Bankruptcy Reform Act and bankruptcy fraud: Implications and opportunities for CPAs.
With bankruptcy filings on the rise, it is not surprising that bankruptcy fraud is also increasing. While the Executive Office for U.S. Trustees estimated that approximately ten percent of all bankruptcies contain some fraud, recent independent audits show that more than 25 percent of all audits contain some element of fraud. This paper presents a brief overview of the federal bankruptcy system and the most recent changes to bankruptcy law. Common bankruptcy fraud schemes are reviewed and the newly created Debtor Audit Program is discussed, which offers opportunities to independent CPA firms to participate in auditing bankruptcy filings. CPAs who understand how the bankruptcy law has changed and the basic elements and types of bankruptcy fraud schemes being perpetrated have an advantage in being able to guide clients through the bankruptcy process, to help them steer clear of common pitfalls, and to avoid being made a party to any fraudulent activities themselves. Additionally, the bankruptcy law changes provide opportunities for CPAs to become bankruptcy "experts" and in doing so to provide the best possible services for a variety of clients.
Louisiana State University. E.J. Ourso School of Business and the Department of Accounting
Barker, K., Stowell, N.F., Polansky, C. & Kieffer, D. (2010). Bankruptcy Reform Act and bankruptcy fraud: Implications and opportunities for CPAs. Journal of Forensic & Investigative Accounting, 2(3), 75-94.
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