Career Path 4 – Forensic Services

The onslaught of frauds (think Enron, Madoff, Satyam, Tyco, WorldCom) in recent years has brought forensic accountants clearly into public view. Annual fraud surveys, e.g., ACFE’s Report to the Nations on Occupational Fraud and Abuse, multiple fraud surveys by the Big Four CPA firms, indicate that fraud is ever present and often growing and that no organization is immune to the threat of and thus losses from fraud. Growing recognition of fraud and/or the threat of fraud combined with the usual contractual and other business disputes have created a thriving market for forensic accountants.

Forensic accounting enables CPAs to put on their detective hats while solving mysteries. They employ auditing skills and accounting and systems knowledge to investigate frauds and financial transgressions. Unique to forensic accountants is the need for knowledge of the legal system as they are responsible for collecting the evidence needed for courts of law or other dispute resolution arenas. Forensic CPAs have a broad selection of potential employers to choose from – attorneys, law enforcement agencies, public accounting and consulting firms, financial institutions, insurance companies, and government organizations.

In conducting an investigation, a forensic CPA may research records and transactions, interview various parties involved, and conduct surveillance. Forensic investigations include financial statement misrepresentations, embezzlements, hidden assets, bankruptcies, and damage calculations. Forensic CPAs are frequently called in to investigate potential fraud, determine the response needed, and recommend fraud prevention efforts. They also testify in court as expert witnesses. A critical skill required of forensic CPAs, especially those who serve as expert witnesses, is the ability to communicate clearly and effectively. This is more difficult than it sounds as financial transgressions often wind tortuously through multiple entities and systems. The forensic CPA’s ability to simplify the information presented, making it easy to understand and thus to “see” the fraud committed, is essential to successful resolution of an investigation.

Forensic accounting increasingly involves other specializations, e.g., valuations and information technology. Business transactions rely on adequate determination of the “value” of the asset being traded or the company being sold. The “value,” however, is often the result of a complex series of computations based on an equally complex set of assumptions. As both computations and assumptions can be disputed, the merit of having a forensic CPA with valuation skills is clear. The need for IT skills arises from the rapid growth of cybercrime. Increasing “connectedness” via the Internet has proven to not only facilitate business transactions but also fraudulent transactions. Cyber criminals, from remote locations, can access corporate and government systems to transfer funds and data. Investigation requires the ability to follow the money/data trail through cyberspace leading to the need for both forensic and IT skills.

Certification of forensic expertise may be demonstrated through Certified Fraud Examiner (CFE) or Certified in Financial Forensics (CFF) credentials. The CFE is awarded by the Association of Certified Fraud Examiners while the CFF was established by the AICPA. Both require that forensic accounting expertise be demonstrated through knowledge and skills (tested via exam) and experience.

In recent years, the forensic accounting market has benefited from increased regulatory focus on the Foreign Corrupt Practices Act, additional compliance requirements a la Sarbanes-Oxley, and the growth of fraud. Strong candidates for this career path are those with superior analytical skills, a curious nature, and the ability to communicate clearly and effectively.