Forensic Accounting: What Would Columbo Say?

Forensic Accounting: What Would Columbo Say? Columbo was a Los Whether it is solving murders, that were intuitive, and the Angeles police detective in a jewelry thefts, or white collar patience to develop a case. TV series from 1971 to 1978. crime – SEC investigations The lieutenant detective was and cooked books all follow What would Columbo say played by Peter Falk who, the same investigation of our new fads? Or of our with his rumpled raincoat, principles of observation, forensic accountants who are tousled hair, and sputtering awareness, patience, and text book trained and tested, Peugeot car, solved murders correlation analysis to and who possess a by observation, inquiry, and discover what fits and what numerous amount of taking notes on his pocket doesn’t. certifications after their name? pad. Is it one’s ability to pass a test that certifies one as a A little past the halfway forensic accountant or is it point of each episode, experience, mentoring by an Columbo would start flipping experienced investigator, and pages in his notepad, time on the street? comparing current room layouts, weather patterns, Despite being a CPA and interviews, etc. The second holding many important half rose to a crescendo as certifications, I keep using Columbo synthesized the one word over and over facts, saw the pattern from again, i.e., investigator rather the data and interviews, and than forensic accountant. I have found in practice that ultimately captured the wrongdoer and solved the the art of investigation is the case. My father, a former Navy primary skill that those Captain in charge of counter practicing forensic For those of us who work intelligence, and Columbo accounting must possess. with and/or rely on forensic are my idols. They lived at a accountants, I wonder how time when computers were These skills are Columbo would rate their virtually unknown. Yet they principally taught by law investigative techniques. He understood the importance of enforcement and the military predates our current interviews, surveillance, data as they develop and train fascination with CSI and collection, and analysis. their people. forensic evidence. Yet his Each of these men had principles were the same. strong personalities, minds 1 When you look at the techniques applied, “My examination of the inventory records such as field work, surveillance, and showed deletions for the text books I purchased. interviewing, you realize the common These were coded ‘G’. I totaled the G items and denominator is that they take place at the found the G items for 2005 were $236,000 and location where the defalcation occurred or for 2006 were $240,000. For the five months of where the books were cooked. 2007 they were $102,000. I estimate the unreported income to be about $240,000 per Besides solving the puzzle it also gives a year.” tremendous advantage to the forensic investigator when testifying. Who sounds more plausible answering the question under cross examination about unreported cash – the test taker or the investigator? The Test Taker: “I compared the gross profit on the financial statements to the industry gross profit and saw XYZ Inc. was 2% points below industry. I then applied 2% to the imputed sales and estimate that the unreported sales are $125,000 per year.” The Investigative Accountant: Who’s more plausible? What would a judge “Based on my financial statement analysis say? What would Columbo say? Why do I like and allegations, I ascertained that the gross Peter Falk? Having one eye (lost at age 3), he profit and cash flow to the owner were low. accomplished a Certified Public Accountant “The company’s website said that text designation and has a degree in Political books could be purchased at the company’s Science from the New School For Social location at 999 ABC Highway, Somewhere, Research. New Jersey. On February 14, 2007, March 17, About the author: Martin P. Randisi is one of 2007 and April 1, 2007 I posed as a student New York’s senior investigative accountants. and made three purchases. In making the He was trained by his father, an attorney and purchases, I observed the entire process and Naval Intelligence Officer. Mr. Randisi was told only cash payments were accepted. developed the present Litigation and Valuation These are copies of the receipts for the Practice of the firm and created its Business purchases. Fraud and Investigative Group with former law “On July 8, 2007, I examined the bank enforcement personnel. Martin recently deposit tickets for 2005, 2006 and January to returned to the fun of field work and “action on May 30, 2007. There were no cash deposits for the street” as he calls it, having left the any of the weeks in which I made purchases department’s administration to his partners. and there were no cash deposits in any year. 2 .

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