Demand for forensic accountants goes up as white-collar crimes increase, federal regulations tighten

It’s sad but true. One of the highest growth industries in the country is corporate fraud. 

As a result of the high-profile white-collar scandals in the past few years, federal, state and local governmental agencies, as well as businesses, have developed numerous ways to catch the bad guys and identify areas in which fraud might exist. 

All of that bad news is good news for forensic accountants, specialists who are assigned to detect fraud, prove allegations of embezzlement or insider dealings, investigate books, and potentially testify in legal proceedings. Forensic accountants are typically engaged regarding specific allegations of fraud as opposed to their auditor colleagues who are often consulted to offer an opinion on an organization’s financial statements. 

As a result of the rising need for forensic accounting specialists, and the passage of the Sarbanes-Oxley Act in 2002, most colleges and universities are enhancing the number and depth of courses in forensic accounting, teaching students to conduct financial investigations when questions of fraud or financial loss arise. Often these programs are a combination of accounting, criminal justice and information technology courses. 

Forensic accounting is not new. There have always been cases in which individuals tried to “cook the books.” However, since the advent of computers, it’s gotten easier to hide questionable transactions. So, today’s most successful forensic accountants are often as much information technology specialists as they are financial experts, using various tools to search computer files for key words or number combinations. 

These accounting professionals focus on the minutiae, since it is often a series of small transactions that tell the larger story of illegal activity. One Denver-based forensic accountant describes it as “piecing together a puzzle without having the picture on the front of the box to guide you.”

Unfortunately, another growth area for forensic accounting has to do with national security. In a day when terrorist activity is often identified as a result of fund transfers, many accountants are being trained to watch for suspicious transactions and alert authorities. And, recent natural disasters underscored the need for forensic specialists to conduct “loss of income” investigations for businesses and organizations devastated by the tragedy. 

In addition to their technical expertise, forensic accountants are typically characterized by a more than average dose of skepticism. They are curious by nature. Because forensic accounting often involves interviews of people suspected of wrongdoing, these accountants are typically good listeners, patient, persistent and not easily ruffled. It may also be important to have a thick skin if interviewed by opposing counsel in legal proceedings. 

Most experts agree that the need for forensic accounting will continue to grow, particularly in troubled economic times. Desperate people often resort to desperate measures. Increased government regulation will increase the need for auditing and reporting, and many professional organizations are tightening their standards. There will be continued growth in intellectual property disputes and thefts of trade secrets. In addition, with the aging of the Baby Boomer population, questions around inheritance, estates and unmet financial obligations are more likely to predominate, particularly for the many members of this generation who were married more than once. 

The Big Four accounting firms (KPMG, Pricewaterhouse Coopers, Deloitte & Touche and Ernst & Young) report that their annual revenue has risen nearly 19 percent in the past year. The forensic accounting area has seen the largest jump with growth of $2.4 billion. Deloitte added 15,000 employees to its workforce this year. The firm predicts it will have nearly 200,000 employees by 2011. 

These are good times for accountants who like a good mystery. Forensic accounting involves a quest for the facts rather than proof of the facts. It involves following an uncharted path rather than retracing a familiar one. The word “forensic” has its origins in Latin words for public forum. Put another way, forensic accounting brings the facts into the public forum for discovery and debate.