Chapter 1
Introduction to Forensic Accounting and Fraud Examination
Teaching Notes
This chapter presents the opportunity to get students excited about the fields of forensic
accounting and fraud examination. Suggested points to stress:
General
o Forensic Accounting breaks out from the traditional image of accounting as
boring.
o There are many specialty opportunities within forensic accounting.
o Fraud Examination is one very important opportunity within forensic
accounting.
o Forensic accounting is a challenging field that requires many special skills.
Learning Objectives
o LO1: Define forensic accounting and fraud examination.
Differentiate from traditional accounting
o LO2: Describe the difference between forensic accounting and auditing.
Forensic accounting includes auditing, special auditing methods, and
other services in additional to auditing (e.g., litigation support)
o LO3: Explain the role of forensic accountants and fraud examiners.
Forensic accountants are needed in almost every area of business.
Where there is money involved, a forensic accountant can play a role.
Fraud examiners are needed to assist in preventing, detecting,
investigating, and reporting on fraud.
o LO4: Identify the knowledge and skills that forensic accountants and fraud
examiners are expected to possess.
, Must not only be good with accounting numbers, but also with
psychology, IT, and so on. The AICPA offers a special forensic
accounting certification to CPAs.
o LO5: Describe the opportunities that exist for those who choose to work as
forensic accountants and fraud examiners.
Some specialties within forensic accounting (e.g., expert testimony,
expert consultant) can result in some of the highest-paying career
opportunities in business.
o LO6: Identify the organizations that support the work of forensic accountants
and fraud examiners.
The organizations and professional certifications demonstrate that
forensic accounting is a well-recognized accounting specialty.
,Review Questions
1. To what does the word forensic pertain?
a. Financial audits when fraud is involved.
These types of audits are forensic audits, but the term “forensic” applies in a more
general sense.
b. A particular type of accounting
Forensic accounting is one type of accounting, but the term “forensic” applies in a more
general sense.
c. Matters relating to law and courts of law.
Correct. Forensic is a general term that relates to law and courts of law.
d. Prosecutorial investigations.
These represent forensic investigations, but the term “forensic” is more broadly
applicable.
2. For an act to be considered fraud, which of the following ingredient is required?
a. Large loss.
Fraud can involve losses of any size.
b. Legal entity (e.g., a corporation, partnership, or trust).
Fraud can be committed against both legal entities and individuals.
c. Intentional harm.
Fraud can involve accidental harm or harm not realized by the victim. For example, if by
fraud one steals an object from someone, that someone is still a victim of fraud even if
she never misses the stolen object.
d. Intentional action or inaction.
Correct. Fraud generally does not include accidents.
, 3. Which of the following is outside the area of forensic accounting?
a. Corporate acquisitions.
Forensic accountants routinely review documents and provide consulting services in
relation to acquisitions.
b. Divorce.
For example, forensic accountants might search for hidden assets in a divorce proceeding.
c. Contract disputes.
For example, forensic accountants might search for evidence of fraud in contract
disputes.
d. None of the above.
Correct. None of the above is outside of the area of forensic accounting.
Introduction to Forensic Accounting and Fraud Examination
Teaching Notes
This chapter presents the opportunity to get students excited about the fields of forensic
accounting and fraud examination. Suggested points to stress:
General
o Forensic Accounting breaks out from the traditional image of accounting as
boring.
o There are many specialty opportunities within forensic accounting.
o Fraud Examination is one very important opportunity within forensic
accounting.
o Forensic accounting is a challenging field that requires many special skills.
Learning Objectives
o LO1: Define forensic accounting and fraud examination.
Differentiate from traditional accounting
o LO2: Describe the difference between forensic accounting and auditing.
Forensic accounting includes auditing, special auditing methods, and
other services in additional to auditing (e.g., litigation support)
o LO3: Explain the role of forensic accountants and fraud examiners.
Forensic accountants are needed in almost every area of business.
Where there is money involved, a forensic accountant can play a role.
Fraud examiners are needed to assist in preventing, detecting,
investigating, and reporting on fraud.
o LO4: Identify the knowledge and skills that forensic accountants and fraud
examiners are expected to possess.
, Must not only be good with accounting numbers, but also with
psychology, IT, and so on. The AICPA offers a special forensic
accounting certification to CPAs.
o LO5: Describe the opportunities that exist for those who choose to work as
forensic accountants and fraud examiners.
Some specialties within forensic accounting (e.g., expert testimony,
expert consultant) can result in some of the highest-paying career
opportunities in business.
o LO6: Identify the organizations that support the work of forensic accountants
and fraud examiners.
The organizations and professional certifications demonstrate that
forensic accounting is a well-recognized accounting specialty.
,Review Questions
1. To what does the word forensic pertain?
a. Financial audits when fraud is involved.
These types of audits are forensic audits, but the term “forensic” applies in a more
general sense.
b. A particular type of accounting
Forensic accounting is one type of accounting, but the term “forensic” applies in a more
general sense.
c. Matters relating to law and courts of law.
Correct. Forensic is a general term that relates to law and courts of law.
d. Prosecutorial investigations.
These represent forensic investigations, but the term “forensic” is more broadly
applicable.
2. For an act to be considered fraud, which of the following ingredient is required?
a. Large loss.
Fraud can involve losses of any size.
b. Legal entity (e.g., a corporation, partnership, or trust).
Fraud can be committed against both legal entities and individuals.
c. Intentional harm.
Fraud can involve accidental harm or harm not realized by the victim. For example, if by
fraud one steals an object from someone, that someone is still a victim of fraud even if
she never misses the stolen object.
d. Intentional action or inaction.
Correct. Fraud generally does not include accidents.
, 3. Which of the following is outside the area of forensic accounting?
a. Corporate acquisitions.
Forensic accountants routinely review documents and provide consulting services in
relation to acquisitions.
b. Divorce.
For example, forensic accountants might search for hidden assets in a divorce proceeding.
c. Contract disputes.
For example, forensic accountants might search for evidence of fraud in contract
disputes.
d. None of the above.
Correct. None of the above is outside of the area of forensic accounting.
