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02
The Forensic Accounting
Legal Environment
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
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Overview
 The
forensic accountant constantly works in the legal
environment and for this reason must have a broad, basic
understanding of the legal systems in the United States.
 Civil and criminal procedures are especially important to
the forensic accountant because they define the logical
steps that are followed in investigations and criminal and
civil litigation, and forensic accountants can be called to
participate in almost all of the major steps.
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Sources of Law and the Court System
 Sources
 U.S.
 Civil
of Law
Constitution, Statutes, Cases, Administrative
and Criminal Procedures
 The
Legal System and Jurisdiction
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Civil versus Criminal Cases
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Main “Players” In Investigations
And Legal Cases
 Prosecutor
or District Attorney
 Courts
 Law
Enforcement
 Attorneys
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Investigations
 Investigations
and Trials
 Working
Papers
 Chain of Custody
 Fraud Triangle
 Subpoenas,
search warrants, grand juries
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Arrests and Pretrial Processes
 Arrests
 Probable
 Citations
cause (necessary)
(alternative to immediate arrest)
 Arrest Warrants (by a judge)
 Booking, Charging, and Bail
 Arraignments (charges read, plea entered, lawyer
appointed)
 Pretrial Discovery
 Preliminary Hearings (mini-trial, judge decides whether
probable cause exists)
 Plea Bargaining and Civil Negotiations
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Rules of Evidence
 Rules
of Evidence
 Rules
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Personal Knowledge Rule (hearsay typically excluded)
Expert Witnesses (exception to personal knowledge rule)
Exceptions to Hearsay Exclusion: dying declarations, excited
utterances, defendant admissions, statements that show
someone’s state of mind, written government and business
records, and prior inconsistent statements.
 Rules
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Relating to Evidence Content
Relating to Manner of Testimony
Leading Questions not Permitted on Direct Testimony
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Common-Law Financial Crimes
 Larceny
(Intentionally and permanently converting
another’s property to an individual’s own use or
possession.)
 Burglary (Unlawfully entering any building or structure with
the intent of committing a crime.)
 Conspiracy (Two or more people agree to commit a crime
with common intent and then act on that intent.)
 Embezzlement (Must first have lawful posession)
 Fraud (False Pretenses)
 Robbery (Force or Threat of Force in Presence of Victim.)
 Extortion (Threat of future force.)
 Arson
 Solicitation
 Aiding and Abetting