The New York State Society of CPAs held a conference to discuss ways that accountants can battle fraud at the companies they audit.
Nidhi Gupta, senior manager of BDO Consulting, a division of BDO Seidman, discussed concerns by employees about calling the special whistleblower lines that have been established at companies to report fraud. She cautioned that companies should not make any promises about guaranteeing confidentiality as the whistleblower's identity often becomes obvious once an investigation gets underway.
"The perception was that caller ID or e-mail would be used to identify a complainant," she said. "Employees should not be promised anonymity."
PricewaterhouseCoopers partner Jonny Frank discussed his work as a lawyer for the accounting firm. He recommended that accountants invest time in building relationships with lawyers to collaborate on more cases. Accountants should be sure to "become a core member of the team" in an investigation, he said.
Bryan Skarlatos, a partner with the law firm Kostelanetz & Fink, and a professor at New York University Law School, talked about the attorney-client privilege, and how it could be used to protect accountants hired by law firms to help clients in fraud cases. In one case, United States v. Kovel, the court held that the accountant was mainly hired to clarify communications between the attorney and client. "An accountant can be like a translator of a foreign language," said Skarlatos.
However, he added, "State of mind is the most important thing in fraud investigations." In a 1991 case, Cheek v. the United States, he noted, the Supreme Court ruled that tax protester John Cheek's good-faith belief that he didn't need to pay taxes was a valid defense against tax evasion charges. Fraud examiners often need to find a "badge of fraud" such as a double set of books or an offshore bank account to prove that the fraud is intentional.
The conference also included a talk by Bo Dietl, who discussed the work of his investigative firm, Beau Dietl & Associates, and its involvement with CPAs, certified fraud examiners and computer forensic experts. He noted that the economic downturn could increase the risk of fraud at many companies.
