Forensic and Investigative Accounting

Chapter 2 Forensic Accounting Education, Institutions, and Specialties

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Termites, Rust, and Fraud

Just as termites never sleep, fraud never sleeps. Just like termites, fraud can destroy the foundation of an entity.

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Professors Top Ten Topics in Forensic Accounting Curricula

1. 2. 3.

4.

5.

Fundamentals of fraud. Financial statement fraud. Types of fraud. Cooking the books and problems in accounting. Elements of fraud: pressure, opportunity, and rationalization.
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Professors Top Ten Topics in Forensic Accounting Curricula

Antifraud controls. 7. Internal control evaluation. 8. Theory and methodology of fraud examination. 9. Principles of ethics and corporate code of conduct. 10. Fraud detection and deterrence programs. Practitioners tend to emphasize litigation service more than professors.
6.
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Knowledge, Skills and Abilities Needed by Forensic Accountant

Law, legal system, courts, and courtroom procedure. Financial statement fraud. Corporate governance, shareholder rights and litigation, securities laws, and protections. Report writing and communication. Criminal law and procedure.

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Knowledge, Skills and Abilities Needed by Forensic Accountant

Computer fraud and cybercrime. Human factors involved in intelligence gathering, interview techniques and understanding the motivations for fraud and other criminal activities. Ethical issues in business. Business valuation.

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Find It, or Ill Sue

Accountants must be attuned to detecting fraud at every level of service, including standard accounting services, compilations, reviews, and bank reconciliations. If there is fraud and you dont detect it, you are going to be sued, and you will likely lose, as the public perception is the accountant is the watchdog.
Robert J. DiPasquale, Parsippany, N.J.

Source: H.W. Wolosky, Forensic Accounting to the Forefront, Practical Accountant, February 2004, pp. 23-28.
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Forensic Accounting Knowledge Base

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Careers in Forensic Accounting

Parade magazine on April 15, 2007, indicated that the hottest jobs for college graduates were forensic accountants.

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Income Expectations for Forensic Accountants

Salaries start around $50,000. Senior-level government employees can earn between $85,000 to $95,000. In the private sector, one can earn between $125,000 to $150,000.

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Consulting Fees
Forensic accountants work with attorneys, private investigators, law enforcement officers, corporate security specialists, the IRS, and the FBI. In 1999, Kessler International stated that the firm charges about $300 per hour for forensic consultations.

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Background in Forensic Accounting

A forensic accounting background is helpful in these professional specialties: Accountants SEC accountants Consultants Bankruptcy specialists Internal auditors Professors IRS auditors Bank examiners Government Chief financial officers auditors Valuators of closely FBI agents held businesses
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Specialties Within Forensic and Investigative Accounting

Employee Crime Specialist Asset Tracing Specialist Litigation Services Specialist and Expert Witness

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Forensic Groups and Credentials

Group Credential

American College of Forensic Examiners International (ACFEi) Association of Certified Fraud Examiners (ACFE) Association of Certified Fraud Specialists (ACFS)

Certified Forensic Accountant (Cr.FA) Certified Fraud Examiner (CFE) Certified Fraud Specialist (CFS)

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Forensic Groups and Credentials

Group Forensic Accounting Society of North America (FASNA) Credential None

National Association of Certified Valuation Analysts (NACVA)

Certified

Valuation Analyst

(CVA) Certified Forensic Financial Analyst (CFFA) Certified Fraud Deterrence (CFD) (merged with CFFA in 2007)
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Professional Groups and Credentials

Group National Litigation Support Services Association (NLSSA) Network of Independent Forensic Accountants (NIFA) Institute of Business Appraisers American Institute of CPAs
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Credential None

None Certified Business Appraiser (CBA) Certified Financial Forensics (CFF)

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CPA Certificate Important

AICPA research indicates that CPAs represent 94 percent of forensic experts hired over two years.

Source: Field of Forensic Service Remains Hot, A. E. Feldman Blog, http://blog.aefeldman.com/2009/04/13/field-of-forensic -services-rem...

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Difficulties With Fraud

Joseph Wells says Regrettably, the actual cost of fraud is unknown and unknowable. It is a concept the criminologists call the dark figure. Unlike visible crimes such as robbery, not all frauds are uncovered. Of those uncovered, not all are reported. No agency is tasked with compiling comprehensive data on fraud.
Source: http://www.nysscpa.org/cpajournal/2006/906/infocus/p16.htm

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Predication

The ACFE group indicates that in the private sector, a fraud investigation should not be conducted without proper predication. Examples: Anonymous tips, complaints, audit inquires, conflict of interest. Thus, predication is the basis for undertaking a fraud investigation. Without predication, the target might be able to sue for real or imaginary damages.

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Skills of a Forensic Accountant

Analytical Skills Basic Accounting Skills Problem Solving Skills Data Analysis Skills Interviewing Skills Verbal Communication Skills Basic Computer Skills Mean 6.51 6.31 6.30 6.27 6.25 6.11 6.05

Source: D.A. McMullen and M.H. Sanchez, A Preliminary Investigation of the Necessary Skills, Education Requirements, and Training Requirements for Forensic Accountants, Journal of Forensic and Investigative Accounting, Vol. 2, Issue 2, July-December, 2010, p.43. Chapter 2 Forensic and Investigative Accounting 20

Characteristics of a Forensic Accountant

Persistence Skepticism Puzzle Skills People Skills Flexibility Works well in teams Experience in Auditing Mean 6.12 6.12 6.08 6.04 5.91 5.84 5.80

Source: D.A. McMullen and M.H. Sanchez, A Preliminary Investigation of the Necessary Skills, Education Requirements, and Training Requirements for Forensic Accountants, Journal of Forensic and Investigative Accounting, Vol. 2, Issue 2, July-December, 2010, p.43. Chapter 2 Forensic and Investigative Accounting 21

Demand for Forensic Accountants

Robert Half 2009 Salary Guide indicates that even in the 2009 economic recession, there was still a strong demand for forensic accountants. In a 2008 AICPA survey, two out of three accountants indicated that their forensic practices had grown over the past year.
Source: Robert Half, 2009. Robert Half 2009 Salary Guide, Accounting and Finance. P.R. Newswire, 2008. Demand for Forensic CPAs Accelerates, AICPA, Survey Shows, New York, September 25, 2008.

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Society for Financial Examiners

Established in 1973, the Society for Financial Examiners is a professional organization for examiners of insurance companies, banks savings and loans, and credit unions. SOFE offers three professional designations which are earned by completing extensive requirements and a series of examinations.
Source: www.sofe.org/about

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International Association of Asset Recovery

The International Association of Asset Recovery (IAAR) has a new certification called the Certified Specialist in Asset Recovery (CSAR). The IAAR mission is to help practitioners to win back assets that rightful belong to victims, government agencies, other organizations, or individuals who have been victimized by criminal or wrongful conduct.
Source: www.iaaronline.org
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Corporate Crime Reporter

The Corporate Crime Reporter is a legal print newsletter published and mailed 48 times a year (corporatecrimereporter.com). Some articles are posted on their website, but are only highlights from the print newsletter.

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