Forensic Accountants in Demand as Fraud Increases
U.S. companies lose 7% of annual revenue to fraud, that’s roughly $994 billion, according to the Association of Certified Fraud Examiners. The group also notes that financial services is the most commonly victimized industry. Today, the global financial crisis and recession are causing a significant increase in fraud. As a result, forensic accountants have been inundated with work. SmartBrief quotes Ted Baskerville, Chairman of the Alliance for Excellence in Investigative and Forensic Accounting at the Canadian Institute of Chartered Accountants as saying, “Certainly in bust periods, such as we’re going through, transgressions of the past bubble to the surface. This one is worst than most, so it has increased the need for forensic accounting.”
Forensic services have become one of the fastest-growing practice niches among CPA firms. Now as the economy slows and concerns about potential incidents of fraud grow, executive search firm, A.E. Feldman, says accountants with expertise in forensic services are in a prime position to capitalize on the trend. In fact, AICPA research shows that CPAs represent 94% of forensic experts hired over the past two years.
The crawling economy has kept area forensic accountants hopping in one area: rooting out fraud for clients, according to the Kansas City Business Journal. “Most finger the economy as the culprit, either because desperate people are more likely to steal or companies are scouring the books to find more savings,” the report states. Ed Goings, Midwest Managing Director of Forensics Technology Solutions at KPMG LLP is quoted as suggesting that companies are looking deeper into their books, potentially venturing into areas they may not have looked at before. “By doing that, they are starting to identify more areas of fraud,” he said.
A new study shows that fraud is, in fact, on the rise. The Intense financial pressure during the economic crisis has led to an increase in fraud, according to a survey of more than 500 fraud experts conducted by the Association of Certified Fraud Examiners (ACFE). More than half, 55%, of respondents said that the level of fraud has slightly or significantly increased in the previous 12 months compared to the level of fraud they investigated or observed in the past. Additionally, about half, 49%, of respondents cited increased financial pressure as the biggest factor contributing to the increase in fraud.
“The message to Corporate America is simple: Desperate people do desperate things…especially now, organizations must be vigilant during these turbulent times by ensuring proper fraud prevention procedures are in place,” said ACFE President James D. Ratley, CFE.
Looking ahead, fraud levels are expected to continue rising. The vast majority, nearly 90% of respondents said they expect fraud to continue to increase over the next 12 months. As a result applications to become a certified fraud examiner are on the rise as companies, government regulatory bodies, and accounting firms aim to have better safeguards in place to prevent financial fraud, and have been hiring, according to the WSJ.
Most recently, New York City-based accounting firm Marks Paneth & Shron LLP (MP&S) announced the addition of David Gannaway, MBA, CFE, CAMS, EA, an IRS veteran with deep experience in fraud investigations and forensic accounting as a director in its Litigation and Corporate Financial Advisory Services Group. The firm says Gannaway will play a key role in complex white-collar fraud investigations, and in the firm’s newly expanded foreign disclosure services.
“In these challenging times, we need to make sure our clients are prepared for a wide range of extremely stressful events, including litigation, investigation and the impact of marketplace developments,” said Steven L. Henning, Ph.D., CPA, the partner-in-charge of the MP&S Litigation and Corporate Financial Advisory Services Group.
Aside from The Big Four, second-tier firms such as Grant Thornton, BDO Seidman and RSM McGladrey all have forensic divisions that investigate accounting blowups or provide support services for litigation situations. Opportunities also exist at independent firms that are free of client conflicts because of other audit or consulting work they perform for companies.
Competency and credentials, however, are critically important in this field, notes A.E. Feldman. CPA’s looking for business valuation jobs or opportunities in forensic services will benefit from adding other relevant credentials. For example, many CPAs who specialize in forensic accounting also add CFE or certified fraud examiner to their list of qualifications. In fact, Certified Fraud Examiners (CFEs) earn on average, nearly 22% more in salary than their non-certified colleagues, according to new research commissioned by the ACFE.
Are you an accountant or working in fraud or forensic services? If you want to grow your career or discuss your company’s talent needs, contact A.E. Feldman’s President, Mitch Feldman today.
