Forensic Accounting as it relates to fraud Essay

3321 Words Mar 29th, 2014 14 Pages
Fraud 12

Forensic Accounting as it Relates to Fraud
February 20, 2014

The field of Forensic Accounting has seen a remarkable growth in the last decade. This growth is due in part to the many high profile accounting scandals like Enron, Arthur Anderson, and Bernie Madoff investments (Shinde & Poznic, 2010, p. 1). This paper intends to highlight the effect that forensic accountants has on fraud cases, specifically securities fraud. According to the Merriam Webster dictionary fraud is defined as “an act of deceiving or misrepresenting.” This paper is meant to address how the ineffectiveness of forensic accountants can lead to them being held legally liable for their client’s
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There is no need to show that the accountant knew the unpleasant truth” (p. 58). This means that the accountant should know by oath there can be no corners cut while conducting an investigation because the legal ramifications can be open and closed when tried in a court of law. Also, being tried in a court of law for malpractice can ruin an investigator reputation. Every work that they have done before will be under scrutiny to make sure that corners were not being cut in the previous cases. This can ruin an investigators chance of getting another job even if they were found innocent. An example of a malpractice is “Consider a case in which a CPA has prepared an audit report regarding a client’s financial statements. The CPA opines that the statements present fairly the financial position of the client and genuinely believes this to be true; however, it is later discovered that the financial statements are materially incorrect and misleading. Because CPAs should promise nothing more than to conduct the audit in accordance with GAAS, they will be liable in such cases only if they performed the engagement negligently—that is, in violation of the applicable professional standards. If the CPA in question performed the audit in accordance with GAAS and with the care and skill usually possessed and exercised by other CPAs, then she will have no liability, even if the financial statements are incorrect…. The legal consequences for being sued for

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