AcFn 611-ch VII Revised PDF

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Chapter 7
Recent Developments in
Accounting
Inflation Accounting
And
Forensic Accounting
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Chapter 7
Forensic Accounting
Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

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Forensic Accounting
What Is Forensic Accounting?

z Forensic accounting is the application of investigative
and analytical skills for the purpose of resolving financial
issues in a manner that meets standards required by
courts of law.
z The Forensic Accountant

z Forensic accountants apply special skills in accounting,
auditing, finance, quantitative methods, certain areas of
the law, research, and investigative skills to collect,
analyze, and evaluate evidential matter and to interpret
and communicate findings.
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Forensic Accounting
z Knowledge and Skills of the Forensic Accountant

z Auditing, investigative, and communication skills; criminology;
legal; psychology; IT; and Accounting
z Opportunities in Forensic Accounting
z Fraudprevention and investigation, litigation support,
computer forensics
z Forensic Accounting Organizations
z Association of Certified Fraud Examiners, the American
College of Forensic Examiners, the Association of Certified
Fraud Specialists, the National Association of Certified
Valuation Analysts, the National Litigation Support Services
Association, the Institute of Business Appraisers, and the
American Institute of Certified Public Accountants.
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Forensic Accounting
z The forensic accountant constantly works in the legal

environment and for this reason must have a broad, basic
understanding of the legal systems.
z 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.

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Internal Auditor, External Auditor and external forensic
accounting consultant
z The internal auditor internal auditor focuses on

maintaining adequate internal control processes.
z The external auditor focuses on attesting to
financial statements.
z The external forensic accounting consultant in an
external audit is likely to focus on a specific area of
concern, one that is likely to involve suspected or
actual fraud.

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Various elements of fraud within the organization.
z Various types of fraud include, for example,

z theftof assets, theft of information,
z improper purchases, and
z improper hiring.
z Assets can be stolen by their unauthorized conversion to
personal use and embezzlement.
z Information can be stolen in a variety of ways; examples of
such ways include by smuggling disks out of the office and by
emailing information to unauthorized.
z Improper hiring may include, for example, hiring friends or
family without disclosing the relationship, or by hiring friends
or family and improperly inflating their salaries or wage rates.

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IT skills are very important to the forensic

accountant
z IT skills are very important to the forensic accountant.
z The main areas of forensic accounting include auditing and
investigation.
z Both these areas involve computers and information
technology.
z Examples:
1) forensic auditing in an IT environment,
2) security consulting,
3) expert testimony in computer crimes,
4) recovering erased data from computers used in computer
crimes,
5) tracing the source of an email message relating to a
computer crime.
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The roles played by forensic accountants in areas

besides those relating to fraud
z Examples of non-fraud-related forensic accounting

roles include:
z valuation,
z dispute resolution,
z due diligence in mergers and acquisitions,
z expert testimony in divorce or bankruptcy
proceedings.

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The most important skills of forensic accountants
z Forensic accountants must be skilled of working

with people, with communications, must have
excellent analytical and investigative skills, and
have good overall accounting skills.
z Forensic accountants must also have various
specialized skills, including those in the areas of
valuation and expert consulting and expert
testimony.
z Results of investigations and analyses are of little
value unless the forensic accountant is skilled at
communicating such results to others
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The Sarbanes-Oxley
Act of 2002

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SOX Regulatory Framework

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SEC Oversight
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The Sarbanes-Oxley Act
z The Sarbanes-Oxley Act. The full official title of the act is

“Public Company Accounting Reform and Investor
Protection Act of 2002
z Title
I—Public Company Accounting Oversight Board
The PCAOB consists of five members, only two of whom are
permitted to either be or have previously been certified
public accountants (CPAs). Furthermore, its chairperson
cannot have been a practicing CPA anytime in the five
years before serving on the board.

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SOX Titles II and III

z Title II—Auditor Independence
z Prohibitsservices
z Requires rotation of audit partners
z Title III—Corporate Responsibility

z Mandates audit committees
z CEO/CFO must certify reports
z SEC powers to bar executives for directorships
z SEC powers to seek equitable relief
z Reporting requirements for corporate attorneys

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SOX Title IV
z Title IV—Enhanced Financial Disclosures
z Requires the disclosure of all material off-balance-sheet
transactions and reconciliation of pro forma financial
statements to GAAP
z Forbids personal loans to directors and executives.
z Requires that senior management and directors disclose
report changes in securities ownership within 2 days.
z Requires the CEO & CFO to “certify” internal controls, and
that the auditor attest to and report on management’s
assessment of the internal control structure and procedures.
z Requires that companies disclose whether they have adopted
an ethics code for senior management and whether the audit
committee includes at least one financial expert.
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SOX Titles V-VIII

z Title V
z Requires independence of financial analysts
z Title VI and VII—Commission Resources and Authority and
Studies and Reports
z Title VIII—Corporate and Criminal Fraud Accountability
z Provides for up to 20 years in prison for certain types of
interference with any kind of federal-related investigation
z Requires auditors to retain their working papers for 5 years.
z Makes nondischargeable fines, penalties, and certain civil
debts arising from violations of state and federal securities
fraud laws.
z Whistle-blower protection
z Up to 25 years in jail for securities-related fraud

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SOX Titles IX and X

z Title IX—White-Collar Crime Penalty Enhancements
z Increases maximum penalty for wire and mail fraud from 5 to
20 years
z Makes it a criminal offense for officers to willfully and
knowingly certify financial reports not in compliance with the
act. Possible 20 years in jail.
z Title X—Corporate Tax Returns

z Recommend that the CEO sign the corporate tax return

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SOX Title XI
z Title XI—Corporate Fraud and Accountability
z Establishes a potential 20-year prison term for anyone who
alters, destroys, mutilates, or conceals a record, document, or
other object or otherwise impedes an official proceeding.
z Empowers the SEC to petition federal courts for temporary
injunctions to freeze pending “extraordinary payments” to
certain individuals under investigation for possible violations of
federal securities law.
z Empowers the SEC to bar from serving as corporate officers
any individuals who violate certain rules that govern certain
manipulative, deceptive devices
z Increases penalties for filing a false or misleading SEC report
to up to $25 million dollars and up to 20 years in prison.
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SOX Compliance
z SOX Rules, Regulations, and Standards (SOX involves an
ongoing rulemaking and regulatory process)
z The Federal Criminal Sentencing Guidelines (point system
with mitigation for ethics and control processes)
z The COSO Reports
z Focus on basic control processes and risk management
z The COBIT Standard
z Contains high-level and detailed control objectives, audit
guidelines, and management guidelines
z ISO 27002
z Contains 11 major topics, with over 5,000 controls in total
z Comparison of the Various Models for Control Practices

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SOX and Small Public Companies

z Sox 404 Compliance with Small Public Companies
z Leadershipinvolvement and effective boards of directors
z Compensating for limited segregation of duties by
management reviews
z Compensating for limited IT by using ASPs
z How Small Public Companies Can Achieve Efficiency in

Internal Control Processes
z Apply a risk-based approach
z Focus on changes
z Manage reporting objectives
z Right-sizing documentation

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The intent of the Sarbanes-Oxley Act
zThe basic intent was to restore investor

confidence in financial statements after a
wave of major financial reporting scandals.

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According to the comments made by President

Bush, the benefits of the Sarbanes-Oxley Act are:
President Bush referred to:

z restoring confidence in financial
statements,
z integrity in the board room, and
zan end to abusive accounting practices
designed to artificially drive up stock
prices.

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Forensic Auditing and

Investigation

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Financial Statement Fraud

z Financial statement fraud involves the intentional
misstatement of financial statements so that they do not
present accurately the financial position, results of
operations, and cash flows of the entity.
z When financial statement fraud is not suspected, auditors
use the following audit procedures: confirmation,
observation, physical examination, re-performance,
performance of analytical procedures, inquiry of client, and
documentation. These procedures can identify financial
statement fraud if it exists.
z Analytical review procedures can point to areas that the
forensic accountant should investigate for the presence of
possible fraud.
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Five Common Types of Analytical

Procedures
z Compare client data with industry data

z Compare client data with prior period data
z Compare client expected results with non-financial data
(e.g., number of units produced)
z Compare client data with results expected by client (e.g.,
budgets)
z Compare client data with results expected by auditor (e.g.,
expected decline due to downturn in economy)

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Analytical Review and Financial

Ratios
z Analytical review comparisons are often made by using

ratio analysis to determine whether over- or
understatements of revenue (and assets) and expenses
(and liabilities) appear to exist.
z Horizontal analysis
z Vertical analysis

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Consideration of Fraud in a
Financial Statement Audit
z The auditor is required to determine the potential that the
financial statements were affected by fraud.
z SAS No. 99 incorporates the conditions of the Cressey
triangle—pressures, perceived opportunities, and
rationalization—to aid the auditor in considering the extent
to which the audit client could have experienced fraud.
z Early in the audit, the audit team must engage in a
“brainstorming” session.
z The auditor is also required to interview management and
others to determine their opinions on the client’s risks of
fraud and how those risks have been addressed and to
consider unusual or unexpected relationships identified by
means of analytical procedures.
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Fraud Risk
z If the auditor believes the risk of material misstatement due
to fraud is high, SAS No. 99 suggests that the auditor take
the following actions with respect to the current audit:
z Assign audit personnel who have the requisite knowledge,
skills, and abilities commensurate with the fraud risk assessed
and consider engaging other persons who have specialized
skills and knowledge such as forensic accounting specialists.
z Carefully consider whether management’s choice of
accounting principles is appropriate, especially those that
involve the use of subjective measurements and those that
apply to complex transactions.
z Incorporate an element of unpredictability to the nature,
timing, and extent of audit testing so that the client cannot
easily arrange to avoid detection of management fraud.

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When the Auditor Suspects Fraud
z Once financial statement fraud is suspected, the forensic

accountant can examine the financial statements more
closely.
z Examine whether the financial statements agree with the
general ledger balances.
z Examine whether the general ledger accounts agree with
subledger accounts.
z Investigate the detail of the accounts themselves.
z Financial
statement fraud is not always discovered through
missing documents. At times, fictitious documents can be
used to cover up fraud.
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Symptoms of Fraud
z Record-Related Symptoms
zA records-related symptom involves an unusual source
document or relationship among financial data.
z Person-Related Symptoms
z Symptoms related to human behavior are known as person-
related symptoms. Changes in behavior can signal
underlying problems bothering the person. Other symptoms of
person-related behavior include levels of spending that
exceed the person’s level of income. The forensic accountant
should ascertain the reason for the behaviors to determine
whether they point to fraud.

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Analysis of Questioned Documents
z Questioneddocuments are documents that are contested

because one or more persons do not believe they are
authentic.
z Altered
Documents (additions or deletions)
z Handwriting
z The graphologist compares an exmplar to any handwriting that
appears in the document.
z Printer Output
z Ink
z Paper
z Document Restoration
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Forensic Investigation and

Sources Of Evidence
z Sources Available to the Public
z Real Estate Records
z Court Records
z Assumed Name Indexes
z Uniform Commercial Code (UCC) Filings
z Other Public Records
z Restricted Sources
z Drivers’licenses and boat and aircraft licenses.
z Motor vehicle transactions, records of vehicle dealerships
z Currency transaction reports and suspicious activity reports
z Report of International Transportation of Currency Instruments
z Report of Cash Payments over $10,000 Received in a Trade
or Business
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Forensic Investigation and

Sources Of Evidence
z Link Analysis
z Invigilation
z Search Warrants
z Surveillance
z Other Methods
z Source and application of funds that the Internal Revenue
Service uses (this method is discussed in Chapter 11). These
methods are often useful in estimating funds that been
obtained by illegal means.
z Fraud Discovery Statistics

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Interview And Interrogation

z An interview is typically a non-confrontational information-
seeking technique of asking questions of a person not
believed to have committed a crime.
z An Interrogation is an information-seeking technique that
involves subjects who are in custody and are persons of
interest. It is therefore more likely to involve confrontation.
z The first step in an interview is to build a profile of the
subject: position in firm, job functions, length of time with
the firm, salary and benefits, any promotions expected but
not received, ability to work with co-workers, age and
marital status, interests and hobbies, assets, outstanding
bills, including recent purchases such as cars and real
estate.
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Subject Responses during an

Interview
z Subjects who are not trying to hide anything usually provide
direct answers to questions without hesitation.
z Verbal cues
z Words like you, yours may indicate shifting responsibility
z Sometimes deception by answering questions with questions
z Qualifiers may indicate deception
z Pausing with words like “ah” may indicate deception
z Nonverbal cues
z Failure to deny allegation or respond to questions
z Eye movements and body language can be clues regarding
subject’s honesty

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Subject Interview Responses: Eye

Movements and Body Language
z Eye movements for truthful responses:
za subject who is primarily sight oriented usually (1) looks up
and to the left, (2) straight ahead, or (3) both.
z A subject who is auditory dominated exhibits truthful memory
recall by either (1) looking down and to the left or (2)
horizontally and to the left.
z A touch (or feeling) dominated person will either (1) look
downward and to the right, (2) look downward, (3) blink
rapidly, or (4) close the eyes when responding truthfully.
z Body language—signs of possible untruthfulness
z Long pauses, shifting body, reaching for nearby objects
z Tenseness, shifting positions

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Interviews: Question Types
z Investigators can use several different types of questions

during interviews: closed ended, forced choice, open
ended, connecting, positive reaction, clarifying,
confrontational, and secondary.
z The interviewer should avoid certain questions that allow
the subject to respond with vague, even untruthful,
answers. One type is the compound question
z Leading questions and negatively phrased questions
should be avoided.

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Interviewing Plan
z The first five minutes of an interview are the most

critical; the interviewer must assess the subject’s
willingness to cooperate, personality, and mood. If the
subject is willing to cooperate, for example, the interviewer
can use an inductive approach by asking questions about
details and then generalizing from the answers. If, however,
the subject is anxious, the interviewer may want to use a
deductive approach by beginning with general questions,
often to put the subject more at ease and to establish
rapport, and then proceed to more detailed questions.

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Interviewing: Persuasive
Approaches
z The direct approach is used when the subject is a suspect,
there is little doubt as to his guilt, and she does not have a
criminal history but does have a sense of fairness and sympathy
for others.
z The non-direct approach is more likely employed when
interviewing subjects who are not suspects, or who are suspects
who previously have been involved in crimes, or do not possess
a sense of fairness and sympathy for others. This approach
works well when the interviewer is dealing with a guilty person
who realizes that his guilt can be established by evidence other
than answers to the interviewer’s questions.
z The combined approach involves using parts of each
approach or even switching from using one type to the other
type.
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Admission-Seeking Interviews:
Special Considerations
z Seating arrangements
z One interviewer takes notes, other questions
z The interviewer should avoid the use of emotionally
charged words such as fraud, crime, theft, steal, embezzle
or embezzlement, manipulation, lie, and cheat
z If the suspect denies the accusation but the interviewer
has evidence that the suspect is guilty, the suspect should
not be allowed to continue to make denials because with
each denial, she is making any subsequent confession
more difficult.
z When a confession is presented to be signed, the
investigator should avoid seek a direct, unequivocal
admission of guilt.
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The Signed Confession

z The signed confession should be a concise statement
regarding the perpetrator’s guilt. It should include a
statement indicating that the confession was voluntarily
made, an acknowledgment that the confessor knew the act
was wrong, the approximate dates that the offenses
occurred, and an approximate amount of the losses.
z The confession should acknowledge that the perpetrator
read the statement and that the perpetrator believes the
statement is true to the best of her knowledge.
z Because the suspect can quickly decide not to sign a
sworn statement, the interviewer should come to the
admission-seeking interview with a hard copy of the expected
statement and, if possible, a copy in electronic format.
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Financial Statement
Fraud

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Financial Statement Fraud:

Overview
z Financial statement fraud (FSF) is any undisclosed
intentional or grossly negligent violation of generally
accepted accounting principles (GAAP) that materially
affects the information in any financial statement.
z The various general areas for FSF schemes:
z Improper revenue recognition.
z Overstatement of assets (other than accounts receivable
related to revenue fraud).
z Understatement of expenses/liabilities.
z Misappropriation of assets.
z Inappropriate disclosure.
z Other miscellaneous techniques.
z About half of all FSFs involve overstating revenues/assets
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Revenue Schemes
z Sham sales
z Premature revenue recognition
z Recognition of conditional sales
z Abuse of cutoff date of sales
z Misstatement of the percentage of completion\
z Unauthorized shipments or channel stuffing
z Consignment sales

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Different types of revenue recognition fraud
z Sham sales:
z This scheme involves recording
z fictitious sales and
z frequently includes falsified sales, inventory, and
shipping records.
z In some cases, company employees go so far as to
hide part of the inventory to make it appear that the
hidden items have been sold.

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z Premature revenue recognition Company

employees record sales after receiving customer
orders but before shipping the goods.
z Recognition of conditional sales Employees
record sales for transactions that are not yet
complete because of unresolved contingencies. In
some cases, employees make secret agreements
with the customer that alter the terms of the sale.
For example, a company could secretly agree that
the customer can return all unsold goods.

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z Abuse of cutoff date of sales Normally, a

company’s books are “closed” at the end of each
reporting period, and sales that occur after the
closing date do not appear on the current period
income statement. Some companies keep the
books open after the closing date and include the
next period’s sales on the current period income
statement.

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z Misstatement of the percentage of completion

Revenue from some types of contractual work,
such as construction, is considered to be earned
according to the estimated percentage of the
project completed. In this scheme, employees
overstate the percentage that projects are
completed and thus overstate revenues.

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z Unauthorized shipments or channel stuffing

Employees create sales orders at the end of the accounting
period by shipping goods that have not been ordered to
record the shipments in current period sales. When they
goods are returned in the next period, they will be charged
against the next period’s sales. Channel stuffing is similar
but the company has a relationship with the customer to
which it automatically ships goods according to the
company’s estimates of the customer’s demand. The
company takes advantage of this relationship and ships too
many goods toward the end of the accounting period.

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Schemes Involving Overstating Assets
z Inventories The most common inventory fraud involves

the overstatement of assets.
z Accounts receivable Accounts receivable are overstated
by understating allowances for bad debts or falsifying
accounts balances.
z Property, plant, and equipment In this scheme,
depreciation is not taken when it should be or property,
plant, and equipment is simply overstated. A corresponding
overstatement is made to the revenues.
z Other overstatements These involve other accounts such
as loans/notes receivables, cash, investments, and so on.

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Schemes Involving Improper Accounting
Treatment
z Recording an asset at market value or some other incorrect

value rather than cost.
z Failing to charge proper depreciation or amortization
against income.
z Capitalizing an asset when it should be expensed.
z Improperly recording transfers of goods from related
companies as sales.
z Not recording liabilities to keep them off the balance sheet.
z Omitting contingent liabilities (e.g., pending product liability
lawsuits, pending government fines, and so on) from the
financial statements.

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Other Schemes
z Fictitious and Fraudulent Transactions Recording sham

transactions and legitimate transactions improperly.
z Fraudulent Transaction Processing Intentionally
misprocessing transactions to produce fraudulent account
balances. For example, accounting software is modified to
incorrectly total sales and accounts receivables so that all
transactions in the account are real but the total is
overstated.
z Direct Falsification of Financial Statements Producing
false financial statements when management ignores
account balances.
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Characteristics of Financial Statement Fraud
z The median amount of the fraud is approximately 25

percent of the median total assets.
z Most frauds span multiple fiscal periods with the average
fraud time being approximately two years.
z The majority of fraud involves overstating revenues by
recording them fictitiously or prematurely. <<AU: In the
section
z FSF is much more likely to occur in companies whose
assets are less than $100 million.
z FSF is much more likely to occur in companies with
decreased earnings, earnings problems, or a downward
trend in earnings.
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z In a large majority of cases, either the CFO or CEO is

involved in the fraud.
z In many cases, the board of directors has no audit
committee or one that seldom meets, or none of the audit
committee members has the required skills to perform as
intended.
z The members of the board are frequently dominated by
insiders (even related to managers) or by those with
financial ties to the company.
z Auditor changes occurred about one-fourth of the time in
and around the time of the fraud.

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z Nearly half of audit reports indicate some type of anomaly,

such as a change of auditors, doubts about the company’s
ability to continue as a going concern, a change in
accounting principle, or a litigation issue. Problems with
departures from GAAP seldom occur, however.
z The size of the audit firm does not seem to matter. FSF
occurs frequently in companies audited by both large and
small audit firms.
z Nearly one-third of the enforcement action cases that name
individuals allege wrongdoing on the part of the external
auditor. About half the time, the auditor is accused of
participating in a fraud; the other half the time the auditor is
accused of negligence.
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Motives for FSF
z Poor Income Performance

z Impaired Ability to Acquire Capital.
z Product Marketing
z General Business Opportunities
z Compliance with Bond Covenants
z Generic Greed
z Theft, Bribery, or Other Illegal Activities

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Prevention of Financial Statement Fraud
The general philosophy behind SOX is to minimize FSF by

promoting strong corporate governance and
organizational oversight through the oversight of the
following six organizational groups.
z Board of directors
z Audit committee
z Management
z Internal auditor
z External auditor
z Public Oversight Bodies

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Red Flags: Indications of Possible Financial

Statement Fraud
z Lack of Independence, Competence, Oversight, or

Diligence
z Weak Internal Control Processes
z Management Style
z Personnel-Related Practices
z Accounting Practices
z Company’s Financial Condition
z Industry Environment and Conditions

D P L ik th ACFN 611 Ad d Fi i lA ti
1 - 60
Management Discretion, Earnings

Management, And Earnings Manipulation
z Management Discretion. With respect to accounting
discretion, its legitimate use does not violate any ethics
guidelines although some individuals complain about its
use and would like it eliminated. Managers also make use
of economic discretion.
z The term earnings management is used frequently confused
with earnings manipulation. The term earnings management
refers to management’s routine use of non-fraudulent accounting
and economic discretion.
z Earnings manipulation has a more nebulous meaning. It can
refer either to the legitimate or aggressive use, or fraudulent
abuse, of discretion. By definition, then, earnings management is
legitimate, and earnings manipulation can be legitimate,
marginally ethical, unethical, or illegal, depending on its extent.
1 - 61
Earnings Smoothing and

Earnings Management
z Earnings smoothing is the manipulation of earnings to
reduce their volatility. In simple terms, this means using
manipulations to increase earnings in years when they are
weak and to lower them in years when they are strong.
z It’s very well known on Wall Street that investors prefer
steadily increasing earnings that consistently meet or
exceed financial analyst expectations. This stems from the
general economic principle that investors are risk averse.
z In financial terms, risk aversion is associated with earnings
volatility.

1 - 62
Cookie Jar and Big Bath Accounting

z Cookie Jar Accounting One type of earnings
management and earnings manipulation. The practice
treats the balance sheet as a cookie jar: In good years, the
company stores cookies (reserves) in the cookie jar (the
balance sheet) so that it can take them out and eat them
(place them on the income statement) when management
is hungry (needs extra income to look good).
z Big-Bath Accounting When a company makes a large

one-time write off, it is said to take a big bath to improve
future earnings. Many companies take a big bath (often in
the form of restructuring or inventory write-downs) when
earnings performance is already poor.
1 - 63
Cases Of Financial Statement

Fraud And Manipulation
z McKesson & Robbins: Financial Statement Fraud 101.
z The Great Salad Oil Swindle
z Equity Funding: They Made a Movie about It
z Cedant Corporation: Manufacturing Revenues
z Zzzz Best: The Teenager Who Fooled Wall Street
z Sunbeam Corp.: Channel Stuffing
z Nortel: The Ultimate Big Bath
z WorldCom: Boosting Earnings in a Big Way
z Enron: Lessons in Creative Accounting
z Qwest and Global Crossing: Swap Sales

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1-1

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

What Is Forensic Accounting?

z The Forensic Accountant

z Knowledge and Skills of the Forensic Accountant

z The forensic accountant constantly works in the legal

z Civil and criminal procedures are especially important to

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Internal Auditor, External Auditor and external forensic

z The internal auditor internal auditor focuses on

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Various elements of fraud within the organization.

z Various types of fraud include, for example,

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

IT skills are very important to the forensic

The roles played by forensic accountants in areas

z Examples of non-fraud-related forensic accounting

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

The most important skills of forensic accountants

z Forensic accountants must be skilled of working

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

SOX Regulatory Framework

The Sarbanes-Oxley Act

z The Sarbanes-Oxley Act. The full official title of the act is

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

SOX Titles II and III

z Title III—Corporate Responsibility

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

SOX Titles V-VIII

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

SOX Titles IX and X

z Title X—Corporate Tax Returns

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

SOX and Small Public Companies

z How Small Public Companies Can Achieve Efficiency in

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

The intent of the Sarbanes-Oxley Act

zThe basic intent was to restore investor

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

According to the comments made by President

President Bush referred to:

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Forensic Auditing and

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Financial Statement Fraud

Five Common Types of Analytical

z Compare client data with industry data

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Analytical Review and Financial

z Analytical review comparisons are often made by using

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

When the Auditor Suspects Fraud

z Once financial statement fraud is suspected, the forensic

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Analysis of Questioned Documents

z Questioneddocuments are documents that are contested

Forensic Investigation and

Forensic Investigation and

Dr. P. Laxmikantham ACFN 611: Advanced Financial Accounting.

Interview And Interrogation

Subject Responses during an