Question

You are an associate at ABC LLP, a forensic accounting firm. Your company is retained by the Law Firm that is representing a client. The client, the former CFO of the Public Company, is being investigated by the SEC and FBI for running a large accounting fraud scheme and funneling money to his own account after allegedly falsely invoicing sales during 2013 and 2014. The Auditing Firm, which was recently terminated, audited the Public Company and issued opinion letters in connection with the Public Company’s 2013 and 2014 annual reports.

You are just getting up to speed on the case, but the ABC Partner asked for you to help analyze the issue in connection with the Law Firm.

Assume that you received a large data file reflecting invoices and purchase orders identified by date. Assume that the CFO provided to you, through his/her attorney, a large data file concerning the CFO’s own monetary transactions, which are listed by date.

1. Generate a step-by-step guide concerning how you would go about analyzing this information. (In other words, explain how you would transition from raw data to an analysis through forensic accounting techniques).  10 points

2. More specifically, assume that you would analyze this information using Excel: identify the formulas and methods you would use to analyze the data. 10 points

Answer 1

1. Generate a step-by-step guide concerning how you would go about analyzing this information. (In other words, explain how you would transition from raw data to an analysis through forensic accounting techniques)

We need to use the direct forensic accounting method since we have already received all invoices and purchase order.

I will follow the below step by step approach for analyzing this information.

1. Thoroughly check the authenticity of the documents shared by CFO.

2. Cross check the invoices and purchase order with the company records.

3. Eliminate CFO's own monitory transactions that are not related to the company.

4. Cross check the purchase orders with the invoices by filtering the data as per date, period and vendor.

5. Speak to the vendors if necessary.

6. Make a note of invoices that do not have a purchase order.

7. Investigate those in invoices and get the necessary explanation for those invoices from the CFO.

8. Eliminate invoices for which CFO could provide a valid explanation.

9. Create a list of invoices for which CFO fails to provide necessary explanation.

10. Submit audit report concluding fraud against invoices for which we did not receive a proper explanation.

2. More specifically, assume that you would analyze this information using Excel: identify the formulas and methods you would use to analyze the data.

Excel is a very useful tool for analyzing and concluding a large data. Following excel formulas methods will be very useful in this scenario for analyzing and concluding the data.

1. Filter: the filter function is one of the very useful function in excel which will help us to filter the data we required from a large data. In this scenario, we need to select data by date, period and vendor. The filter function can help us do that.

2. Freeze: Freeze function freeze can be used for freeing the header when you are looking at a large data.

3. Sum: Sum function is useful for calculating the total of invoice value and purchase order value.

4. Vlookup: Vlookup function look for a value in a large data and give its respective value from the next columns. It will work only vertically.

5. Hookup: Hlookup function look for a value horizontally and give its respective value from the next rows.

6. Match: Match function can be used for matching a value in a large data and let us know in which cell the value is reported.

7. Addition: Addition function can be used for adding multiple values the same as the function we have in the calculator.