Forensic Accounting Essay

Forensic Accounting Essay Forensic Accounting Essay THE EVOLUTION OF THE ACCOUNTING QUALITY MODEL Sam Ferguson Regis University Innovation in the Era of â€Å"Big Data† provided a standardized Computer Readable Language & eXtensible Business Reporting Language Oversight & The U.S. Securities & Exchange Commission’s â€Å"RoboCop† Introducing... XBRL ïÆ'Ëœ In 1998, Charlie Hoffman, the â€Å"father of XBRL,† combined XML with HTML for user-defined data tagging ïÆ'Ëœ Each tagged element offers currency, balance type, and period. ïÆ'Ëœ Layer in taxonomies linking the data to accounting principles. ïÆ'Ëœ Offers standardized financial report format. ïÆ'Ëœ XBRL becomes a â€Å"Twitter hashtag for the financially savvy† THE ACCOUNTING QUALITY MODEL THE SEC†S â€Å"ROBOCOP† ANALYZES DISCLOSURES WITHIN 24-HOURS POSTED TO EDGAR Provides quantitative analytics to degree of anomalies in filing GENERATES RISK SCORE AS TO LEVEL OF POSSIBLE FRAUD RISK SCORE USED TO COBORRATES/INVALIDATES FRAUD TIPS SEC EXAMINERS FURTHER REVIEW FLAGGED FINANCIALS SEC RESPONDS WTIH COMMENT LETTER, INFORMAL INQUIRY, OR AUDIT â€Å"RoboCop’s† Profiling Techniques Earnings Management Analysis Revenue Earned but not Received DISCRETIONARY & NON-OBLIGATORY Add Expenses incurred but not Paid Accrued Revenue Accrued Expense s ACCRUALS Deferred Revenue Transfer to a Liability Revenue but not Earned Risk Indicators: ïÆ'Ëœ Earnings Quality Management ïÆ'Ëœ Quality & Quantity of Discretionary Accruals Comparative to Peer Industry Group NON-DISCRETIONARY & OBLIGATORY Deferred Expense Transfer to an Asset Unused Expense Amount Risk Inducers: ïÆ'Ëœ Decrease of Market Share ïÆ'Ëœ Lower Profitability Margins FALSE POSITIVES* *†RoboCop† analysis produces risk score for benign anomalies PROS CONS âÅ"Å¡ Customizable factor-based analysis to specific needs âÅ"Å¡ Includes discretionary accruals factors in its regression analysis - Costly disruptions of sec inquiries damaging effects to reputation EVOLUTION OF THE â€Å"ROBOCOP† ïÆ'Ëœ Creation of Financial Reporting & Audit Task Force and Microcap Fraud Task Force ï‚ ² Provides accounting & legal oversight to â€Å"RoboCop† ï‚ ² Expands policing to securities issued by microcap companies ïÆ'Ëœ New analytical tool to review supporting written documentation to disclosures ï‚ ² Parses the word & phrases common in past fraudulent activity ï‚ « Seek out overuse of words & â€Å"under-disclosure of risk† Recommendations for compliance  File Accurate XBRL Reports  Implement Conservative Accounting Policies  Conform to Peer Industry Group Practices  Adequately Document Policies  Stay Current on SEC Regulatory Activity  Be Prepared for an SEC Inquiry Bibliography ACFE. (2013, August). The Fraud Examiner. Retrieved July 15, 2014, from ACFE: acfe.com/fraudexaminer.aspx?id=4294979300&terms=(check) Anderson, G. (2014, August 15). Retail Wire. Retrieved August 16, 2014, from Forbes: forbes.com/sites/retailwire/2014/08/15/will-amazon-be-using-merchants-who-use-amazon-localregister/ Brands, C. K. (2012, December). The SEC and Interactive Data. Strategic Finance , pp. 56-57. Brands, CMA., K. (2013, September). XBRL SEC Filings Are Hampered By Errors. Strategic Finance , pp. 56-57. Brands, K. (2014, June 28). Discussions. Retrieved June 30, 2014, from Regis University World Class: https ://connect.regis.edu/p66ymuyj580/?launcher=false&fcsContent=true&pbMode=normal Brands, K. (2014, June 27). Discussions. Retrieved June 30, 2014, from Regis University World