions n Introductory n Informational n Assessment n Closing n Self Admission-use carefully

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

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

FORENSIC ACCOUNTING - BA124 - spring 2007Slide 9-9 Fraud Reporting n WFO Suggestion: n Summary n Chronology n Interview & Procedural Summaries n Admission information n Loss Assessment

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