Table Of ContentForensic Accounting and R Financial Accounting, Auditing
THE BUSINESS E
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EXPERT PRESS Financial Statement Fraud, AE and Taxation Collection
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DIGITAL LIBRARIES Volume I Mark S. Bettner, Michael P. Coyne, and Roby Sawyers, Editors
EBOOKS FOR Fundamentals of Forensic Accounting
BUSINESS STUDENTS
Forensic
Zabihollah Rezaee
Curriculum-oriented, born-
digital books for advanced
The existence and persistence of high profi le alleged fi nancial
business students, written statement fraud (FSF) have negatively affected the safety and Accounting
by academic thought soundness of fi nancial markets and investors confi dent in public
leaders who translate real- fi nancial information. Forensic accounting has advanced as an
world business experience important and rewarding fi eld of accounting to prevent, detect and Financial
into course readings and and correct FSF. There has been signifi cant demand for and in-
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reference materials for tertest in forensic accounting as well substantial growth in both O
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students expecting to tackle investigation and litigation services. EN Statement Fraud,
The fi rst volume addresses the relevance and importance of for- S
management and leadership ensic accounting and fraud examination as well as the framework IC
challenges during their A
and structure of forensic accounting practices. The author pres- C Volume I
professional careers. C
ents an introduction to forensic accounting and fi nancial state- O
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POLICIES BUILT ment fraud examination and their relevance and importance to N
BY LIBRARIANS businesses, fi nancial markets, economies and society. Also dis- TIN Fundamentals of
cussed is forensic accounting opportunities, skills, and services;
• Unlimited simultaneous forensic accounting profession; and professional responsibilities G A
usage N
and codes of conduct for forensic accountants. Finally, forensic ac- D
• Unrestricted downloading counting best practices, education, and research are touched on. F Forensic Accounting
and printing IN
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• Perpetual access for a Dr. Zabihollah (Zabi) Rezaee, PhD, CPA, CMA, CIA, CFE, CGFM, N
one-time fee CSOXP, CGOVP, CGRCP, CGMA and CRMA, is the Thompson-Hill CIA
• No platform or Chair of Excellence, PhD coordinator and professor of accountan- L
maintenance fees cy at the University of Memphis. He also served a two-year term ST
• Free MARC records on the Standing Advisory Group of the Public Company Account- AT
ing Oversight Board (PCAOB). He received his BS degree from the E
• No license to execute M
Iranian Institute of Advanced Accounting, his MBA from Tarleton E
The Digital Libraries are a State University in Texas, and his PhD from the University of NT
comprehensive, cost-eff ective Mississippi. Dr. Rezaee holds ten certifi cations, including certi- F
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way to deliver practical fi ed public accountant (CPA) and certifi ed fraud examiner (CFE). A
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is currently the editor of the Journal of Forensic Accounting Research L
student and faculty member. U
(JFAR). Professor Rezaee has published over 220 articles and made M
more than 240 presentations, written 11 books including the two E I
books on Corporate Governance and Audit Committees published
by the Business Expert Press. He has testifi ed before the Federal
For further information, a Courts as the expert witness.
free trial, or to order, contact:
Financial Accounting, Auditing
and Taxation Collection
Mark S. Bettner, Michael P. Coyne, and Roby Sawyers, Editors
Forensic Accounting
and Financial Statement
Fraud, Volume I
Forensic Accounting
and Financial Statement
Fraud, Volume I
Fundamentals of Forensic
Accounting
Zabihollah Rezaee
Forensic Accounting and Financial Statement Fraud, Volume I: Fundamentals
of Forensic Accounting
Copyright © Business Expert Press, LLC, 2019.
All rights reserved. No part of this publication may be reproduced, stored
in a retrieval system, or transmitted in any form or by any means—
electronic, mechanical, photocopy, recording, or any other except for
brief quotations, not to exceed 250 words, without the prior permission
of the publisher.
First published in 2019 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-148-0 (paperback)
ISBN-13: 978-1-63157-149-7 (e-book)
Business Expert Press Financial Accounting, Auditing and Taxation
Collection
Collection ISSN: 2151-2795 (print)
Collection ISSN: 2151-2817 (electronic)
Cover and interior design by S4Carlisle Publishing Services Private Ltd.,
Chennai, India
First edition: 2019
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
Abstract
The existence and the persistence of high-profile alleged financial state-
ment fraud (e.g., Enron, WorldCom, Parmalat, Satyam), as well as the
investment Ponzi schemes and credit crunch scandals, have negatively af-
fected the safety and soundness of financial markets and investors’ confi-
dence in public financial information. Forensic accounting has advanced
as an important and rewarding field of accounting to prevent, detect,
and correct these financial scandals and other types of fraud. In such an
increasingly unstable economic and litigious environment, there has been
significant growth in the demand for and interest in forensic accounting
and investigative services. Forensic accountants provide litigation con-
sulting, expert witnessing, valuation, and fraud investigation services.
The organization of this book provides maximum coverage and flexibil-
ity in choosing the amount and order of materials on forensic accounting
and financial statement fraud (FSF) theory, education, and practice. This
book is organized into two volumes; each volume can be utilized separately
or in an integrated form. The first volume, entitled “Fundamentals of Fo-
rensic Accounting,” consists of five chapters and addresses the relevance and
importance of forensic accounting and fraud examination as well as the
framework and structure of forensic accounting practices. The first chap-
ter presents an introduction to forensic accounting and financial statement
fraud examination and their relevance and importance to businesses, finan-
cial markets, economies, and society. Chapter 2 presents forensic accounting
opportunities, skills, and services. Chapter 3 illustrates the forensic account-
ing profession. Chapter 4 presents authoritative guidelines for professional
responsibilities and codes of conduct for forensic accountants. Chapter 5
describes forensic accounting best practices, education, and research.
Keywords
forensic accounting; financial statement fraud; fraud examination; expert
witnessing; litigation consulting; skill sets of forensic accountants; pro-
fessional standards; codes of professional conduct; fraud and non-fraud
forensic accounting services; forensic accounting research; forensic
accounting education
Contents
Preface ..................................................................................................ix
Acknowledgments ...................................................................................xi
Chapter 1 An Introduction to Forensic Accounting ...........................1
Chapter 2 Forensic Accounting Services and Skills ...........................25
Chapter 3 Forensic Accounting Profession .......................................43
Chapter 4 Forensic Accounting Guidelines and Standards ...............65
Chapter 5 Forensic Accounting Practices, and Education and
Research ..........................................................................91
About the Author ................................................................................127
Index .................................................................................................129
Preface
Financial statement fraud (hereafter, FSF) is a severe threat to investor
confidence in financial information and thus capital markets. Reported
financial scandals by high-profile companies (Enron, Global Crossing,
Qwest, WorldCom, Parmalat) and ethical debacles in corporations have
eroded investor confidence and public trust in corporate America, its cor-
porate governance, financial reporting, and audit functions. These scan-
dals and related FSF reinvigorated interest in education and practice of
forensic accounting and financial statement fraud examination. Forensic
accounting is gaining considerable attention because the American Ac-
counting Association (AAA) has added a new educational and research
section on “Forensic Accounting.” The Securities and Exchange Com-
mission (SEC) has strengthened its FSF divisions and trained its staff in
the area of forensic accounting and financial statement fraud, all inter-
national public accounting firms have established a forensic accounting
department, and forensic accounting and fraud examination is becoming
one of the fundamental components of business school’s curriculum in
recent years.
This book presents a comprehensive framework of the theory and
practice of forensic accounting investigation and FSF examination in two
volumes. The purpose of this book is to present a comprehensive primer
of forensic accounting in areas of fraud and nonfraud services. At present,
headlines have again been dominated by the investment Ponzi schemes
and credit crunch scandals. Banks have been hit by record levels of fraud
over the past several years, and the situation is likely to get worse as the
full impact of the credit crunch unfolds. In such increasingly unstable
economic and litigious environment, there has been significant growth in
the demand for and interest in forensic accounting services. During the
2007–2009 global financial crisis, the focus on financial statement fraud
prevention and detection become more important as regulators, inves-
tors, and companies seek better understanding of corporate malfeasance
and misconduct.
