Accountants who specialize in forensic and valuation services point to electronic data analysis, or big data, as the most pressing issue they’ll face in the coming months, according to results of a new survey released on Tuesday by the American Institute of CPAs (AICPA).
Also, according to the 2014 AICPA Survey on International Trends in Forensic and Valuation Services, 85 percent of the more than 180 CPAs who responded expected an increase in the amount of time they spend on electronic data analysis in the near future.
The top challenges facing forensic and valuation accountants have changed some in recent years. For the AICPA’s 2014 survey, the top five issues over the next two to five years that were cited by these professionals include:
- Electronic data analysis, or big data (25 percent)
- Increased complexity and scrutiny in engagements (20 percent)
- Competition and fee pressure (14 percent)
- Regulatory changes (11 percent)
- Attracting and retaining qualified staff (7 percent)
Three of the five issues cited for this year also concerned forensic and valuation professionals in 2011 – but big data was not one of them. The top five issues that year were:
- Attracting and retaining qualified staff (25 percent)
- Keeping abreast of regulatory changes (14 percent)
- The economy (13 percent)
- Competition and fee pressure (11 percent)
- Technology (9 percent)
AICPA officials noted that the frequency with which big data was cited in the 2014 survey reflects a business culture with an increasingly sophisticated understanding of the potential of this information. But the sheer volume of data has created an environment where fraud can become more difficult to detect.
“Big data presents a real opportunity for businesses to glean actionable insights from information,” Jolene Fraser, CPA, principal of the Forensic Accounting practice at Sacramento, California-based Ueltzen & Co. LLP and chair of the survey committee, said in a written statement. “However, the downside is that it also presents a risk because the more data available, the harder it is to spot fraudulent activity, such as the creation of a fictitious employee or an improper payment to a vendor. To combat this risk, businesses rely on forensic accountants for their expertise digging deep into the data, unraveling the work of criminals, and detecting fraud.”
Although the buzz about big data has certainly been growing, electronic data analysis is not new to CPAs in this area.
“It’s something we’ve been dealing with for some time,” Tim Bryan, CPA, a forensic accounting and technology services senior manager at the Sacramento office of Crowe Horwath LLP, said in the survey report.
The important changes that have moved it to center stage include new technologies that support greater data mining and the fact that clients have developed a more sophisticated understanding of its potential.
“They are demanding a higher level of data analysis capabilities,” Bryan said.
Growth in Forensic and Valuation Services Expected
The survey also found that a majority (76 percent) of forensic accountants expected to experience increased demand over the next two to five years. Specifically, 30 percent expected demand for their services to increase up to 25 percent, and an additional 33 percent expected growth of up to 10 percent. On the higher end of the spectrum, nearly 13 percent of forensic accountants expected demand to spike by 50 percent or higher. Twenty percent forecast no change in demand, and 4 percent expected a decrease in demand, according to the survey.
Steady growth was expected in the valuation area, as well. More than half (54 percent) of respondents expected more demand for their services in the next two to five years. Specifically, 28 percent anticipated demand to increase by up to 10 percent, with an additional 18 percent anticipating a bump in demand of up to 25 percent. More than 6 percent expected demand to increase by 50 percent or higher. Forty-one percent forecast no change in demand, and 6 percent foresaw a decrease in demand for their services.
“The increasing demand we’re seeing for forensic and valuation services performed by CPAs shows the growth in these areas is poised to continue in the near future,” said Jeannette Koger, CPA, CGMA, AICPA vice president of member specialization and credentialing. “Businesses and consumers realize that the CPA, combined with the AICPA’s Certified in Financial Forensics (CFF) and Accredited in Business Valuation (ABV) credentials, signifies a highly qualified professional with the skill-set to get the job done.”
When respondents were asked what credentials they require of those providing forensic accounting services to possess, a CPA was the most frequently required credential. According to the survey, the CPA coupled with the CFF credential provides the most desirable combination of credentials in the areas of:
- Fraud prevention, detection, and response
- Financial statement misrepresentation
- Damages calculations
- Electronic data analysis
In addition, the CPA coupled with the ABV credential was the most widely desired combination of credentials for valuation engagements.
About the survey:
The 2014 AICPA Survey on International Trends in Forensic and Valuation Services was open to members of CPA Canada, in addition to AICPA members, for the first time. The survey, which was conducted from September 12 to October 25, 2013, contained a total of 182 qualified responses.