Transcript
Forensic Accounting
By Mary-Jo Kranacher, CPA/CFF, CFE Chapter 6 Legal, Regulatory, and Profe!onal En"!ron#ent LEARNING OBJECTIVES 6-1 6-2 6-3 6- 6-! 6-6 6-" 6-# 6-$ 6-1%
Co#pare and contrat the re#ed!e a"a!la$le !n the c!"!l and cr!#!nal %ut!ce yte#& 'dent!fy the c!rcu#tance that re(u!re a M!randa )arn!ng& E*pla!n )hat cont!tute ++good ++good caue !n the d!charge of an e#ployee& !cu the d!fferent approache ued $y !n"et!gator to o$ta!n docu#ent& ecr!$e )hat ! #eant $y de#ontrat!"e e"!dence and g!"e e*a#ple& !cu the d!fference $et)een pro$at!on and parole& ecr!$e the factor that affect the dec!!on to proecute an ent!ty& E*pla!n the d!co"ery proce& !fferent!ate $et)een the three #a%or type of negot!ated re#ed!e& !cu the pr!#ary purpoe of the .ar$ane0*ley Act of 1221&
True&F'(se 6-3/ 6-3/F F 45& 45& An)er
Frau Fraud d #ay #ay only only $e pro proec ecut uted ed cr!# cr!#!!nal nally& ly& Fale
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6-3/F 41& 41& 'f the "!ct!# "!ct!# or other other )!th a ta7e ta7e !n the outco#e outco#e of a fraud fraud tr!al tr!al are not at!f!ed )!th the reult of the cr!#!nal %ut!ce yte#, they #ay purue the!r cla!# through the c!"!l %ut!ce yte#& 3rue
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6-3/F 48& 'n add!t!on add!t!on to the cr!#!nal cr!#!nal and c!"!l c!"!l %ut!ce %ut!ce yte#, yte#, regulatory regulatory agenc!e agenc!e alo play an !#portant role !n #on!tor!ng !llegal act!"!t!e and p uru!ng thoe repon!$le& 3rue
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6-3/F 49& 49& 3he F!rt F!rt A#end# A#end#ent ent pro"!de pro"!de that that a peron cannot cannot $e co#pelled co#pelled to to pro"!de !ncr!#!nat!ng !nfor#at!on aga!nt h!#elf !n a cr!#!nal cr!#!nal cae& Fale
6-3/ 6-3/F F 4:& 4:& An)er
3he 3he Four Fourth th A#end# #end#ent ent proh! proh!$! $!t t unrea unreao ona$ na$le le ear earch che e and and e! e!;ur ;ure e&& 3rue
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6-3/F 46& 3he 3)ent!eth A#end#ent ent!tle a peron to due proce of la) and e(ual protect!on under the La)& Fale
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6-3/F 4<& Becaue e#ployer do not ha"e the r!ght to place e#ployee !n a cutod!al ett!ng, an e#ployee ha l!#!ted F!fth A#end#ent r!ght& 3rue
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6-3/F 4=& A long a a nonpu$l!c ent!ty ! conduct!ng the !nter"!e), an e#ployee doe not ha"e the r!ght to ha"e a la)yer preent dur!ng the !nter"!e)& Fale
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6-3/F 4>& Anyone !n a pu$l!c par7, par7!ng lot, or #all #ay $e "!deotaped )!thout "!olat!ng any la) a long a no aud!o of the target ! recorded& 3rue
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6-3/F 452& Pro$a$le caue ! the tandard $y )h!ch la) enforce#ent #ay #a7e an arret, conduct a peronal or property earch, or o$ta!n a )arrant& 3rue
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6-3/F 455& ?enerally, e"!dence ! ad#!!$le !n court !f !t ! rele"ant, !t pro$at!"e "alue out)e!gh any pre%ud!c!al effect, and !t ! trut)orthy& 3rue
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6-3/F 451& 'n the cr!#!nal %ut!ce yte#, !nd!"!dual can $e na#ed a defendant, $ut $u!nee and other organ!;at!on #ay not $e proecuted& Fale
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6-3/F 458& .u$e(uent to the paage of the .ar$ane0*ley Act of 1221, the aud!t!ng of pu$l!c co#pan!e $eca#e the repon!$!l!ty of the ne)ly created A#er!can 'nt!tute of CPA @A'CPA& Fale
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6-3/F 459& 3he .ar$ane0*ley Act of 1221 )a !gned !nto la) on July 82, 1221 to addre corporate go"ernance and accounta$!l!ty a )ell a pu$l!c account!ng repon!$!l!t!e !n !#pro"!ng the (ual!ty, rel!a$!l!ty, !ntegr!ty, and tranparency of f!nanc!al report& 3rue
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6-3/F 45:& 3he PCA0B ! charged )!th o"eree!ng pu$l!c co#pany aud!t, ett!ng aud!t tandard, and !n"et!gat!ng act of nonco#pl!ance $y aud!tor or aud!t f!r#& 3rue
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6-3/F 456& .ect!on 929 of .0 reco##end, $ut doe not re(u!re, the co#pany e*ternal aud!tor to attet to and !ue a report on #anage#ent ae#ent of !nternal control& Fale
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6-3/F 45<& .0 alo #a7e !t unla)ful for any off!cer or d!rector of a pu$l!c co#pany to ta7e any act!on to fraudulently !nfluence, coerce, #an!pulate, or #!lead an aud!tor !n the perfor#ance of an aud!t of the co#pany f!nanc!al tate#ent& 3rue
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6-3/F 45=& 3he .ar$ane0*ley Act #andate that each #e#$er of a co#pany aud!t co##!ttee #ut $e a #e#$er of !t $oard of d!rector and #ut other)!e $e !ndependent& 3rue
)u(ti*(e C+oice 6-M/C 45& 3he A#end#ent proh!$!t unreaona$le earche and e!;ure& A& F!fth B& Fourth C& .!*th & Fourteenth An)er B
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6-M/C 41& 3he A#end#ent pro"!de that a peron cannot $e co#pelled to pro"!de !ncr!#!nat!ng !nfor#at!on aga!nt h!#elf or herelf !n a cr!#!nal cae& A& F!fth B& Fourth C& .!*th & Fourteenth A
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6-M/C 48& 3he A#end#ent pro"!de that an !nd!"!dual ha the r!ght to an attorney to defend h!#elf and the r!ght to confront )!tnee aga!nt h!#& A& F!fth B& Fourth C& .!*th & Fourteenth C 6-M/C 49& 3he A#end#ent ent!tle a peron to due proce of la) and e(ual protect!on under the La)& A& F!fth B& Fourth C& .!*th & Fourteenth Page 3 of 12
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6-M/C 4:& A& B& C& & An)er
3he M!randa )arn!ng con!t of e"eryth!ng $ut the follo)!ng 3he !nter"!e)ee ha a r!ght to re#a!n !lent& 3he !nter"!e)ee ha a r!ght to an attorney& 3he !nter"!e)ee an)er #ay D03 $e ued aga!nt h!#& 'f the !nter"!e)ee cannot afford an attorney, one )!ll $e pro"!ded at no cot&
C
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6-M/C 46& 't ! ad"!a$le that e#ployer docu#ent good cause for any ter#!nat!on !n the e#ployee peronnel f!le& ?ood caue #!ght !nclude the follo)!ng ECEP3 A& 3he e#ployee conduct )a aga!nt )r!tten pol!cy& B& 3he !n"et!gat!on )a fa!r, o$%ect!"e, and e"!dence uggeted the el!#!nat!on of alternat!"e upect& C& 3he pun!h#ent f!t the cr!#e, #ean!ng that the pun!h#ent ! reaona$le g!"en the nature of the offene& & 3he ter#!nat!on )a d!cr!#!natory, #ean!ng that not all peron co##!tt!ng uch an act )ere or )ould $e ter#!nated&
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6-M/C 4<& Legal pr!"!lege are protect!on aga!nt certa!n type of tet!#ony& h!ch of the follo)!ng ! not a legal pr!"!lege A& Attorneycl!ent pr!"!lege B& L!$rar!an-patron pr!"!lege C& Attorney )or7-product pr!"!lege & Phy!c!anpat!ent pr!"!lege B
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6-M/C 4=& ?enerally, !n"et!gator can o$ta!n docu#entary e"!dence u!ng all approache ECEP3 A& theft& B& "oluntary conent& C& u$poena& & earch )arrant& A
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6-M/C 4>& 3arget #ay enter the cr!#!nal %ut!ce yte# fro# all of the route $elo) e*cept for A& a )arrantle arret $y the pol!ce $aed upon pro$a$le caue& B& a grand %ury proceed!ng that lead to an !nd!ct#ent and a u$e(uent arret )arrant !ued $y a %udge& C& an !n"et!gat!on that lead to the f!l!ng of an Information. A& a c!t!;en arret&
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6-M/C 452& 3he nor#al order of d!co"ery !nclude the follo)!ng tep !n )hat e(uence 5& 'nterrogator!e 1& Attorney ta7e depo!t!on 8& Re(uet to produce docu#ent 9& Re(uet for ad#!!on A& 5, 8, 1, 9 B& 1, 5, 9, 8 C& 9, 8, 1, 5 & 5, 1, 8, 9 B
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6-M/C 455& h!ch of the follo)!ng ! not a #a%or for# of negot!ated ettle#ent !n a c!"!l tr!al A& out-of-court ettle#ent B& #a%or!ty %ury "ote C& ar$!trat!on & #ed!at!on B
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6-M/C 451& 3he $a!c account!ng flo) con!t of the follo)!ng e"ent !n )hat e(uence 5& Pot to general ledger 1& Bu!ne tranact!on occur 8& F!nanc!al tate#ent are prepared 9& Journal entr!e are recorded A& 1, 9, 5, 8 B& 1, 9, 8, 5 C& 9, 1, 8, 5 & 9, 8, 5, 1 A
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6-M/C 458& h!ch of the follo)!ng tate#ent ! not a #a%or f!nanc!al tate#ent A& 'nco#e .tate#ent B& Balance .heet C& .tate#ent of Cah Flo) & .ale Budget
6-M/C 459&
An)er
3he pur"!e) of aud!t!ng of nonpu$l!c co#pan!e fall under the gu!del!ne of the A& FA.B B& PCA0B C& A'CPA & ?A0 C Page 6 of 12
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6-M/C 45:& 3he A'CPA ha the author!ty to et tandard and #a7e rule !n all the follo)!ng area ECEP3 A& Aud!t!ng tandard @for nonpu$l!c co#pan!e& B& Aud!t!ng tandard @for pu$l!c co#pan!e& C& Code of profe!onal conduct& & Co#p!lat!on and re"!e) tandard& B
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6-M/C 456& h!ch of the follo)!ng ! not a #a%or pro"!!on !n the .ar$ane0*ley Act of 1221 A& Creat!ng an !ndependent regulatory fra#e)or7 for the account!ng profe!on& B& Enhanc!ng the (ual!ty and tranparency of f!nanc!al report& C& Re"!!ng the proce of eta$l!h!ng ne) f!nanc!al account!ng tandard& & Eta$l!h!ng ne) protect!on for corporate )h!tle$lo)er& C
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6-M/C 45<& h!ch of the follo)!ng ! not a repon!$!l!ty of the PCA0B A& Reg!ter!ng pu$l!c account!ng f!r# that aud!t pu$l!cly traded co#pan!e& B& 'npect!ng reg!tered pu$l!c account!ng f!r#& C& Con"erg!ng ?AAP tandard )!th 'FR. tandard& & Enforc!ng co#pl!ance )!th the .ar$ane0*ley Act& C
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6-M/C 45=& 'n .epte#$er 1229, the Co##!ttee of .ponor!ng 0rgan!;at!on @C0.0 of the 3read)ay Co##!!on releaed the!r fra#e)or7, recogn!;ed $y the .EC a the cr!t!cal #ethodology for .ar$ane0*ley& A& ERM B& 'FR. C& BRL & ML A
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6-M/C 45>& PCA0B Aud!t!ng .tandard Do& 8 @A.8, Audit Documentation, re(u!re that aud!t engage#ent docu#entat!on hould !nclude a l!t of all ECEP3 A& !gn!f!cant fraud r!7 factor& B& the aud!tor repone& C& the reult of the aud!tor related procedure& A& L!t of the !nternal control& 6-M/C 412& Me#$er of the PCA0B are appo!nted $y the A& A'CPA B& .EC C& FA.B Page 8 of 12
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& B
'A.B
6-M/C 415& 3he lead aud!t or coord!nat!ng partner and re"!e)!ng partner of the reg!tered account!ng f!r# #ut rotate off of the aud!t e"ery year& A& F!"e B& 3en C& 3)o & hen the PCA0B #andate !t& A
S+ort Ans,er Ess' 6-.AE 45& hat co##on la) protect!on do !nd!"!dual ha"e dur!ng !nter"!e) An)er 3hee !nclude M!n!#!;at!on of !n"a!on of the e#ployee pr!"acy • L!#!tat!on on !nter"!e) content to e#ployee %o$ dut!e an d repon!$!l!t!e • L!#!tat!on on pu$l!c d!cloure of the e#ployee pr!"ate fact • L!#!tat!on on !ntent!onal !nfl!ct!on of e#ot!onal d!tre on the e#ployee • L!#!tat!on on defa#at!on - unfounded fact and accuat!on #ade $y the • !nter"!e)er A duty to deal fa!rly and !n good fa!th • Do fale !#pr!on#ent •
6-.AE 41& An)er
!cu the con!derat!on that #ut $e g!"en !n repect to docu#entary e"!dence& F!"e con!derat!on #ut $e g!"en to any p!ece of docu#entary e"!dence 5& 3he docu#ent #ut not ha"e $een forged& 1& 0r!g!nal docu#ent are prefera$le& 8& 3he docu#ent #ut not $e hearay or o$%ect!ona$le& 9& 3he docu#ent need to $e authent!cated& :& 3he docu#ent #ut $e rel!a$le&
Critic'( T+in.ing E/ercise A c!ent!t ha t)o $uc7et, one hold four gallon and the other hold f!"e gallon& 'n add!t!on, the c!ent!t alo ha an unl!#!ted )ater upply& By u!ng noth!ng $ut the $uc7et and )ater, ho) can the c!ent!t accurately #eaure three gallon of )ater An)er F!rt you du#p out the 9 gallon %ug& .econd you du#p o#e of the : gallon %ugG )ater !nto the 9 gallon %ug o the 9 gallon %ug ! co#pletely full& u#p out the 9 gallon& Do) you ha"e 5 gallon of )ater held !n the : gallon %ug& Pour the 5 gallon !nto the 9 gallon %ug& F!ll up the : gallon %ug and pour o#e of the )ater of the : gallon !nto the 9 gallon conta!ner& Do) du#p out the 9 gallon %ug& Hou no) ha"e 8 gallon held !n the : gallon %ugI
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Te/t Re0ie, uestions 6-3R 45& hat re#ed!e are a"a!la$le through the c!"!l and cr!#!nal %ut!ce yte# An)er 3here are three #a%or for# of negot!ated re#ed!e !n c!"!l procedure out-ofcourt ettle#ent, ar$!trat!on, and #ed!at!on& 3he cr!#!nal %ut!ce yte# #ay reult !n f!ne, co##un!ty er"!ce, pro$at!on, !ncarcerat!on, cenure, and e"en cap!tal pun!h#ent& 'n the n!ted .tate, ho)e"er, there are no fraud cr!#e that carry the death penalty&
6-3R 41& An)er
nder )hat c!rcu#tance )ould a M!randa )arn!ng $e re(u!red 'n cutod!al ett!ng $y la) enforce#ent, and !n thoe ett!ng )here the upected perpetrator ha $een ta7en !nto cutody and den!ed freedo# preu#a$ly aga!nt the!r )!ll, federal la) #ay re(u!re that a M!randa )arn!ng $e read to the upect&
6-3R 48& An)er
hat cont!tute good caue !n the d!charge of an e#ployee ?ood caue #!ght !nclude the follo)!ng N 3he e#ployee conduct )a aga!nt )r!tten pol!cy& N 3he e#ployee conduct #ade for unafe or !neff!c!ent $u!ne operat!on& N 3he co#pany co#pleted a reaona$le !n"et!gat!on to enure that any uch (uet!ona$le act )a co##!tted $y the e#ployee and ha e"!dence to upport uch a cla!#& N 3he !n"et!gat!on )a fa!r, o$%ect!"e, and e"!dence uggeted the el!#!nat!on of alternat!"e upect& N 3he ter#!nat!on )a nond!cr!#!natory, #ean!ng that all peron co##!tt!ng uch an act )ere or )ould $e ter#!nated& N 3he pun!h#ent f!t the cr!#e, #ean!ng that the pun!h#ent ! reaona$le g!"en the nature of the offene&
6-3R 49& An)er
hat approache are ued $y !n"et!gator to o$ta!n docu#ent ?enerally, !n"et!gator can o$ta!n docu#ent u!ng three approache N Ooluntary conent N .u$poena N .earch )arrant
6-3R 4:& An)er
hat ! #eant $y de#ontrat!"e e"!dence ?!"e e*a#ple& e#ontrat!"e e"!dence ! any e"!dence that purport to educate, u##ar!;e, or a#pl!fy real e"!dence& Po)erPo!nt l!de, u##ary chedule, graph!c, p!cture, reenact#ent, #odel, etc& are all for# of de#ontrat!"e e"!dence& e#ontrat!"e e"!dence tend to tell a tory and co#ple#ent other for# of e"!dence uch a real and tet!#on!al e"!dence& .o#e e*a#ple of de#ontrat!"e e"!dence !nclude the follo)!ng N Photograph and "!deotape& N Map, chart, d!agra#, dra)!ng& N .cale #odel& N Co#puter recontruct!on or an!#at!on& Page 10 of 12
N
.c!ent!f!c tet or e*per!#ent&
6-3R 46& An)er
'n the cr!#!nal %ut!ce yte#, ho) ! pro$at!on d!fferent fro# parole Pro$at!on ! a penalty and ! ued a an alternat!"e to pr!on, )herea parole ! ued to decr!$e the correct!on proce u$e(uent to ha"!ng er"ed t!#e !n pr!on& Parole ! often ued a a re)ard for good $eha"!or dur!ng t!#e er"ed& ur!ng the parole per!od, a parole off!cer ! a!gned&
6-3R 4<& An)er
hat are the factor that affect the dec!!on to proecute an ent!ty ?enerally, $u!nee #ay $e held l!a$le, au#!ng that the cope of the !nfract!on )a )!th!n the dut!e of the !nd!"!dual )ho co##!tted the cr!#e, and the !nd!"!dual )a act!ng a an agent for the ent!ty& 'n add!t!on, the agent act!on )a !ntended to $enef!t the ent!ty& Factor that affect the dec!!on to proecute an ent!ty are !#!lar to thoe for !nd!"!dual proecut!on and !nclude the uff!c!ency of e"!dence, l!7el!hood of ucce at tr!al, pro$a$!l!ty of deterrence and reha$!l!tat!on, and ade(uacy of nonproecutor!al re#ed!at!on opt!on&
6-3R 4=& An)er
hat ! the d!co"ery proce and ho) doe !t )or7 !co"ery ! the proce $y )h!ch each !de #ay e*plore the #er!t of the other !de argu#ent $y o$ta!n!ng docu#entary and tet!#on!al e"!dence& Any #atter or #ater!al rele"ant to the c!"!l act!on that ! n ot pr!"!leged ! u$%ect to d!co"ery& 'n!t!ally, !nterrogator!e are paed to the oppo!ng counc!l& .u$e(uent to !nterrogator!e, oppo!ng part!e u$#!t re(uet to produce docu#ent to one another& 3h!rd, attorney tart to ta7e )orn tet!#ony fro# oppo!ng part!e !n the for# of depo!t!on& 3he fourth and lat tage of d!co"ery ! an atte#pt $y counel to get the other !de to agree to certa!n $a!c apect and fact of the cae through re(uet for ad#!!on&
6-3R 4>& An)er
hat are the three #a%or type of negot!ated re#ed!e and ho) do they d!ffer 3here are three #a%or for# of negot!ated re#ed!e out-of-court ettle#ent, ar$!trat!on, and #ed!at!on& 0ut-of-court ettle#ent occur )hen $oth !de co#e to a ettle#ent po!t!on after e*a#!nat!on of the!r o)n cl!ent, the e"!dence, the (ual!t!e of the!r fact )!tnee, the trength of the!r e*pert op!n!on, and other !#portant a pect of the cae& 'n #ed!at!on, an !ndependent, o$%ect!"e #ed!ator )!ll )or7 )!th $oth et of oppo!ng counel to help reach a ettle#ent $et)een the t)o @and the!r cl!ent&
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An ar$!trator ! an !ndependent th!rd party )ho ha the author!ty to deter#!ne the outco#e of the cae& 3hu, the ar$!trator act l!7e the %udge and %ury, l!ten!ng to the pr!#ary apect of each !de cae and dec!d!ng )hat he or he $el!e"e to $e the #ot appropr!ate outco#e $aed on the #er!t of the cae preented&
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6-3R 452& o) d!d the .ar$ane0*ley Act addre corporate go"ernance and pu$l!c account!ng repon!$!l!t!e 3he Act pro"!de )eep!ng #eaure a!#ed at N Eta$l!h!ng h!gher tandard for corporate go"ernance and accounta$!l!ty& N Creat!ng an !ndependent regulatory fra#e)or7 for the account!ng profe!on& N Enhanc!ng the (ual!ty and tranparency of f!nanc!al report& N e"elop!ng e"ere c!"!l and cr!#!nal penalt!e for corporate )rongdoer& N Eta$l!h!ng ne) protect!on for corporate )h!tle$lo)er&
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