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2
The Legal Environment
Applicable to Forensic
Accounting

McGraw-Hill/Irwin
Forensic Accounting

2008 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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The Trial Process

The

Trial Process (key concepts: bench vs. jury trials,

double jeopardy, rules of evidence)
Motions

in limine
Opening statements
Prosecution Case
Direct

Examination
Cross-examination
Re-direct-examination and re-cross-examination
Prosecution Rests Case
Defense

Case
Prosecution Rebuttal Witnesses
Closing Arguments and Jury Instructions

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The Trial Process

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Rules of Evidence
Rules

of Evidence

Rules

Relating to Evidence Content

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
someones state of mind, written government and business
records, and prior inconsistent statements.
Rules

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

anothers property to an individuals 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

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Federal Financial Crimes

Federal

Financial Crimes: The United States Code and Acts

of Congress
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USC 78dd: Foreign Corrupt Practices Act (FCPA) of 1977

18 USC 96: Racketeer Influenced and Corrupt Organizations
(RICO)
The Sarbanes-Oxley (SOX) Act of 2002
Federal Computer Intrusions Laws