THE KESSLER REPORT Continued
A Publication of Michael G. Kessler & Associates, Ltd.
Archive
Home
Behind the Numbers®
Edition
|
Volume 1
|
 |
Number 2
|
|
...Forensic Accounting
(continued from page 1)
|
T E C H T A L K
Evidence in the Electronic Age
By Joan E. Feldman, President, Computer Forensics,TM Inc.
|
The growing use of electronic mail and
other evidence in litigation is having a profound effect on how
individuals and businesses communicate and store information.
Electronic mail is particular has a
nasty way of turning up in the courtroom. Take for example the message
Los Angeles police officer Lawrence Powell wrote shortly after the
Rodney King beating: "Oops, I haven't beaten anyone so bad in a long
time." Extreme cases such as this aside, take a moment to mentally
review some of the messages you have recently sent of received. Which
of these would you like to see blown up on a chart for presentation to
a jury?
Often treated as the equivalent of a
hallway conversation or telephone call, E-mail messages can be
stored--sometimes for years--on hard drives, file servers, diskettes
and backup tapes. Electronic mail, especially, proliferate at an
uncontrolled rate. Multiple copies of an E-mail message can be
"broadcast" with a simple keystroke, and E-mail messages in while or in
part can be easily forwarded to hundreds of recipients.
While E-mail gets a lot of attention in
discovery, electronic calendars, correspondence, memos and reports may
all be deemed discoverable in a civil litigation matter. For
individuals using computers in every facet of their business and daily
lives, including (and certainly not limited to) E-mail, word
processing, calendars and scheduling, data can accrue at a staggering
rate. This data is often created, transmitted and stored without the
records management controls applied to paper files. But like a paper
file, if it's relevant to the lawsuit, electronic data is fully
discoverable. See Crown Life Insurance Co. v. Craig, 995 F-2d 1376,
1383 (7th Cir. 1993). Electronic data's innate ability to replicate
itself compounds the problem. Most software manufacturers protect
users from inadvertently losing their files by incorporating an
automatic backup feature.
(continued on page 3)
|
|
improving your odds of finding and prosecuting the
perpetrator. Here are just some of the situation where retaining a
qualified Forensic Accountant can benefit your business:
Fraud Investigation:
Frequently, a Forensic Accountant is
called in by an alert CFO who simply has a gut feeling something is
not right. Often the instinct is right on the money. A Forensic
Accountant will respond to such a request by thoroughly investigating
your financial records and computer data to look for evidence of
fraud. He will analyze the data using computer models to discover the
implications of any irregularity and the findings of any discovery, so
you are in a position to make an informed decision whether to
prosecute. Finally, the Forensic Accountant will assist you in
preparing for any litigation you decide to pursue.
Litigation Support:
If you are entering litigation involving
a fraud claim, a Forensic Accountant will help you obtain any
documentation necessary to support or refute a claim. After reviewing
the documentation, an initial assessment will be formed to identify
areas of loss. Familiar with the legal concepts and procedures for
investigating fraud, the Forensic Accountant will provide questions to
ask during discovery that will elicit the answers you need. Attending
discovery enables him to review testimony, help explain the financial
issues raised, and formulate additional questions. He will also review
the opposing expert's damage reports, assist with settlement
discussions, and provide support during the trial.
|
Expert Witness Testimony:
Once you decide to go to trial, the
Forensic Accountant plays a highly visible role testifying as an
expert witness. A key part of this function is to report the findings
of the investigation ot to dispute the findings of another expert. In
the jury box, the Forensic Accountant educates the judge and jury in
understanding complicated financial concepts. A good Forensic
Accountant will also be skilled at defending a position under
withering cross-examination.
Lost Earnings Calculations:
Forensic Accountants can also be
instrumental in helping to calculate the amount of money one would
have earned but for the actions of the defendant. A variety of
information is analyzed: earnings before the incident, length of the
damage period, establishing an appropriate rate of growth and other
factors.
It takes a special investigative ability to root out fraud.
Experience is the prime factor to
consider when shopping for a Forensic Accountant. Many so-called
Forensic Accountants are merely extensions of traditional accounting
firms. While a traditional accounting firm may be skilled at
presenting a set of numbers, it takes investigative skill and fraud
accounting experience to diagnose the meaning behind those
numbers. Even the average CPA with 20 years of experience will usually
have little experience in fraud investigation, and may never have
testified in a courtroom. Traditional accountants still rely on the
presumption that nothing is wrong with the numbers with which they are
presented. Unfortunately, such representations and internal controls
are not impervious to willful fraud or collusion.
Face it. If your business is successful,
one day someone may decide they want to share in the gains. And when
that happens, don't wait. Call in a qualified Forensic Accountant to
look into the problem and help you deal with it head-on.
|
Copyright © Michael G. Kessler & Associates, Ltd. 1997. All rights
reserved.
|
|
