Source: Accounting Today

According to the FBI, white collar crime accounts for $300 billion in losses each year in the U.S.

New, post Enron regulations and stricter enforcement have bred a surge in development of forensic practices within accounting firms, large and small. Accountants no longer assume financial information to be correct.

Thomas Golden, PricewaterhouseCoopers, and co-author (with Steven Skalak and Mona Clayton) of “A Guide to Forensic Accounting Investigation” (Wiley, 2006), says the detection of fraud most often happens accidentally. But, with the many techniques available for detecting and preventing fraud, discovery should be intentional.

The result of Sarbanes-Oxley has been a strengthening of internal controls, allowing for better detection and prevention of fraud.

A study by PricewaterhouseCoopers (third biennial “Global Economic Crime Survey 2005), shows a 22 percent increase in the incidence of fraud between 2003 and 2005. But almost 80 percent of respondents said fraud in their companies over the next five years was improbable, and to achieve this objective would require a strong fraud prevention initiative. And, although the detection of fraud when there is collusion is most improbable, the public tends to believe CPAs should be held responsible for such detection.

Because of the above noted public perception, CPAs should educate their clients on the establishment of fraud prevention controls—including codes of conduct, whistleblower programs, and communiqués to employees that the companies will be performing audits to detect fraud.

Accrediting bodies for this niche include: The Association of Certified Fraud Examiners, and the American Board of Forensic Accounting.

To be a fraud examiner, you must be more than an accountant. Too many unqualified people are involved in forensic accounting. Successful forensic practitioners must know how to interview and interrogate, and must have special legal knowledge. Accounting programs at universities will have to incorporate criminal justice courses in the curricula.

Computer forensics is also a growing discipline as the use of computers can provide digital information admissible in courts.

From Accounting Today, May 1, 2006, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004. For the complete article, click on the following link: http://www.webcpa.com/article.cfm?articleid=20019&;pg=acctoday.