A Joint Effort to Fight Corporate Fraud: CPAs Stand as a Solid Line of Defense in Thwarting Basic Accounting Fraud

By Telberg, Rick | Journal of Accountancy, April 2004 | Go to article overview

A Joint Effort to Fight Corporate Fraud: CPAs Stand as a Solid Line of Defense in Thwarting Basic Accounting Fraud


Telberg, Rick, Journal of Accountancy


EXECUTIVE SUMMARY

* IN THE BATTLE AGAINST CORPORATE FRAUD, the FBI's top financial crime investigators have taken their case to the CPA profession, seeking expanded cooperation between accountants and law enforcement officers.

* THE AICPA AND THE FBI RESPONDED with a joint effort that was kicked off with a webcast featuring three FBI white-collar crime-fighter chiefs. Some 20,000 accountants watched nationwide.

* THE PROJECT IS EXPECTED TO BLOSSOM into a deep and wide-ranging partnership in which FBI agents and AICPA members will share and learn from each other the latest fraud-detection and deterrence techniques, auditing "tricks and traps" and the roles and responsibilities of CPAs and law enforcement officials.

* AS PART OF THE FBI's STRATEGIC OVERVIEW of white-collar crime, the agency said CPAs are an essential part of winning the fight.

* THE FBI WILL BE CALLING UPON CPAs in several ways--as objective, third-party expert witnesses, as eyewitnesses and as candidates to join the agency. The FBI is actively recruiting CPAs as special agents and as analysts. Accountants already area key part of the FBI team, with 1,300 accountants working as special agents. And the bureau will hire CPAs to fill 15% of new positions.

* THE FBI SAYS CPAs STAND AS A SOLID LINE of defense in thwarting basic accounting fraud: The independence of CPAs, as well as their objectivity and professional skepticism, remains a crucial element in conducting effective audits.

Faced with a crisis of corporate fraud in American business, the Federal Bureau of Investigation's top financial crime investigators have reached out to the CPA profession, seeking expanded cooperation between accountants and law enforcement officers. The AICPA and FBI responded with a joint effort, which was kicked off with a webcast featuring three FBI white-collar crime-fighter chiefs. It was watched nationwide by some 20,000 accountant members. The project is expected to blossom into a deep and wide-ranging partnership in which FBI agents and AICPA members will share and learn from each other the latest fraud-detection and deterrence techniques, auditing "tricks and traps" and the roles and responsibilities of CPAs and law enforcement officials.

"The CPA's rich tradition of independence and integrity led us to see if we could broaden and deepen this relationship with the AICPA," said Grant Ashley, CPA, assistant director in charge of the FBI Criminal Investigative Division.

Specifically, the FBI and the AICPA together will deal with the scope of the problem, identify common accounting schemes, work effectively with each other and under the impact of the Sarbanes-Oxley Act and related rules and regulations. The FBI and the AICPA have a long tradition of cooperation, but the new initiatives are designed to broaden and deepen the relationship and to expedite communications between the organizations. For instance, at a recent FBI training conference attended by more than 300 white-collar crime investigators from various agencies, the AICPA provided a number of instructors. "We believe we can reach the greatest number of CPAs through a joint effort," said Ashley, referring to the relationship with the AICPA. "The CPA's role in uncovering and preventing fraud cannot be underestimated."

CPAs ARE CRUCIAL PARTNERS

Following the corporate scandals of 2002, the Department of Justice issued a three-part formal definition of corporate fraud: accounting fraud, self-dealing by corporate insiders and obstructive conduct. The FBI is handling more than 2,000 securities and corporate fraud cases, the majority representing millions or even billions of dollars in losses and thousands of victims. As part of the FBI's strategic overview of white-collar crime, Ashley said, his agency realized CPAs are an essential part of winning the fight. "It was clear to me the CPA profession is uniquely situated to join in the partnership--in education, in focusing and sharing information on what we're seeing and what the profession is seeing," he added. …

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