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The Forensic Accounting Legal Environment McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2-3Overview The forensic accountant constantly works in the legal environment and for this reason must have a broad, basic understanding of the legal systems in the United States. Civil and criminal procedures are especially important to the forensic accountant because they define the logical steps that are followed in investigations and criminal and civil litigation, and forensic accountants can be called to participate in almost all of the major steps.

2-4 Sources of Law U.S. Constitution, Statutes, Cases, Administrative Civil and Criminal Procedures The Legal System and Jurisdiction Sources of Law and the Court System

2-5 Civil versus Criminal Cases

2-6 Main “Players” In Investigations And Legal Cases Prosecutor or District Attorney Courts Law Enforcement Attorneys

2-7Investigations Investigations and Trials Working Papers Chain of Custody Fraud Triangle Subpoenas, search warrants, grand juries

2-8 Arrests and Pretrial Processes Arrests Probable cause (necessary) Citations (alternative to immediate arrest) Arrest Warrants (by a judge) Booking, Charging, and Bail Arraignments (charges read, plea entered, lawyer appointed) Pretrial Discovery Preliminary Hearings (mini-trial, judge decides whether probable cause exists) Plea Bargaining and Civil Negotiations

2-9 Rules of Evidence Rules Relating to Evidence Content Personal Knowledge Rule (hearsay typically excluded) Expert Witnesses (exception to personal knowledge rule) Exceptions to Hearsay Exclusion: dying declarations, excited utterances, defendant admissions, statements that show someone’s state of mind, written government and business records, and prior inconsistent statements. Rules Relating to Manner of Testimony Leading Questions not Permitted on Direct Testimony

2-10 Common-Law Financial Crimes Larceny (Intentionally and permanently converting another’s property to an individual’s own use or possession.) Burglary (Unlawfully entering any building or structure with the intent of committing a crime.) Conspiracy (Two or more people agree to commit a crime with common intent and then act on that intent.) Embezzlement (Must first have lawful posession) Fraud (False Pretenses) Robbery (Force or Threat of Force in Presence of Victim.) Extortion (Threat of future force.) Arson Solicitation Aiding and Abetting