Short seller John Hempton published an interesting post yesterday about explaining what he does to his son:

I went through the mechanics of short-selling. I borrow a share from a broker. I sell it in the market. If the stock goes down I get to buy it back for less than I sold it. I repay the loan by returning the share and I keep the profit. I explained it does not work so well when the stock goes up.

Then I got to the nub of the issue: I am a short-seller of frauds and stock promotes. I look for people in the stock market who have fake accounts and who are stealing from gullible shareholders (also known as marks, dupes, fools, day traders or mutual fund managers).

A competent expert witness is vital to cases involving economic damages and other financial calculations. However, the expert must be much more than just a mathematician, market analyst, economic guru or forensic accountant. The job of the expert is far from over once the facts are analyzed and the calculations are completed.

Traditional accounting and finance skills are not enough when it comes to litigation. A financial expert witness must qualify as an expert in court and must convey the findings to non-accountants on paper and on the witness stand.

Guest post by Michael Volkov, Esq.

The Department of Justice is proud of its record on FCPA enforcement. They take credit whenever and wherever they can. They trumpet every settlement. They proudly proclaim that over half of last year’s criminal fines were collected for FCPA violations. They are entitled to claim success.

It is hard to argue against prosecutions of private companies and individuals who engage in foreign bribery. Such conduct skews competition in the global marketplace, undermines the integrity of foreign governments and threatens to destabilize governments. These harms are more than evident – they are inescapable and persuasive. Our national interest supports reducing foreign bribery to protect the integrity of the global economy and foreign governments.

We hear almost daily reports of companies engaging in accounting shenanigans to boost their apparent performance. As of late, companies like Diamond Foods (DMND), Green Mountain Coffee Roasters (GMCR) and Avon Products Inc. (AVP) are grabbing headlines for their alleged bad behavior.

Avon has been under the shadow of bribery allegations, in violation of the Foreign Corrupt Practices Act (FCPA), since at least 2008. The company has spent hundreds of millions of dollars conducting internal investigations, has lost at least four executives linked to bribery in China, and has been suffering from poor financial performance. And now it appears that Avon may have been aware of bribes being paid as far back as 2005, meaning the company’s problems may soon get even worse.

The most interesting cases I work are criminal cases for defendants accused of financial crimes such as money laundering, tax fraud, bribery and corruption, embezzlement, and investment fraud. I do my best work as a forensic accountant and fraud investigator in cases in which a trail of money must be followed through a complex web of people, entities, and bank accounts.

Peers and colleagues often question my desire to do criminal defense work. CPAs often see themselves as financial watchdogs, especially when they are providing traditional accounting or auditing services. The see themselves on the “right side” of the law, and can’t get their heads around the idea of a CPA helping a criminal.

From my thought leadership series at Securities Docket:

How to determine the right mix of expertise for a fraud investigation.

By Tracy Coenen, Contributor to CFO.com

It’s every CFO’s worst nightmare: despite your best efforts, your company’s compliance program has failed. There are credible reports of fraud and corruption inside the company, and an initial analysis of the situation confirms a problem. An internal investigation is necessary to determine the magnitude of the fraud, the parties involved, and the company’s financial and reputational exposure under government regulations.

How should you proceed? These investigations are often high stakes, so it is important to do things the right way from the start. In-house counsel should be involved in any situation involving allegations or evidence of fraud. Once executives have sufficient reason to believe the allegations are credible, they should involve outside counsel as well.

Guest Post by Keith Paul Bishop

Editor’s Note: This article was originally published on Keith Bishop’s blog, California Corporate & Securities Law on November 23, 2011. It offers us a different view from that of Tracy Coenen regarding the SEC’s action against Michael Koss and Koss Corp. for the embezzlement perpetrated by Sujata Sachdeva.

In this week’s issue of Compliance Week, Tammy Whitehouse writes about the SEC’s recent enforcement action against Koss Corporation and Michael J. Koss, its Chief Executive Officer and former Chief Financial Officer.

My article in the AICPA Corporate Finance Insider Newsletter

Reasonable accountants can disagree about whether a move to International Financial Reporting Standards (IFRS) will improve financial reporting. One key concern is that principles-based financial statements are much more susceptible to fraud. Rather than relying on strict rules, management’s judgment will guide much of the reporting. Clearly this creates a risk of fraud, but how big is the risk?

Today’s Compliance Week article, “SEC Pursues Small Company Over Lax Internal Controls,” [subscription required] discusses the SEC settlement with Koss Corp over the $34 million embezzlement by former Vice President of Finance Sujata (Sue) Sachdeva.

The article explains the settlement, which is essentially a clawback of some of Michael Koss’s compensation: