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Student: Bayo Elizabeth Cary
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CaryBACC7010-8
6
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ACC7010-8
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Dr. Wendy Achilles
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Legalities of Fraud Resolution
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Assignment 6
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Thank you again, for the extension until this Sunday,
with no late penalty . I did a great deal of research for this paper. I did not
end up including, all of the information that I researched, in the final
research paper. My writing flowed easily. It was easy to present the ideas, in
the research paper, which you requested in the assignment. I reached the
required 5 pages worth of research paper, with a great deal of academic content
quickly, and therefore decided, not to include some of the additional
information, that I researched, while preparing to write assignment 6.
April 4, 2015
Assignment 6: The Legalities of Fraud Resolution
Fraud Examination, Fourth Edition
Cases 8 and 9 Respond to Questions:
Case
8:
You
are involved as an expert witness in a case of alleged fraud by top management
against the corporation. Supposedly, working in collusion, top management
defrauded the company of $5 million over two years. The allegations suggest
that the fraud involved stealing $5 million and then concealing the fraud by
overstating expense accounts and manipulating balance sheet accounts.
Following
the initial discovery of this alleged fraud, shareholders of the company
brought a lawsuit against top management. The prosecuting attorney for the
shareholders has retained you to assist as an expert witness in this case. The
case has already moved into the discovery phase.
1. What
will your role likely be as an expert witness? At what point in the process
will you be most involved? What might you do to assist the prosecution as much
as possible?
Case
9:
Bobby
Jones, an accountant for ABC Corporation, has been suspected of committing
fraud. Some information already gathered about the fraud points to Bobby Jones as
the most likely perpetrator. In his scheme, Bobby supposedly stole more than $5
million over the past three years. Due to the magnitude of the fraud and to set
an example in the company, ABC decides to prosecute Bobby both civilly and
criminally.
2
Describe what will happen to Bobby Jones
during the civil litigation, including the stages of civil litigation that he
and ABC will go through.
In
businesses, it is important, for the management at the top, to set: a good
clear, honest appropriate, example, for the employees beneath them to follow.
Studies show that businesses, where management sets the correct: responsible,
ethical, and moral examples, the businesses suffer, from a decreased incidence
of employee fraud. In academic literature, about the field of fraud, in the
workplace, the reinforcement, of correct: rules, regulations, and practices by
management, is referred to, as the correct management and work environment,
supported by the: “Top” down. It is important, in big business, such as
companies that are actively trade on Wall Street, that the correct tone for a
company be set, by the C.E.O. and C.F.O. of the company-from the very “Top” of
the businesses hierarchy, and management.
Businesses are vulnerable to acts of
fraud, by employees, and by management. Working hard to ensure that the correct:
information, rules, and regulations, for honest business practices, are
reinforced by “Top” management, is just a start, to preventing fraud, in the
workplace. There are certain guidelines, that are provided, and reinforced, by
the United States government, that dictate to a business, what steps must be
taken by the business, to help to prevent fraud, in the workplace. In 2002 the
United States government, issued new legislation, and guidelines, to increase
preventative measures, in the U.S. workplace, to fight fraud. The new
legislation, and U.S. government supports: rules, regulations, and laws, were
in reaction, to a series of major big business failures on Wall Street, with
companies like: Enron, and Worldcom, when businesses collapsed, because of
their dishonest participation, in fraudulent activities, such as falsified financial
reporting.
The deceitful
acts, of companies like: Enron, and Worldcom, in 2001-2002-acts of fraud, from
the issuance, of falsified financial statements, affected the U.S. stock market
to such a negative extent, that the U.S. government, and U.S. Congress,
established the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002
provides more financial protections for consumers and investors, and for
American companies trading on the U.S. stock market, and, it also increases the
stability, of the U.S. stock market. The guidelines provided by the
Sarbanes-Oxley Act of 2002, help to support and to reinforce, business
practices, that proactively work, to prevent acts of fraud, by both:
management, and employees. The Security Exchange Commission (S.E.C.), provides investigative
services as reinforcement, of the: laws, rules, and regulations, introduced in
the: Sarbanes-Oxley Act of 2002-to limit the incidence of fraud, in U.S.
companies, that are actively traded on Wall Street.
Businesses in the United States, are responsible for ensuring: honest,
accurate, safe, and timely practices, and of the reporting of their financial
activities. The executive board of a business, is in charge of working with
business management, in making arrangements, for an auditor, to conduct an
internal audit, to check for any unusual accounting entries, and financial
statements, at a business. The internal auditor, is not a professional investigator,
and sometimes has a limited amount of information, regarding how acts of fraud at
a business, should be handled-if fraud is suspected? However, an internal
auditor, is adequately trained to initially research the business and, the businesses
activities and financial statements, to point out any areas at the business or on
the businesses records, which indicate questionable financial information, and,
which require further attention, and investigation, by a professional
investigator.
Sometimes
acts of fraud in a business, are committed by just one individual, whereas at other
times, acts of fraud at a business, are committed in collusion-with the
assistance of a number of employees, and/or with management. As an initial
fraud detection, and preliminary researcher, an internal auditor, generally
works with management, at a business. However, an internal audit, becomes
difficult, if the auditor discovers, that the management, may be involved in
acts of fraud, against the business. In the case, that management, is suspected
of fraudulent activities, at a business, the internal auditor, must be careful,
not to communicate directly with management. Often times, when management is
involved with acts of fraud at a business, it is difficult, for the internal
auditor, to perform their job, because, their employment is threatened, by the
management, for revealing the suspected fraudulent acts of management.
Management, is often times, higher up, in the business hierarchy, than an
internal auditor.
In the
cases, where management is involved in acts of fraud at a business, that are
suspected, in a workplace, the internal auditor, is supposed to rely, on the
internal audit committee, which oversees the internal auditor, for support.
Additionally, there is supposed to be a clear division of the services, that
the internal auditor is providing, and the services that the investigator of
the suspected fraud, will provide-when researching the suspected fraudulent activities
of management-that the internal auditor, has discovered. A clear separation,
between the services of the internal auditor, and the fraud investigator, takes
some of the pressure off of the internal auditor-who only suspects the
fraudulent activities of management, and, who is not really equipped, or
trained, to investigate the allegations, for evidence-that requires further specialization,
in the field of fraud investigations.
When fraud is suspected in the
workplace, an investigation should be initiated. A fraud investigation,
depending on the nature of the fraud, and the kinds of evidence sought, and
required for prosecution, can take a considerable period of: time, money, and
man power. In order to send the message to employees, and to management, that
fraud will not be tolerated, by a business, in the workplace, all acts of
suspected fraud, at a business, must be fully investigated, and, if sufficient
evidence is present, and collected-prosecuted, to the fullest extent of the
law. Legally speaking, when an employee,
or management at a business, is suspected of fraud, the case can be tried in
court, as a civil, or a criminal matter. According to: Albrecht, Steve W.,
Albrecht, Chad O., Albrecht, Conan C., & Zimbelman, Mark F. (2012), the
following, are four basic stages to litigation in a civil case, that a
defendant suspected of fraud, will be subjected to, after he or she, has
initially be legally charged, with the suspected act of fraud (These are the
stages, that Bobby Jones, during the civil litigation, including the stages of
civil litigation-that he and ABC will go through):
1. Investigation and pleadings;
2. Discovery;
3. Motion
practice and negotiation;
4. Trial and
appeal. (p. 625)
A complaint and charge is initially filed against the
defendant, by the prosecution, stating the suspected fraudulent acts (Albrecht,
S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman, M.F., 2012, p. 625).
After the complaint and charge is entered, against the defendant, the
defendants lawyer, will submit a motion, to the court, to dismiss the charges,
on the grounds, that there is not enough evidence, to convict the client, and/or
a defendant, could also choose to file a counterclaim, against the plaintiff (Albrecht,
S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman, M.F., 2012, p. 625).
If the
case is not dismissed by the judge, and the case begins to proceed to trial,
the lawyers on both sides of the case, will engage in the process of discovery.
During the process of discovery, evidence against the defendant, and other
information, that is held by the prosecution, is requested by the defendant’s
lawyer, and is released to the defendant’s lawyer, for defense case preparation,
for the trial. The defendant’s attorney, can file a motion with the court, for
a: production request. The production request, can be issued by the defendants
attorney, during the process of discovery-requesting copies of specific
information, that the defense attorney thinks, that the prosecution, has in
their possession, for submission in court, to present as evidence in the case,
against the defendant (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,&
Zimbelman, M.F., 2012, p. 626).
The prosecuting
attorney, in a civil court case, can submit a motion to the court, for an
interrogatory. A fraud investigator, as an expert witness, who is knowledgeable
about the field of fraud, and fraud investigations, can assist the prosecution,
by helping to write the questions, which are posed to the defendant, during an
interrogatory (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman,
M.F., 2012, p. 626). The expert witness, the fraud investigator, will know, due
to expertise in the field, which questions must be asked of the defendant, by
the prosecutor, in order to establish guilt of the defendant, of the suspected
fraud. Because of in-depth knowledge, about fraud, and fraud investigations,
the fraud investigator-the expert witness, works closely, throughout the pre-trial
litigation, and the trial itself, to assist the prosecutor, in establishing and
proving the guilt of the defendant, in regards to the suspected acts of fraud
charge.
The answers to the questions, that are
asked by the prosecutor’s office, of the defendant, regarding the suspected
acts of fraud-that the defendant is charged with, are held on file, and
reviewed during the trial, to compare the initial answers provided to the
prosecutor’s office, to what is stated by the defendant in court. If the
defendant, makes statements in court, during the trail, which contradict the
statements the defendant made, during the interrogatory, then the prosecutor
can point that out in court. The difference in responses, from what the
defendant stated in the interrogatory, and what the defendant states in court,
can be utilized by the prosecutor in court, to discredit the defendant. The
difference, in the pre-trail statements, made by the defendant, during the
interrogatory, and the statements made in court, can be judged in court, as
being perjurious statements.
During the
process of discovery, a prosecutor, can submit a motion to the court, for requests
of admission. A request of admission, asks the defense, to admit to some
stated, verifiable facts, regarding the fraud case against them, prior to the
case being heard in court (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,&
Zimbelman, M.F., 2012, p. 626). Requests for admissions, are submitted in
court, by the prosecutor, in order to support the suspected fraud case, against
the defendant (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman,
M.F., 2012, p. 626). Lawyers, from both sides of the case, during the process
of discovery, can request that subpoenas be issued by the judge, forcing
witnesses, to submit to a deposition, and/or, to be present for testimony in
court (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman, M.F.,
2012, p. 626). A fraud investigator, the expert witness, is again very helpful,
because of expertise in the areas of fraud, and fraud investigation, in
assisting the prosecutor, with deciding what questions should be asked of
witnesses, during a deposition (Albrecht, S.W., Albrecht, C.O., Albrecht,
C.C.,& Zimbelman, M.F., 2012, p. 627). The fraud investigator, the expert
witness, will know exactly what types of information, must be uncovered, and elucidated
in court, in order to fully support, the prosecution’s case, against the
defendant.
Throughout
the litigation phase of the case, during the pre-trial stages, both sides of
the case, the prosecutors side, and the defendants side, may file a number of
motions with the court, requesting that the judge rule on specific issues, one
way, or another (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,&
Zimbelman, M.F., 2012, p. 627). A defendant often times, files a summary
judgement motion with the court, immediately prior to trial, requesting that
the case be dismissed (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,&
Zimbelman, M.F., 2012, p. 627). The summary judgement, filed by the defendant,
immediately prior to trial, is usually, a last ditch effort by the defendant,
claiming his or her innocence, and arguing against the prosecutions charges
again, be stating, that there is a dearth of evidence, to support the case, in
court.
If,
during the litigation stages, of the pre-trial negotiations, the judge who will
hear the case, still denies a defendants summary judgement request-to dismiss
the case, then, the case proceeds, to the next step, in the litigation process.
At any given point, during the pre-trial litigation process, and/or during the
pre-trail negotiations, the defendant, can opt to agree to a settlement of the
case (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman, M.F.,
2012, p. 627). If both sides, agree to negotiate, and discuss a possible
settlement, then again, the fraud investigator-the expert witness, can be very
helpful, to the prosecutor (Albrecht, S.W., Albrecht, C.O., Albrecht,
C.C.,& Zimbelman, M.F., 2012, p. 627). The fraud investigator, the expert
witness, can work during the negotiation process, to handle any
misunderstandings, or disagreements between both legal parties, concerning the
suspected fraud charge, and the collected evidence, against the defendant, which
is intended to be presented in court, to support the prosecutor’s case, against
the defendant (Albrecht, S.W., Albrecht, C.O., Albrecht, C.C.,& Zimbelman,
M.F., 2012, p. 627).
If the
two parties, do not decide on a settlement, during the negotiation stage, of
the pre-trail litigation, then the case moves on to the next stage of civil
court proceeding-which is: the trial itself, and then, a possible appeal. The
fraud investigator, as the expert witness, in cases of fraud, and fraud
investigation, then proceeds to testify for the prosecutor, and against the
defendant in court, by providing: accurate, detailed information, and evidence,
as to why the defendant, should be judged guilty, of the fraud, that he, or
she, is suspected of committing (Albrecht, S.W., Albrecht, C.O., Albrecht,
C.C.,& Zimbelman, M.F., 2012, p. 627). The fraud investigator, the expert
witness, assists the prosecutor, by providing information, regarding fraud, and
the fraud investigation, which is known only by individuals, who specialize in
the field. This expert witness testimony, provided by the fraud investigator,
buttresses the prosecution’s case, against the defendant, with: clear,
convincing, and undeniable evidence, against the defendant.
After the trial has been held, and all testimony has been heard, and all
evidence has been submitted-a decision will be rendered by the court. If the
defendant, or the prosecutor, disagrees with the final decision of the court,
then, an appeal can be filed, based on technical issues, pertaining to the
procedures, which are applicable to, the functioning of the court, and the
processing of the court documents, and the proceedings which occurred, within
the courtroom, during the trial. The court of appeals, will receive the request
for appeal, and then decide, if the appeal that is filed, has substantial procedural
grounds, for the case to be heard again, in the court of appeals.
Works Cited
Albrecht,
Steve W., Albrecht, Chad O., Albrecht, Conan C., & Zimbelman, Mark F. (2012).
Fraud Examination: Fourth Edition.
Ohio: South-Western.
Baker,
Neil. (Dec2014). Failing to Prevent Financial Crimes and Crime in U.K.. Compliance
Week, 11(131). Retrieved
From http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=5&sid=82d8ce48-b80b-4dc1-807d-0e8eed8d91ab%40sessionmgr198&hid=111
Chan,
Peter, Diamantatos, Tinos. (Mar2015). Dishonest Services. Investment Advisor, 35 (3).
Deju,
Mihai,& Stoica, Petrică. (2012). Auditor’s Mission in Preventing and
Fighting Against
Fraud. Economy Transdisciplinarity Cognition, 15 (1). Retrieved from
http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=3&sid=82d8ce48-b80b-4dc1-807d-0e8eed8d91ab%40sessionmgr198&hid=111
http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=3&sid=82d8ce48-b80b-4dc1-807d-0e8eed8d91ab%40sessionmgr198&hid=111
Jackson,
Russell A. (Oct2014). When Executives Go Bad. Internal Auditor, 71(5).
Retrieved
McNeal,
Andi. (Aug 2011). What’s Your Fraud IQ? Journal of Accountancy, 212 (2).
Retrieved
Perry,
Michelle. (4/30/2009). Title of article. Accountancy
Age, no vol. number (no
issue
number). Retrieved
from http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=15&sid=82d8ce48-b80b-4dc1-807d-0e8eed8d91ab%40sessionmgr198&hid=111
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