We need more than a regular audit of the books; we need a Forensic Audit of the Association Books for the last four years or more. I want to point out that the auditor, Thomas P. Donovan CPA, who was hired by our old Board performing the audit of the books for the Years 2000 and 2001 ?“did not discover?” any wrongdoing and ?“did not detect?” any fraud other than revealing the Related Party Transactions. It seems to me that the person who hired the auditor could actually affect the outcome of the audit itself.
Based on my review and analysis of the Association?’s financial documents earlier last year, I estimated conservatively that at least 45% or more of our hard-earned money was being stolen either by overstating of the expenses or by funneling the income into someone else accounts. If we want to find out how much money has actually been stolen from the Association?’s account in the last couple years, we must have a Forensic Audit. Forensic Audit is not cheap, but this is the expense worth spending. Evidence could be forwarded to the Travis County District Attorney?’s Office for investigation and probably for the recovery of some of our hard-earned money.
WHAT ARE FORENSIC AUDITS?
For every major corporate-audit failure nowadays, there seems to be a follow-up with a ?“Forensic Audit.?” What exactly does that mean? The short answer: It?’s the kind of thorough, investigative audit that should have been done in the first place ?– but wasn?’t!
Here?’s how a forensic-audit scenario typically plays out: A company releases its audited financial statements, and its independent auditor says the number comply with GENERAL ACCEPTED ACCOUNTING PRINCIPLES. Later, the company admits the statements didn?’t comply with those accounting principles, and that the company?’s stock falls. The Securities and Exchange Commission investigates. Plaintiffs?’ lawyers sue. The company announces its own internal investigation and then brings in its own forensic accountants. They go digging for accounting mis-statements so the company can assess its true financial condition. That means checking ledgers and bank records, interviewing employees and customers, doing background checks on executives and scouring e-mails, among other things. They?’re also on the lookout for other types of fraud, such as theft of corporate assets. By that point the plaintiffs?’ lawyers usually already have hired their own forensic accountants. The company?’s forensic accountants often disagree with their counterparts for the plaintiffs?’ lawyers on the degree to which the books were cooked. Usually, they argue the fraud was not as widespread as the lawsuits allege.
THE FORENSIC AUDITORS WOULD NOT HAVE BEEN NEEDED IF THE INDEPENDENT AUDITORS HAD DONE A BETTER JOB.
