Financial Forensics Body of Knowledge (eBook)

DARRELL D. DORRELL, CPA, ABV, MBA, ASA, CVA, DABFA, CMA, is a principal and founding partner of financialforensics¯®. He is a nationally recognized expert witness, speaker, and author and has trained many organizations in twenty-four U.S. states, Canada, and Puerto Rico, including the FBI, U.S. Department of Justice, SEC, Bankruptcy Bar Association, AICPA, NACVA, IMA, PricewaterhouseCoopers, and thirteen state CPA societies. He authored nearly seventy technical articles in nearly two dozen professional journals and coauthored "Counterterrorism: Conventional Tools for Unconventional Warfare" and "Forensic Accounting: Counterterrorism Weaponry" for the U.S. Department of Justice. GREGORY A. GADAWSKI, CPA/ABV, CFE, CIRA, CVA, is a principal and founding partner of financialforensics¯®, with over fifteen years of professional experience. He is a recognized expert witness in state and federal courts in both civil and criminal matters. He has contributed to several professional journals and coauthored "Counterterrorism: Conventional Tools for Unconventional Warfare" and "Forensic Accounting: Counterterrorism Weaponry" for the U.S. Department of Justice.

Preface xi

Acknowledgments xv

Introduction 1

What Is a Methodology? 1

Why Was This Book Written? 4

How to Use This Book 10

About the Book's Website 10

How This Book Is Organized 11

PART ONE Financial Forensics Tools, Techniques, Methods, and Methodologies

CHAPTER 1 Foundational Phase 21

Assignment Development Stage 21

Scoping Stage 36

Conclusion 54

CHAPTER 2 Interpersonal Phase 55

Interviews and Interrogation Stage 56

Behavior Detection 62

Background Research Stage 73

Conclusion 77

CHAPTER 3 Data Collection and Analysis Phase: Part I 79

Data Collection Stage 79

Surveillance Stage 111

Confidential Informants Stage 114

Undercover Stage 117

Laboratory Analysis Stage 119

Confirmation Bias: Clinical Thinking 122

Aberrant Pattern Detection: What's the Difference? 131

Forensic Lexicology: How to Analyze Words Like Numbers 150

Conclusion 172

CHAPTER 4 Data Collection and Analysis Phase: Part II 173

Analysis of Transactions Stage 173

The Myth of Internal Control 175

Financial Statements--Written Confessions 181

60-Second Method 185

Forensic Indices 204

Forensic Financial Analysis 212

Conclusion 252

CHAPTER 5 Data Collection and Analysis Phase: Part III 255

FSAT--Financial Status Audit Techniques 255

Applying Digital Analysis Techniques in Financial Forensics Investigations 270

Valuation & Forensics--Why & How 287

Valuation's Orphan 294

Conclusion 314

CHAPTER 6 Trial and Reports Phase 315

Trial Preparation Stage 315

Testimony and Exhibits 318

Weapon (WPN) 320

Reports and Exhibits: Tips and Techniques 325

Post-Assignment 333

Conclusion 334

PART TWO Financial Forensics Special Topics

CHAPTER 7 Counterterrorism: Conventional Tools for Unconventional Warfare 337

Stop the Money--Stop the Terrorists 337

Civil Tools Used by Federal Law Enforcement 338

The Civil Statutes as Counterterrorism Weapons 339

Why Use Civil Laws in Addition to Criminal Laws? 341

Discussion of Alter Ego 343

Alter Ego Literature 348

Alter Ego Jurisdictional Examples 358

The Challenges of Alter Ego Investigation 361

Fraudulent Transfer 372

Solvency 374

Forensic Accounting Techniques 378

Alter Ego, Fraudulent Conveyance, and Solvency Matters in Action 384

What Target-Rich Scenarios Can Be Exploited? 386

Forensic Accounting: Counterterrorism Weaponry 391

Financial Statements--The Sources of Data 395

When Financial Statements Contain Laundered Money 403

When No Records Have Been Prepared by the Terrorist 408

Summary of Forensic Accounting Observations 413

A Forensic Accounting Methodology to Support Counterterrorism 415

Summary 421

Conclusion 423

CHAPTER 8 Civil versus Criminal Law Comparison 445

Comparison 457

What If You Suspect Embezzlement?--The Three Big Don'ts and Several Do's 457

Conclusion 469

Appendix

Forensic Inventory: Forensic Tools, Techniques, Methods, and Methodologies 471

Bibliography 517

About the Authors and Contributors 521

Index 529