Latest news, events, research and insights for Forensic Brief

Business Development Top Concern of Forensic and Valuation Services Professionals
June 17, 2022

According to a new American Institute of Certified Public Accountants (AICPA) study, business development concerns are outpacing technical issues for forensic and valuation services accountants. The 2013 FVS Membership Top Issues Survey found that “bringing in new clients” was the top issue facing 87 percent of the respondents.

The survey findings are based on responses from CPAs in firms ranging from sole practitioner to large, full-service public accounting firms and from forensic or valuation specialty practices.

These results are quite different from the 2010 survey results. Back then, “keeping up with professional standards” took the top spot. “Bringing in new clients and client retention” placed third in 2010.

Although the economy has been moving in a positive direction over the past three years, the shift in results can potentially be attributed to the new valuation standards issued in 2008. Five years later, most firms have completed implementation of those standards.

ParenteBeard Partner Bob Gray, chair of the AICPA Forensic and Litigation Services Committee, suggests the forensic valuation teams are the “emergency room of the accounting hospital.” According to Mr. Gray, forensic and valuation services practitioners have to be on call and ready for financial triage in the event of shareholder or matrimonial disputes that are likely to end up in court.

Although the challenge of attracting new business is never going to disappear, Mr. Gray offers best practices to fellow professionals. He says it is vital to forge relationships with litigators and general counsels. Speaking at bar associations or in board meetings can display an accountant’s expertise and poise. Both traits are highly sought after by clients who need an authority to help present their cases at trial.

Read the full article in Journal of Accountancy.

As chair of the AICPA Forensic and Litigation Services committee, Mr. Gray leads the group in providing professional guidance to CPA practitioners who practice in forensic accounting, economic damages analyses and other specialized services.

ParenteBeard’s forensic, litigation and valuation services group has extensive experience with shareholder and matrimonial disputes that end up in court. If you have questions regarding our forensic and valuation services, a member of our leadership team is available to help.

Forensic Accountants Take on False Claims Act
June 11, 2022

Forensic accountants apply specialized knowledge and investigative skills to collect, analyze and evaluate evidential matter and to interpret and communicate findings in the courtroom, boardroom or other legal administrative venue. Now that we’ve covered that, curious what role these professionals play in connection with the United States’ Department of Justice? Here’s the rundown of how they assist in False Claims Act trials.

Q. What role can forensic accountants play in FCA matters?

A. There are many opportunities for forensic accountants in connection with FCA matters.  For example, they are often called upon to help clients assess the scope and the magnitude of the issue.  This evaluation is often critical, since the act provides for damages between $5,500 and $11,000 for each false claim submitted.  This, in turn, can result in significant potential damages because each invoice containing a false claim is subject to these penalties.  Forensic accountants, often working in conjunction with other industry specialists in areas such as medical billing, possess the skills and expertise to evaluate billings records and quantify a potentially false claim.

Moreover, the courts have held that an employer may be liable for an employee’s FCA violations when no or inadequate internal controls exist. Forensic accountants, either working individually or with other specialists in risk management, can help clients to evaluate the control environment, either before an issue arises or afterward.  Proactively, forensic accountants may be involved with projects such as compliance audits, data mining analyses and industry benchmarking and analyses.

ParenteBeard’s forensic, litigation and valuation services group has extensive experience in providing expert consulting and expert witness testimony in mediations, arbitrations and bench and jury trials. If you have questions regarding the False Claims Act, or think you may have information of a violation of this Act, reach out to a member of our leadership team.

False Claims Act Simplified
June 3, 2022

You may have recently heard about the False Claims Act as professional cyclist Lance Armstrong is facing a lawsuit from the Department of Justice over USPS sponsorship under this Act.
Armstrong is being sued by the Department of Justice (DOJ) to recover at least the $40 million the U.S. Postal Service paid to sponsor his team, claiming Armstrong was “unjustly enriched” by using steroids and other drugs to win the Tour de France seven times.

Q. What is the federal False Claims Act (FCA) and how does it relate to forensic accountants?

A. The FCA was enacted initially in 1863 during the Civil War when it was discovered that defense contractors were selling the Union army, among other things, sickly horses, faulty rifles and ammunition and spoiled rations and provisions. The FCA was subsequently amended in later years, including in 1986 in response to the growing federal deficit and abuses in defense contracting, and in 2010 as part of the Affordable Care Act.

Today, the FCA is the primary enforcement tool used by the to prevent fraud on the government in connection with government programs, including but not limited to:

  • Medicare and Medicaid;
  • Defense contracts and other procurement situations;
  • Social Security;
  • Loans and grants for medical/scientific research; and
  • Legislative initiatives (bailouts).

A key aspect of the FCA since its inception has been the “qui tam”[1] provision, which permits citizens (“relators”) to sue on behalf of the federal government and receive a percentage of the recovery.  Under the 1986 amendments, the reward to qui tam plaintiffs was increased to between 15 and 30 percent of the funds recovered from defendants.

ParenteBeard’s forensic, litigation and valuation services group has extensive experience in providing expert consulting and expert witness testimony in mediations, arbitrations and bench and jury trials. If you have questions regarding the False Claims Act, or think you may have information of a violation of this Act, reach out to a member of our leadership team.

[1] Qui tam is a writ (formal order) that allows a private individual who assists in the matter to receive all or part of the penalty imposed in prosecution. Its origin comes from a Latin phrase that is applied in the FCA to allow a private individual, or “whistleblower,” with knowledge of past or present fraud committed against the federal government, to bring suit on its behalf and potentially receive part of the settlement/judgment.

Construction Project Financial Oversight
May 28, 2022

As companies expand their facilities, overseeing the construction activity becomes an additional responsibility of the management team.  The tasks and effort necessary to oversee and coordinate a construction project, which can last several years, can be overwhelming.

Ensuring a smooth construction project

Most companies that undertake expansion or renovation projects do not have the internal expertise to oversee or manage all project aspects.  Asking for assistance from your most trusted advisor can be a first and simple step in gathering necessary data to build a team that can assure a smooth project.

Obtaining expert guidance from industry professionals can prove vital in the overall project success.  Upfront discussions with trusted advisors or industry experts can save a company significant time and money.  Issues that need to be carefully discussed and vetted before and during the project’s undertaking include determining the project scope; budgeting, financing and cost analysis; identifying and selecting design professionals and contractors; deciding the type of contracts; finalizing contract terms and language negotiations; monitoring the contract through to completion; gaining approval for payment and change order and contingency reviews.

Construction and real estate is one of the specialty service areas that the ParenteBeard’s forensic, litigation and valuation services group (FLVS) provides.  Several of our team members have well over 25 years experience in the construction industry and have worked on many engagements involving all aspects of building and construction. We know the issues and consequences.

Sureties, insurance companies, owners, design professionals, contractors and subcontractors continue to engage us to provide expert consulting and expert witness testimony. We are also called upon to support project prosecution and analyze financial data. Projects have included new construction or renovation of existing resorts, schools, universities, condominiums, high-rises, convention centers, parking garages and sports complexes.

If you have questions regarding construction project financial oversight, a member of our FLVS leadership team is available to help.

Fictitious Vendor Schemes
May 21, 2022

As individuals continue battling with challenging economic times, employees continue to think about additional sources of personal income.  Fraud perpetrators are finding endless ways to extract hard earned company assets to line their pockets.

A fictitious vendor scheme occurs when a vendor is falsely established within a company but does not provide legitimate services or goods to that company. The fictitious vendor submits invoices for services or goods.  In some instances of fictitious vendor schemes, the perpetrator doesn’t submit an invoice but writes a company check to the vendor. These fictitious vendors are then paid for services or goods that were never received by the victim company.

Since fictitious vendors are not legitimate businesses, several typical red flags show up in fictitious fraud schemes. These include P.O. box mailing addresses, invoices created using Microsoft Excel or Word, invoices for even dollar amounts, invoices for vague services or undefined products, local business addresses located near company locations, omitted supporting documentation for vendor payments, payments to non-corporate credit cards, vendor names with initials and vendor names that match employee names.

Fictitious Vendor Fraud: Prevention and Detection

Generally, fictitious vendor schemes happen due to poor internal controls for new vendor approval or through the conspiracy of company employees.

An easy solution to conquer fictitious vendor fraud is to maintain strong internal controls for approval of new vendors. Each new vendor should be approved by multiple individuals within the organization and be required to agree to a background check.  Additionally, a periodic review of all vendor additions and changes to existing vendor contact information should be performed by someone outside of the accounts payable department.  These measures will ensure that no collusion occurred in approving the fictitious vendors.

If at any time a you suspect there may be a fictitious vendor scheme perpetrated within your organization, a forensic accountant can help identify the issue and the potential recovery of funds.

ParenteBeard’s forensic, litigation and valuation services group has extensive experience providing expert consulting and witness testimony in mediations, arbitrations and bench and jury trials. If you have questions regarding fictitious vendor schemes, a member of our leadership team is available to help.

Summary of the Latest Public Company Accounting Oversight Board Inspection Report
March 8, 2022

The PCAOB has published their report on inspections of audit firms. Read more here.

AICPA Forensic and Valuation Services Executive Committee on Reducing Litigation Costs
November 28, 2021

ParenteBeard’s Partner Glenn Newman served on the task force that researched and presented financial perspectives to the Institute for the Advancement of the American Legal System (IAALS) and the AICPA’s Forensic Valuation Services Committee. The task force’s findings are presented in Another Voice: Financial Experts on Reducing Client Costs in Civil Litigation. If you have questions about the report or are interested in learning more, contact Glenn Newman at 215.972.2354 or [email protected].

Read the full e-alert here.

The Jury is In: Apple v. Samsung
August 27, 2022

A quick deliberation in favor of Apple opens up a significant dialogue about the verdict and its far-reaching implications. Read the full e-alert here.