Accounting Malpractice and the Auditor’s Responsibility to Detect Fraud

Accounting Malpractice and the Auditor’s Responsibility to Detect Fraud

In the case of Livent, Inc. v. Deloitte & Touche the Ontario Court of Appeal upheld a 2014 decision ordering Deloitte & Touche (Deloitte) pay $118 million in damages to a theater company (Livent, Inc.) for which Deloitte performed auditing services. Why was Deloitte held accountable for such a large sum?

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The CFE: More Than Just a Credential

Tiffany at the 28th Annual ACFE Global Fraud Conference in Nashville in June.

Tiffany at the 28th Annual ACFE Global Fraud Conference in Nashville in June.


Tiffany Couch, CFE,CPA/CFF, Former ACFE Regent
Principal, Acuity Forensics

It was July 18, 2010, and I was putting the finishing touches on my PowerPoint presentation. I was nervous. You see, the ACFE had invited me to be a speaker at the ACFE Global Fraud Conference in Washington, D.C. the following week. I was giddy, but extremely nervous about this first-time opportunity. I wanted to get my presentation just right. My family and I were visiting my parents in California, and just before my dad retired to bed early (he lived the "early to bed, early to rise" life!), I walked him through my presentation.

“I sure am proud of you, punkin,” he said as he patted me on the shoulder. He called for his grandkids to give him hugs and went to bed. Those would be the last words my dad ever spoke to me. During the night, he had a massive stroke that he never recovered from and that would take him from us just 30 days later.

The first few days after the stroke, we had high hopes that he would recover. And even though he couldn’t speak, my dad was still being a dad from that hospital bed. As an example, we were contemplating whether or not I should fly from California to Washington, D.C. to attend the conference and he pointed to the door, directing me to “go.” 

I weighed that decision heavily. My chance to speak at the largest fraud conference on the planet was a huge professional “win” for me, for sure. Of course, Dad would want me to go! But the thought of being 3,000 miles away in such an untenable situation was just too much. I sheepishly made the call to Austin to let the ACFE know that I needed to bow out of the conference at the last minute. I was thinking for sure that my big chance was flying out the window, just like the hope that we held for Dad’s recovery.

Before I could get the sentence out of my mouth, Allan Bachman, the ACFE’s former education manager, cut me off. The only words out of his mouth were expressions of genuine care. “We have you covered,” he said. “Do not give it a second thought. We will be thinking of you and your family.” I learned that there had even been an announcement during my scheduled breakout session for warm thoughts for my family. I was blown away by the kindness I experienced from an association that up until that point, I had “only” held a credential from.

Since 2010, I have had the opportunity to become a faculty member and an ACFE Regent. I have attended more than 12 conferences, taught or attended countless seminars, and met hundreds of fellow CFEs. I have learned that holding a CFE credential is so much more than the three additional initials next to my name, and so much more than the training I have received. Some of what I have realized is the value of:

  • Professional connections: The number of professional connections I’ve made through my attendance at various ACFE events has expanded my professional network beyond my imagination. My professional Rolodex includes the director of investigations at a large publicly-traded company, the Bernie Madoff whistleblower, current and former CIA and FBI agents, and a host of people making huge differences in our profession. The depth and breadth of experience walking the halls of a typical fraud conference is truly astounding. As a self-employed person, that Rolodex is certainly an asset when I have a question on a case, need to refer work to a different expert or need to collaborate on a large engagement.
  • Meaningful friendships: I met Janet McHard when she taught the seminar Auditing for Internal Fraud in August of 2004 before I had the credential or knew very much about what being a CFE was really all about. She was someone I very much emulated. You see, at that time she had the kind of career I could only dream of! She was gracious enough to answer my phone calls and emails, encourage me when I left my “dream job” to start a forensic accounting firm, and reach out during professional challenges of her own. Janet is just one of many professional connections who have translated to meaningful friendships that will last beyond our careers. I am forever grateful for these relationships and the meaning they bring to my life.
  • Lifelong learning: I may be a faculty member for the ACFE, but I can’t possibly articulate how much I often learn from the attendees at any one of our many trainings. Attend a training or a conference, and not only will you be taught by a master in the field, you will likely find yourself sitting next to one, too. And when you surround yourself with masters, it only leads to one thing: mastering your own game. There is no shortage of learning you can absorb from ACFE events, local chapter events or just hanging out with the truly awesome people in our profession.

I am often asked what the CFE credential means. To me, it means so much more than just how to investigate fraud, interview suspects and write reports for lawyers, judges and juries. The CFE means camaraderie and professional support. It means fun. But more than that, it means we belong to a group of people who care about each other beyond the professional confines that originally brought us together.

Being a CFE has been a game-changer in my professional career and personal life. I am proud to be among your ranks.

Dissecting the Minds of Fraudsters


James D. Ratley, CFE

During my years in investigative work, I’ve often pondered why perpetrators commit their crimes. Working as a police officer in the Dallas Police Department, I witnessed just about every type of transgression from fraud to child abuse to murder. As fraud examiners, we use the Fraud Triangle — pressure, opportunity, rationalization — to begin analyzing wrongdoings. Regardless, we find it difficult to pry open a fraudster’s mind. But Eugene Soltes is trying.

Soltes, a Harvard Business School professor, wants to know why some C-suite executives appear to risk everything to commit fraud. Middle management and employees further down corporate ladders might do it because they’ve found a ready source of cash to ease their economic problems. However, top-flight business people seldom lack for anything; their organizations often reward them spectacularly. Why would they need to steal?

Beginning in 2008, Soltes began to write prison letters to several convicted white-collar criminals whom you know — Madoff, Fastow, Kozlowski, Stanford — and some you might not — Richards, Waskal, Drier, Hoffenberg. He asked them the first dozen questions that came to mind. What were the most significant pressures they faced? How did the way they were compensated influence their decision making? What were their intentions once they were released?

He combined the material from close to 50 fraudsters with his criminology research into the 2016 book, “Why They Do it: Inside the Mind of the White-Collar Criminal” (PublicAffairs). Soltes was a keynote speaker at the 28th Annual ACFE Global Fraud Conference, June 18-23.

Soltes says he realized after interviewing these white-collar criminals that they failed to see the personal and professional consequences of their choices because they never deeply felt that their decisions were harmful to themselves or others. (The ACFE commonly calls that “diffusion of harm.”)

He says that stealing money from a victim’s wallet involves a high degree of intimacy. But executives who manipulate corporate conduct never need to get close — physically or psychologically — to their victims. Modern “arms’ length” transactions, Soltes says, have made it perilously easy to wander into that “gray zone” between right and wrong.

Soltes doesn’t condone the fraudulent behavior, but he says that studying these men (and they were all men) with the scarlet “F” on their chests changed him

“I became a lot less confident about how I’d respond to every difficult situation,” Soltes writes. “I think I’m more humble now that I’ve realized I have limitations much like anyone else, and I need to be diligent to watch those. Moral hubris is a remarkably easy trait to acquire and not realize when one actually has it.”

You can read more about Soltes in the cover article in the latest Fraud Magazine

28th Annual ACFE Global Fraud Conference in Nashville — Like a Fine Wine

Summerford and ACFE President James D. Ratley, CFE

Summerford and ACFE President James D. Ratley, CFE


Ralph Summerford, CFE
President, Forensic Strategic Solutions

The premier annual conference for anti-fraud professionals just concluded in Nashville at Music City Center. Nashville has every reason to beat its chest about this new venue — it is just fantastic. It’s as good as, if not better than, any conference center in any major city across the country.

The ACFE Global Fraud Conference just gets better and better every year. The ACFE now has more than 80,000 members, more than 3,100 of which attended this conference. These members allow the conference to grow exponentially each year, making it the place to be for anyone serious about the detection and prevention of fraud.

The world of fraud is rapidly changing, making the ACFE Global Fraud Conference a necessity. For example, nowadays a bank robber can remain in his basement and commit 15,000 robberies through his computer. He doesn’t even have to go to the bank, and he can cover his tracks through the Dark Web of the internet. Internet 2.0 is coming — it looks great and security will be better for everyone, but it will take some time.

Meanwhile back at the ranch, computer hacking, ransomware and theft through the computer continue to grow exponentially. These trending topics and more were covered extensively at the immeasurably valuable conference.

Specialists in the multifarious ways of fraud detection and prevention shared the latest and greatest methods to find and investigate fraud in today’s environment. Anti-fraud specialists know our world functions best through personal networking. The conference gives attendees the chance to connect with peers from around the world. I continue to connect with peers I met more than 20 years ago, as well as those I have met in the last few years. My new connections will be just as valuable as the old ones.

Speaking at the conference is a gratifying experience. The ACFE selects only speakers who can teach and offer valuable insights on their selected subject matter because the members are not timid about offering criticism and feedback. This year marked my 15th year to speak, and I presented two sessions on the auditor’s responsibility to detect fraud. The main takeaway for the presentation was that if fraud is committed and the auditor does not detect that fraud, there is likely a 99 percent chance the auditor will be sued. I shared information on professional standards and the devastating consequences of the auditor’s failure to discover a fraud scheme.

What a treat to attend and speak at one of the most professional, informative and well-organized conferences in the world. I look forward to returning to the conference in Las Vegas next year!

Be sure to register for next year's conference by August 31 to lock in 2017 pricing!

Using Social Media to Give You an Edge in Investigations


A quick search on my social media networks would tell you where I work, who my family members are, where I went to college and who my 5 year-old claims to be her “boyfriend.” Yes, social media is full of seemingly useless information like cat memes and time-lapsed cooking videos. But, what if all of those small, meaningless pieces of information added up to something bigger? According to Diana Ngo, those “crumbs” can each or all lead to that competitive edge you need when working on a fraud examination. “Social media gives me that competitive edge in investigations,” Ngo said. “It gives you a crumb that you can follow.”

Ngo is an Associate Director at Blackpeak Group, where she manages complex reputational and investigative enhanced due diligence projects. She also led the breakout session at the 28th Annual ACFE Global Fraud Conference titled, “Using Social Media for Investigative Purposes” where she highlighted the following ways you can use social media in your investigations:

  • Source of wealth research for on-boarding clients
  • Asset identification research for asset-seizing court orders
  • Whistleblower investigations for employees having undisclosed interests via family members
  • Investigating misrepresented personal or business relationships

According to Ngo, law enforcement uses social media for 80 percent of its investigations. While there may seem like an endless list of sites to consider, she highlighted the top areas of coverage to pay specific attention to:

  • WeChat: China’s Facebook. Best for finding sources. Pro Tip: You can use keyword searches for all public accounts.
  • Weibo: China’s Twitter. Pro Tip: Look at followers of a person and the people they follow for connections.
  • Instagram: A photo-sharing network. Fastest-growing application with most active users 18-29 years old. It is extremely popular in the Philippines and Singapore. Pro Tip: Every single photo has a timeline, so you can build timelines around posts.
  • Facebook: Members have the most active internet users. Pay close attention to the privacy settings: they are complicated and change frequently. Pro Tip: Use their strong search engine. You can search down to “men who went to the UCLA, live in New York and work at Deloitte.”
  • LinkedIn: Professional networking site. Made up of more males than females, people of higher incomes and higher education levels. Pro Tip: You can change the settings on your account to search anonymously.

Ngo reminded attendees to not solely rely on the information you find while scrolling and searching. According to Ngo, you still have to confirm everything you find because social media is managed by individuals. And those individuals, like us, want to represent themselves in the best way possible online. I mean, no one is going to post a video of themselves with piles of jewels and brag about a crime they committed, right?