A Review of Forensic Accounting Services

Source: Practical Accountant

Practical Accountant interviewed several forensic specialists in accounting firms on:

Defining Forensic Services
The following types of engagements are performed:

• Fraud investigations, including those of financial statement fraud.
• Misstatements of financial information.
• Shareholder or partner disputes.
• Investigations of management compensation and benefits.
• Employee expense reimbursements.
• Investigations of board of director or committee control.
• Testifying in court or before mediators and arbitrators.
• Thefts.
• Property insurance.
• Business valuations.
• Employee dishonesty, including fidelity bond investigations.
• Audit committee investigations.
• Internal control consultation.
• Assessing breach of contract damages.
• Construction delay damages.
• Trademark and patent infringement damages.
• Lender liability cases.
• Identifying waste and irresponsible activities.
• Malpractice loss calculations.
• Wrongful termination loss calculations.
• Assisting in criminal investigations.
• Criminal tax matters.
• Tracing assets (often in divorce cases).
• Evaluating reports by other forensic experts.

The nature of the forensic investigator’s role:

• Validate or invalidate financial assertions.
• Follow transaction trails.
• Unravel financial knots.
• Authenticate facts in dispute.

The nature of the work:

• Imaging computers.
• Interviewing vendors.
• Searching computer networks and hard drives.

Qualifications of Forensic Accountants
No one will have all of the following, but qualifications include:

• Ability to understand witnesses’ intentions, motives, and prejudices.
• Interviewing techniques:
  • How to get someone to help you without being a snitch.
  • Knowing who to interview (e.g., a receptionist).
• Speaking skills (for testimony).
• Writing skills (to present complex information to judges and juries).
• Audit skills in a variety of systems.
• Knowledge of internal controls.
• Specialized training in contract disputes, divorce work, and shareholder disputes.
• Accreditations:
  • Certified Fraud Examiner (CFE).
  • Certified Forensic Financial Analyst (CFFA, from the National Association of Certified Valuation Analysts).
  • Certified Fraud Deterrence Analyst (CFDA)
  • Accredited in Business Valuation (ABV)
  • Certified Valuation Analyst (CVA).
  • Accredited Senior Appraiser (ASA).
• Experience with the FBI, other law enforcement agencies, district attorney offices, or a regulatory agency.
• Knowledge of legal rules.
• Skepticism.
• Listening and communication skills.
• Impervious to condemnation and imperturbable.

Referral Sources and Other Marketing Tactics

• Networking and personal contact. Your chances of being engaged are enhanced when you are an attorney’s last contact.
• Providing continuing legal education.
• Getting hired by opposing counsel.
• Advertising in legal journals.
• Writing articles in media.
• Sending newsletters.
• Soliciting insurance companies and adjusters.
• Soliciting accounting firms that either don’t perform this work or have conflicts.
• Being listed in search engines—pay per click.

How Firms Bill
Most bill hourly and have two sets of rates:

• Non-testimony—rates are often 10 percent to 15 percent higher than rates for accounting and auditing.
• Preparation for testimony—more.
• If case is tried, rates are higher.
• Retainers are common.
• Provide estimates but with a big range.
• Fixed fee arrangements are rare.

The Future of the Market
With a slower economy, work will increase in quantity and scale. Sarbanes-Oxley has created more work.

From Practical Accountant, February 2007, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809. For the complete article, click on the following link: http://www.webcpa.com/current_issue.cfm?pub=prc, then select February 2007, then Forensic Accounting: Exponential Growth.