Dec 23rd 2013
In today's increasingly litigious society, there's certainly no shortage of lawsuits or the lawyers needed to negotiate those proceedings.
But with the outcome of an increasing number of those cases hinging on complex financial information – and today's technology making those financial crimes and peccadilloes much more difficult to identify – there's a new player emerging as an indispensable part of many attorneys' legal teams: the forensic accountant.
From nasty and entangled divorce proceedings to headline-grabbing white-collar crimes, forensic accountants have become a critical part of financial investigations and, in many cases, their subsequent legal proceedings.
For many attorneys today, retaining the services of a forensic accountant has become an integral part of resolving their clients' legal disputes, said officials at Gettry Marcus CPA, P.C. Gettry Marcus is a Woodbury, Long Island, and New York City-based accounting, tax, and consulting firm with one of the "premier and most credentialed" business valuation, litigation, and forensic accounting groups in the New York area.
Andrew P. Ross, CPA, CVA, CFE, PFS, partner, Business Valuation & Litigation Services Group for Gettry Marcus, said he has seen the demand for forensic accountants increase dramatically over the last decade.
Ross said there are several reasons attorneys are increasingly deploying forensic accountants, the sleuths of the CPA profession, to investigate, identify, analyze, and interpret the financial data that may determine the outcome of their cases.
"For one thing, society today is much more litigious, creating an increased need for forensic accountants," Ross said. "Over the years, attorneys who litigate cases have become more knowledgeable about the advantages of hiring a forensic accountant in certain matters. In addition, today's technology has made financial crimes much more difficult to identify, leading to a greater need for the forensic accountant."
So what does this uptick in the demand for forensic accountants mean for accounting students or CPAs career changers who may fancy themselves as the future Gil Grissom's (the fictional character on the CBS crime drama CSI: Crime Scene Investigation) of the CPA profession?
AccountingWEB recently sat down with Ross to discuss the expanding role of forensic accountants in litigation, and the type of skills and personality traits forensic accountants need to investigate people, their relationship to their money, and the money-related deception that sometimes results from that dangerous concoction.
AccountingWEB: In your experience, how has the role of the forensic accountant in the field of litigation expanded over the past decade?
Ross: I always try to stress to attorneys the importance of getting a forensic accountant involved early in a matter. While people may consider a forensic accountant as someone that crunches numbers, a good forensic accountant needs a deep understanding of the case that he's involved in, especially if testimony is necessary. A forensic accountant may also assist attorneys in evaluating the financial components of a matter to determine if it's worth litigating, write deposition questions regarding financial matters, or may have to read through depositions themselves to gain a better understanding of the case or locate specific relevant information pertaining to a matter.
AccountingWEB: Who would this type of work appeal to, and what types of skills, both accounting and non-accounting skills, are needed to do this work?
Ross: This type of work should appeal to individuals who are motivated and comfortable with handling the pressures of deadlines and testimony. This person should be a good writer and communicator and be able to manage large volumes of documents. From an accounting standpoint, a basic knowledge of tax and accounting principles would provide an advantage to a forensic accountant.
AccountingWEB: Can you describe how forensic CPAs are the "sleuths" of the CPA profession? What types of cases are they working on and what kind of investigation is required?
Ross: CPAs like to do what they do best, and that is to go right to the money. A CPA has been trained through the years to proceed to the financial records and perform their work, such as complete a tax return or audit a financial statement. As a forensic CPA, I believe the investigation of the people is just as important, if not more important, than investigating the money. A major part of a forensic assignment is to identify relationships, both financial and nonfinancial that may not always be apparent at first glance. Many times, by examining relationships among individuals or companies in your investigation, you can target the financial information you want to analyze even before the first data arrives.
One of the main things that a forensic accountant needs to be able to do is step back and be objective. Each case has its own unique fact pattern, and obtaining an understanding of the relationships between parties before you look for the money can be a critical component. You also have to consider differences among industries, be able to ask the right questions to understand the characteristics of each situation, and have the patience to sort through thousands of documents in order to put together information that relates to the case.
AccountingWEB: To give us a sense of what the work is like on a daily basis, can you walk us through a "model case to illustrate how forensic accountants use their financial acumen to uncover evidence?
Ross: While it's hard to consider any case a "model" case due to the uniqueness of most matters, the first step after being retained is the investigation of the people. While investigating the people, a document request is prepared, and, subsequently, the receipt of financial documents. It's important to record what you received, when you received it, and who you received it from. While simultaneously creating the document inventory, it's important to get a "flavor" for the contents of the documents. This will assist you later on as you work with the information that was provided.
Analysis of the financial documents received may be the next step in your investigation, which may include the use of advanced forensic techniques, such as procedures involving the utilization of data-mining software. Depending on the matter, a report summarizing your findings may be required. The investigation may also include depositions and testimony. In addition, many times a forensic accountant is involved in potential settlement discussions between litigants.
AccountingWEB: What advice would you have for accounting students/CPA career changers who would like to pursue this field?
Ross: I would tell accounting students that this field is a great field to get into; however, experience in the accounting field and obtaining a base of knowledge are important before jumping into forensic accounting. Having a solid, basic knowledge of certain accounting concepts can greatly assist in your career. For the CPA career changers who already have this basic knowledge, forensic accounting is a continually emerging and interesting field to pursue.
Ross recommends those who wish to pursue a career in forensic accounting pursue the following certifications: Certified Fraud Examiner (CFE), Certified Forensic Financial Analyst (CFFA), and Certification in Financial Forensics (CFF).
To read more about the role of forensic accountants in the litigation process, visit Gettry Marcus' online library.