December 14, 2018

Forensic accounting

Here’s a Handy Infographic for Aspiring Forensic Accountants

Following the handy infographic for all kinds of aspiring number crunchers, New England College presents this handy infographic for aspiring forensic accountants: New England College Master of Science in Accounting Online   Copyright © 2013 New England College • School of Graduate and Professional Studies • 98 Bridge Street • Henniker, NH • 03242  

Study: Competing Forensic Accounting Bodies Pretty Much Hate Each Other; Regulation Needed

The continued prevalence of fraudulent activity in business will undoubtedly lead many of you to a career in forensic accounting and/or fraud examination. Because of the nature of their work, you might be under the impression that the organizations in this little corner of the sandbox would be above reproach and bickering over petty differences […]

Here’s Another Article That Says Public Accounting Is Where It’s At

Just what public accounting doesn't need, another pro-public article touting the low unemployment rate and relatively high opportunities available to those with degrees in accounting. Forgive me for being too lazy to look up an actual number at this moment but I believe the last statistic was 3.5% or something – which means most of […]

West Virginia University to Offer PhD Program in Forensic Accounting and Fraud Investigation

Did you ever have dreams of being a doctor that busted the bad guys? Something like Quincy. Or maybe Robert Langdon. When you opted to go into accounting, you probably thought those dreams were hopeless.

Well, we have good news for you aspiring number-crunching crime fighters who still yearn for the “Dr.” prefix. West Virginia University’s College of Business and Economics is announcing (later today, we’re told) that they will be offering the first doctoral program in Forensic Accounting and Fraud Investigation. The program will admit its first students in August 2012 and will prepare individuals for a career in accounting research and teaching at the university level.

Shall we hear from scholarly types? Okay!


“West Virginia University’s Forensic Accounting and Fraud Investigation program has been a model for other colleges and universities across the country,” said WVU President Dr. Jim Clements. “Our expertise has made us a national leader in this field, and the addition of the Ph.D. program will provide WVU with an important opportunity to create scholars in the areas of fraud, forensics and ethics. I applaud the faculty for all they have done to make this possible.”

Dr. Clements is referring to WVU’s Graduate Certificate in FAFI and the new PhD program will simply add to the University’s scholarly fraud-busting prowess. Dr. Jose V. Sartarelli, Milan Puskar Dean, of the school said, “This new Ph.D. program is the next logical step in building a complete educational offering in these specific areas, and that step is due to the commitment and expertise of our excellent faculty. This program is a reflection of their long and dedicated work.”

So this is a pretty exciting for the accounting sleuths (amateur or professional) out there if you’re interested in taking your wonkiness to the next level. Whether or not it has the Sam Antars of the world shaking in the boots is another question.

Anyone interested should contact Dr. Tim Pearson or check out the program on the WVU website. Get crackin’.

AICPA Accounting Competition Offers Cash Prizes to Top (Pretend) Fraud Fighters

Are you an accounting undergrad interested in forensic accounting and cold hard cash? If you are, you might be interested in the 2011 AICPA Accounting Competition, which asks college students to flex their fraud and forensic skills in advising a fictional client on a major overseas expansion. The top three teams will strut their stuff in Washington D.C. on the AICPA’s dime, and the one that does the best job keeping the project on track — and on the right side of the law — gets a very legal $10,000. Legal if you pay taxes on the prize money, of course.


The American Institute of Certified Public Accountants has launched its second annual case competition, challenging college students across the country to test their fraud and forensic accounting skills in a complex scenario that will earn the top performing team a $10,000 award.

The 2011 AICPA Accounting Competition, which unfolds in three stages, focuses on a fictional Texas company looking to expand its business into the Nigerian oil fields. The competition is open to undergraduate students at 2-year and 4-year degree institutions in all 50 states, the District of Columbia, Puerto Rico, Guam, American Samoa, the Northern Mariana Islands and the U.S. Virgin Islands. Because this contest is open to any 2 or 4 year accounting students, this would be a great opportunity for a few future fraud fighters from smaller, less prestigious accounting programs – so if any enthusiastic professors happen to see this, please pass it along.

“The competition is an opportunity for students to get a hands-on, real-life understanding of one of the fastest-growing interest areas in accounting: fraud and forensics,” said Jeannie Patton, AICPA vice president for students, academics and membership. “Those who participate will hone their teamwork and leadership skills, deepen their understanding of financial risks in international business strategy and potentially bring national attention to their college or university.”

Participants in the competition must work in teams of four students, two of whom must be accounting majors. One of the accounting majors must serve as team leader. First round submissions, which are due September 30, will be evaluated to determine a pool of 10 semifinalists. Those semifinalists will compete for three finalist spots, a chance to travel to Washington, D.C. for the final round and three cash awards: $10,000 for first place; $5,000 for second; and $2,500 for third.

Entrants will be expected to outline, in 750 words or less, double-spaced, the top three fraud risks for High Prairie Construction’s plan to expand into the Nigerian oil fields. Would this move increase the risk of fraud within the company? Are there factors within the company’s culture that leave it vulnerable to fraud? Is High Prairie exposed to risk under the FCPA and UK Bribery Act? All of these are considerations you’d make in your summary.

Teams may register and find complete details on the 2011 AICPA Accounting Competition section of the This Way to CPA website.

Going Concern at the ACFE Fraud and Conference Exhibit

Next week I’ll be attending the ACFE Fraud and Conference Exhibit in San Diego where many forensic and fraud sleuths will be enjoying each other’s company and one-upping each other with stories on how many criminals they’ve busted over the years. It looks like you can still register so if my presence is the dealmaker for you, then I suggest you get on this.

John Walsh, the host of America’s Most Wanted will be giving a keynote although I’m a little confused as to what he’ll share with people that comb through ledgers for a living. Anyway, if you want to get in touch with me at the conference or while I’m in San Diego, you can email me, DM or @ me on Twitter or shoot me a message on LinkedIn or Facebook. I promise I’ll respond at some point especially if you offer to drive me to the beach or buy me an old fashioned in the Gaslamp Quarter.

And if you’re not in San Diego or attending the conference, don’t worry, I’ll be on a regular posting schedule so there will be the regular dose of inflammatory nonsense coming your way.

What Are Your Questions for a Forensic Accounting Partner?

Afternoon, gang. As the busy season winds down, you might be thinking about your next career path. Lots of you have expressed interest in forensic accounting and fraud investigations and as luck would have it, I got introduced to Derek Royster, a partner with RGL Forensics in Charlotte, North Carolina. From his bio, Mr. Royster has been with RGL since 1997, having worked extensively with insurance companies and attorneys focusing the scope of his career on forensic accounting, the measurement of economic damages and litigation support. He has lots of letters behind his name and has provided testimony as a damage expert witness.


Mr. Royster has agreed to discuss his career and other aspects of a forensic accounting with GC but since you people are the ones with career decisions to make (whilst I just write about it) we thought it would be best to get your questions for Derek. So whatever you want to know about a career in forensics but were afraid to ask, this marks your opportunity to get the answers.

Leave your questions for Derek in comments below or (email them to us) and we’ll get the answers for you and post our discussion with him.

When Should a Future Auditor Mention to His Firm That He’s More Interested in Forensic Accounting?

Welcome to the dead-seven-Irish-guys-in-a-garage edition of Accounting Career Emergencies. In today’s edition, a future Big 4 auditor wants to get into forensics ASAP but is concerned about appearances. How should he broach?

Have a question about your career? Need a post-Valentine’s Day/busy season break-up plan? Want ideas for cheering up your co-workers? Email us at [email protected]Dear Caleb,

I’m starting with a Big 4 firm in October. I had an audit internship last summer where they spoke about all of the ‘flexibility’ within the firm. I was always more interested in the fraud/forensics side of accounting than audit; however, I felt that I had a better chance of getting an internship in audit due to the larger number of positions available. After taking a fraud course in my masters program this year, I confirmed my initial thought that I would much rather work in that field instead of audit.

How realistic is it to try to switch from audit to forensics within a Big 4 firm? How long should I wait until I ask about switching without burning any bridges? I feel like I already know about the normal downsides of a career in auditing, are there any unique differences (good or bad) from a career in forensics?

-Confused New Hire

Dear Confused,

We’re impressed. It was quite the sly move on your part, playing the numbers game. And per usual for a new associate, you’re thinking WAY ahead, which is fine but don’t forget you haven’t even set foot on hallowed Big 4 ground yet.

Regarding the “realistic” question, we’d venture that it falls somewhere in between “somewhat” and “not very” given the fact that your start date is months away. It’s closer to “not very” at this juncture because you have no work experience whatsoever. Forensics involves turning over lots of rocks and that simply takes time and it’s helpful if you have experience in another investigative career. Now, a switch is “somewhat realistic” for you because you know exactly what career path you’re interested in taking. You have many of your future colleagues (and some superiors) beat in this regard. To appropriately address this with your firm, discussing your interest in forensics with your career counselor and mentors is the best way to go. Simply asking about a transfer in your first year or two at the firm is coming on a little strong. Besides, a few years of auditing will serve your skills well as you prepare for a career in forensics.

As for pros and cons in forensics versus auditing, you’ve already discovered one advantage – the work is far more interesting. It’s also a specialized area, so it can be potentially more lucrative and is a unique skill set. As for disadvantages, forensics is a hot area right now and the groups are relatively small. The groups and demand for services may be growing but lots of people have are exploring this area and spots will fill up quick.

Another big disadvantage is that there’s an intangible quality that forensics experts have, that some people don’t and that is an inherent skeptical attitude and investigative intuition. Here’s what forensic expert Tracy Coenen told us last year:

It’s common for people to think that a good auditor makes a good forensic accountant, and that’s simply not the case. Some people have a gift for thinking outside the box and can get a gut feel for what’s wrong. Others only have a gift for reconciling numbers and using checklists. The [AICPA] survey addressed investigative intuition, but it didn’t even make it into the top five of core skills. I think that’s wrong on many levels.

In that same post, GC friend Sam Antar talked about having additional qualities:

An effective forensic accountant must have a pair of double iron clad balls and a triple thick skin. Prospective forensic accountants can count on making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct. […] Effective forensic accountants must at least think like a scumbag to understand criminal behavior, techniques, and countermeasures.

So, in other words, you need to have raw talent and instincts. You may have wanted to be a professional baseball player when you were a kid but still couldn’t manage to hit a ball off a tee or catch a cold.

So to wrap it up, express interest in forensics but we don’t think you should come on too strong. If you do some time in auditing and perform well, you’ll give yourself a better chance of dipping a toe into a forensics group down the road. Good luck.

The Future of Forensic Accounting is Now

Ed. note: Welcome to the first edition of Going Concern’s Guest Blogger series. We’ll be featuring both seasoned and new bloggers to share their views on various accounting topics. If you’re interested in participating, email us your submission to [email protected]. Please include “Guest Blogger Submission” in the subject line.

Imagine being able to take tens of thousands of pages of financial data and get it into a database in a matter of hours. Those mounds of paper are quickly turned into something useful to the forensic accountant, without spending hundreds of hours manually inputting the data. Financial data is suddenly transformed and the forensic accountant can quickly map the flow of funaction patterns, create charts and graphs that show entities and transactions of interest, and create customized reports.

Doing things the old way, such a result is only a fantasy. For decades, forensic accountants have spent their time manually sorting documentation, deciding which transactions are important, and doing data entry.

It sounds painful because it is. It takes a long time, there is a high risk of inaccuracy, and there is a great chance that an important transaction will be overlooked.

So if there is technology out there to change all of this (and yes, there is!), why aren’t forensic accountants using it?


The only real answer is that they’re afraid of changing their business model. Most accounting firms charge their clients hourly fees, so they are invested in a business model that is dependent on forensic accountants taking more time to perform work which results in more revenue.

Technology that nearly eliminates the need for teams to spend hundreds of hours analyzing financial documentation is not a welcome addition to the firm; it just causes them to lose money.

Of course, it’s not really true that such advances really cause forensic accountants to lose money. All that needs to happen is firms have to find different ways to bill their clients, rather than simply adding up the time of staff and multiplying by a big number.

In addition to this paradigm shift related to billing clients, technological advances also fundamentally change the way forensic accountants investigate fraud. That makes lots of them (especially the old timers) uneasy. After all, we’ve always done it this way! How can we rely on technology over our own hands and eyes?

Here’s the thing…. those forensic accountants who resist embracing technological changes are going to be left behind. I currently use a proprietary system to complete large forensic accounting engagements, making it possible for me to single-handedly do more investigative work in a few days than a team of 4 or 5 investigators can do in several weeks or months.

This is not a fantasy; it is my reality. And my clients are getting better results much faster, allowing them to plan their litigation strategy much sooner, and ultimately be more successful in finding fraud, defending regulatory actions, and competing in litigation.

Yet I am currently the only forensic accountant in the private sector using this system, or anything like it. The government has been using a similar system for years, and if a client is being investigated by a federal agency in a financial matter, there’s a good chance the government is using the latest technology to aid in their investigation.

The future is not going to wait just because so many forensic accountants don’t want to change how they investigate fraud or earn their money. Those who are unwilling to change are going to be left behind. Those, like me, who want to be on the cutting edge, will make more money and win more interesting engagements that previously may have been too large or complex for me to handle alone.

Tracy L. Coenen, CPA, CFF is a forensic accountant and fraud investigator with Sequence Inc. in Milwaukee and Chicago. She has conducted hundreds of high-stakes investigations involving financial statement fraud, securities fraud, investment fraud, bankruptcy and receivership, and criminal defense. Tracy is the author of Expert Fraud Investigation: A Step-by-Step Guide and Essentials of Corporate Fraud, and has been qualified as an expert witness in both state and federal courts. She can be reached at [email protected] or 312.498.3661.

Former Business Journalist Needs Help Becoming the Next Great Forensic Accountant

Welcome to the christ-is-it-next-Wednesday-yet edition of Accounting Career Couch. In today’s edition, a former business journalist is looking to get into forensic accounting. How on Earth can you do that?

Need help with your next career move? Want some advice on an awkward confrontation? Looking for a loophole in your firm’s dress code so you can show off your fantastic gams/guns? Email us at [email protected] and we’ll recommend what to say/wear.

Back to Mikael Blomkvist:

I’m in my earr worked in accounting. I have a B.A. in liberal arts and am currently enrolled in a Masters in Accountancy program. I formerly worked 10+ years as a business journalist, during which I learned a fair amount of basic accounting and financial statement analysis. I especially enjoyed investigative business journalism, which led me to get a PI license and a CFE designation and work as a freelance fraud investigator for several years. But I quickly saw that I needed a CPA license and real-world accounting experience to command decent fees.

Once I get my M.Acc., I’d like to get a job in forensics at a public accounting or consulting firm and starting working toward the CPA. I know exactly what I want to do: forensics, and even more specifically, fraud investigations. I’d rather not toil in entry-level audit and try to worm my way into forensics if I can avoid it.

My questions are myriad. For starters, am I too old to do this? (Yes, I’m a married parent, have paid dues before, don’t mind paying them again as a career-changer.) Where should I apply? Would the Big 4 even be interested, or should I concentrate only on specialized/regional firms? Would I have more luck going the entrepreneurial/sole proprietor route than trying to get a firm to hire me? Will investigate for food. Anything helps, even a smile.

Dear Blomkvist,

Let us just start by saying two things as it relates to the age question: 1) it doesn’t mean shit and 2) it’s irrelevant at this point. Judging by your actions you’ve already made up your mind and you’re just looking for a little confirmation.

Now, then. As far as where you should apply – Big 4 is an option but not a great one. They have forensics practices obviously but getting your foot in the door can be tough as the groups are small and positions are hard to come by. That being said, it won’t hurt to get in touch with the experienced-hire recruiters at the major firms in your area to see if there are openings. You’re certainly a better candidate than someone internal that has no investigative experience and wants to get into forensics for the hell of it. A little pavement pounding could turn up a great opportunity.

That being said, it seems to make more sense to seek out opportunities at boutique or small firms in your city. You will likely get the opportunity to meet the owner(s)/partners of the practice who will probably value your experience as an investigative journalist. Someone like Tracy Coenen would be a good example of an expert that could take you under their wing and show you the ropes (assuming they need someone).

As far as starting hanging your own shingle, it’s an option but you’ll eat what you kill. Are you prepared to live that way? Is your family prepared to live that way? Conversations need to be had. You may be able to lend a hand to other forensics specialists to get your feet wet but it will be a tough sell to land your own clients for quite awhile.

You’ve got the investigator’s instinct and presumably the iron-clad balls that Sam Antar insists are a must and that cannot be taught. These intangibles are extremely valuable and should be a major selling point no matter what path you choose. Skål!

Grant Thornton Is Done Selling: Acquires Huron’s Disputes & Investigations Practice

If you had to judge the state of Grant Thornton based on the activity over the past year, you might assume that the firm was headed downhill because of their disposal of several offices around the country. Despite the haters and accent conspiracy theorists out there, Stephen Chipman was confident about the future. So much so that he sent hand-written notes to all of you encouraging you to become GT evangelists.

Now this morning, we learn that this unleashing of dynamic potential clients could be taking shape:

Grant Thornton LLP said Monday it has acquired the assets of Huron Consulting Group’s disputes and investigations practice in a deal that will bring 60 people to Grant Thornton’s offices in Boston, Chicago, New York and San Francisco.

The acquisition is part of Grant Thornton’s strategy to double revenue in the next five years. Huron Consulting has divested itself of its disputes and investigations practice. Huron’s D&I employees will join Grant Thornton’s economic and advisory groups in four cities, including Boston.

Well! This is quite the acquisition. Since GT and Huron are both Chicago-based, there is likely a lot of connections here that helped make this deal happen. Huron’s press release states that the D&I group (the smallest inside the company) had been on the block because the overlords wanted to focus its efforts on “businesses [with] a more substantial market presence”:

The Company stated previously that it was evaluating the long-term prospects of its D&I service line, which had accounted for approximately 5% of the Company’s overall revenue for the first six months of 2010. “The Disputes and Investigations practice has been a part of Huron since our formation in 2002. We recently conducted a comprehensive assessment of all of our businesses and concluded that the divestiture of the D&I practice would enable management to devote more of its energies and financial resources to businesses where we have a more substantial market presence,” said James H. Roth, chief executive officer, Huron Consulting Group.

[…]

Huron is also revising its 2010 revenue guidance based on the divestiture of the D&I practice and other market factors impacting two reporting segments. When the Company announced second quarter results in July 2010, it provided a 2010 revenue guidance estimate between $600-$620 million.

Based on the divestiture of the D&I practice, the 2010 Company revenue guidance would have been reduced by $35-$40 million. In addition to the D&I divestiture impact, the Company is reducing its annual guidance by an additional $25-$30 million to reflect contract and project delays in two of its service lines: Healthcare and Accounting Advisory.

On the surface, it may look like a good deal for both companies but in reality it feels like Huron was desperate to sell a good revenue-generating unit (19% as of June 30, 2010) and since GT is definitely shopping for acquisitions, the firm was more than happy to take it off their hands.

This acquisition will allow GT access to a sexy area of advisory work (D&I consists of “business disputes, forensic accounting and investigative services, tax controversies and intellectual property disputes”) in key markets and presumably, they can hype the new group internally to expand it and compete for more business.

The only possible downside is that some inside GT may be concerned (we’re speculating here) about taking on more Andersen refugees but ultimately it looks like a good move and the first example of the firm making good on its new strategy. If you’ve got a different opinion, chime in below.

Grant Thornton buys Huron operation [Boston Business Journal]
Huron Consulting Group Announces Divestiture of Disputes & Investigations Practice to Continue Focus on Core Businesses [EON]

Credentials for Accountants: Certified in Financial Forensics

If you’re the type that enjoyed spy shows as a kid and loves scoping out financial statements like CSIs love autopsying dead bodies, you might want to consider a CFF (Certified in Financial Forensics) when you grow up. Anyone considering this designation may want to add CFF to the end of their name with a CFE or CFA. If you’re looking at a CFF, you might want to hurry up and decide before future CFFs are required by the AICPA, starting September 1st, to pass the CFF examination.

In May of 2008, the AICPA introduced the CFF as a professional credential that combines specialized forensic accounting expertise with the core knowledge and skills that make CPAs among the most trusted business advisers.


Education Requirements
Becauential that represents an extensive knowledge base, CPE is an important component to qualify for and renew a CFF designation. New CFFs are required to demonstrate a certain amount of Lifelong Learning (based on the point system below) and must complete 60 hours every 3 years with renewal of the credential.

Professional Requirements
In order to qualify to become a CFF, CPAs must be an AICPA member in good standing, have five years professional experience in the field of accounting and must score at least 100 points on the application (points based on professional experience, knowledge, lifelong learning and forensic accounting credentials already held). Only CPAs can apply as a valid, unrevoked license to practice public accounting is a requirement as well.

The CFF Exam
The exam, which will be introduced as a requirement on September 1, 2010, is a four hour, 100% multiple choice exam administered by the AICPA. It consists of the following areas and weights (check out the CSOs from the AICPA here)

Professional Responsibilities and Practice Management

• AICPA 5%

• CPA Professional Responsibilities in Civil and Criminal Matters 5%

Fundamental Forensic Knowledge

• Laws, Courts and Dispute Resolution 5%

• Planning and Preparation 5%-10%

• Information Gathering and Preserving 10%

• Discovery 5%-10%

• Reporting, Experts and Testimony 5%-10%

Specialized Forensic Knowledge

• Bankruptcy, Insolvency and Reorganization 5%-10%

• Computer Forensic Analysis 5%-10%

• Economic Damages Calculations 5%-10%

• Family Law 5%-10%

• Financial Statement Misrepresentations 5%-10%

• Fraud Prevention, Detection and Response 5%-10%

• Valuation 5%-10%

Career Options
Many with the CFF credential stick to private practice and use the CFF as a way to distinguish themselves as passionate about forensic accounting.

Compensation and Other Benefits
We all know more letters = more money but in the case of the CFF, little real data can be found on the difference in compensation for CFFs versus plain old forensic accountants. We’re guessing this is because the CFF is a relatively new AICPA credential but as time goes on and frauds get larger and more complicated, we trust that this data will be much easier to come by. As a general rule, crendentialed CPAs are more valuable simply because pursuit of a credential in one’s specialty shows a level of professional dedication adored by HR departments and managers alike.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here

Accounting News Roundup: Bidz.com’s Financial Reporting Could Have Some Issues; Tax Planning Stays One Step Ahead Financial Reform; Accountant Denied Bail in Terror Case | 05.18.10

Can We Trust Bidz.com’s Financial Reporting? [White Collar Fraud]
We won’t tell you what to think but you should know that Bidz reported “material weaknesses in internal control over financial reporting” specifically those controls over “management oversight and anti-fraud controls specifically in processing of financial transactions, vendor review and payment processing,” in its most recent 10-K and 10-Q As an investor in Bidz, this should make you queasy. Unless, of course, you’re not concerned with such matters.


Sam Antar probably doesn’t care either way but he does put something out there, “Bidz.com cannot effectively prevent anyone from robbing the company blind and cannot prevent material errors in paying its vendors. Yet, the company wants you to believe that its financial reports contain no material errors and comply with GAAP.” But if you’re not sketched out by such things, then by all means, invest away.

But wait, in case that doesn’t earn your skepticism, the SEC began its investigation last year after Sam pointed out inventory irregularities at the company. Shortly thereafter, the Commission expanded its investigation into “the Company’s co-op marketing contributions and minimum gross profit guarantees.” If that wasn’t enough, the company’s auditors, Stonefield Josephson, were cited by the PCAOB for “significant deficiencies in a smaller sample of one of four audits reviewed.” So, again, if you can get over all that, this is probably a fine company to have your money invested in.

Bobbing as the Taxman Weaves [DealBook]
As Congress continues to dispel its wisdom on financial reform, it’s has become the natural order of things for any regulation to be circumvented prior to the passage of any bill.

In the case of carried interest, an incentive paid to hedge and private equity fund managers out of gains on the funds’ investments, Congress would like to tax these incentives at the ordinary rate (soon to be 39.6%). Currently, carried interest is taxed at the capital gains rate of 15%. DealBook reports that, despite threats by House to penalize those who use creative tax strategies that later fail, the maneuvering has not slowed:

The House of Representatives, aware that some titans of finance were already charting a course around any proposed change to their tax status, included a special provision in its version of the new legislation levying a 40 percent penalty for executives who invoked a loophole to cut their tax bill but were later ruled to have been wrong in doing so.

Still, that hasn’t stopped them from trying.

One of the latest machinations being whispered about in the industry goes like this: Private equity executives would sell their “carried interest” to a third party and then use the cash they received to invest directly in the deal so that any increase in value would be a capital gain.

It’s not clear whether this will work or not but it sure seems like fun.

Accountant held without bail in NYC in terror case [AP]
Sabirhan Hasanoff, a former PwC Senior Manager, was denied bail yesterday for his role in an alleged conspiracy that supported al-Qaida. He pleaded not guilty to the charges against him.

So You Want to Be a Forensic Accountant

Forensic accounting is about as sexy as it gets these days for boutique accounting services. For starters, there’s no shortage of work. And even if you’re too inexperienced to start up your own firm, you might be able to cut your teeth at a Big 4 forensic practice or since the SEC seems to getting serious about doing its job, you could go that route.

Hell, even if you’re currently on the other side of this equation (i.e. the perp) it seems to have worked out for at least a couple people, namely Barry Minkow and Sam Ae–>
The AICPA sees the potential and is on the offensive, offering a
“Certified in Financial Forensics” credential starting in 2008 after demand for such a cred came from its members.

The Institute recently published Characteristics and Skills of the Forensic Accountant, a survey of attorneys, forensic CPAs and academics that presents their “views on the qualities they believed were essential in a forensic accountant.”

Surprisingly, the three groups managed to agree on the most important trait, “All three groups surveyed overwhelmingly cited analytical ability as the most essential characteristic of a forensic accountant: 78 percent of attorneys, 86 percent of CPAs and 90 percent of academics.”

And that’s where the agreement ends:

Attorneys believed oral communications to be the most important skill, reflecting the need to express an opinion effectively in a court of law. CPAs, on the other hand, identified critical and strategic thinking as most important, with written and oral communications as second and third, respectively. The academics agreed with the CPAs that critical and strategic thinking was the prime skill, but, interestingly, rated auditing skills and investigative ability as second and third.

Hard to believe this differing opinions here. Lawyers prefer blabbing? Accountants prefer keeping their heads down and academics take it to an even brainier level? Shock.

We shot a message over to Tracy Coenen, friend of GC, forensic accountant for her thoughts and she notes that all these people surveyed are missing something important – intuition:

I think what they’re missing is investigative intuition. It’s common for people to think that a good auditor makes a good forensic accountant, and that’s simply not the case. Some people have a gift for thinking outside the box and can get a gut feel for what’s wrong. Others only have a gift for reconciling numbers and using checklists. The survey addressed investigative intuition, but it didn’t even make it into the top five of core skills. I think that’s wrong on many levels.

We’d have to agree that there is something to be said for raw talent. You can try and teach someone the necessary skills but if they don’t have that sleuth mentality, forensics probably won’t be a natural fit. Sam Antar agrees, and he laid out his own crucial characteristics for us:

The AICPA likes to talk about the skills of an effective forensic accountant, but it ignores the important personality traits required for them to be successful:

• An effective forensic accountant must have a pair of double iron clad balls and a triple thick skin. Prospective forensic accountants can count on making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.

• The saying, “It takes one to know one” applies to being an effective forensic accountant. If a forensic accountant is not a convicted felon (like me), there must be at least some degree of larceny wired into their personalities. Effective forensic accountants must at least think like a scumbag to understand criminal behavior, techniques, and countermeasures.

• “Critical and strategic thinking” are relatively ineffective unless the forensic accountant exercises “professional paranoia” in the conduct of their work. Effective forensic accountants must be born cynics and skeptics and never accept any information at face value. A healthy degree of paranoia helps.

Without the personality traits enumerated above, no amount of education can help a person be an effective forensic accountant.

Regardless of the differing opinions, the AICPA wants more people getting into forensics and we think that’s a good thing. However, since the chances of a CSI: Bean Counter are nil, more traditional recruitment measures have to be employed.

AICPA Report Educates CPA Firms, Professors on Forensic Accounting [AICPA Press Release]
AICPA Forensic and Valuation Services Center [Website]

Accounting News Roundup: CFOs, Staff Are Getting Worn Down by Guidance; Miami Forensic Accountant to Plead Guilty; Big 4 In Pari Delicto Defense Strategy | 03.10.10

A Growing Contagion: Accounting Fatigue Syndrome [CFO Blog]
Anyone getting worn out from all the guidance that is coming from the alphabet soup of regulators? You’re not alone and there appears to be an epidemic, something that CFO Blog has deemed “Accounting Fatigue Syndrome.” The long/short of it is that things are only going to get more complex as FASB and IASB continue to converge their rules and guidance continues to come out of both rule making bodies.

“Like many finance executives, Terry Lillis, CFO of Principal Financial Group, is tired. The constant stream of guidance from regulators and accounting standard-setters — plus the expected inflow of more to come over the next few years — has created “huge accounting fatigue” among his finance staff”


What’s the solution to AFS? How about just getting out of the biz altogether? “While the panelists gave no hope to CFOs who wish the standard-setters would either slow down or cut back on their agenda, they did offer one tip for ending accounting fatigue. ‘If I were a CFO, the first thing I would do is look at my early-retirement provisions,’ quipped J. Edward Grossman, a Crowe Horwath partner.”

High-profile Miami accountant Lew Freeman to plead guilty to fraud [Miami Herald]
A couple of weeks ago we told you about “go-to” forensic accountant turned swindler Lewis Freeman and his legal trouble.

Today he is expected to plead guilty in Miami to embezzling $2.6 million from his clients. Prosecutors have alleged that Freeman, “wrote 162 unauthorized checks to himself totaling about $6 million from the accounts of five failed businesses once under his company’s control, but put back about half of the money.” Freeman has been cooperating with investigators since his arrest but still may face 10 – 20 years in prison.

In Pari Delicto: Are Auditors Equally At Fault In The Big Fraud Cases? [Re: the Auditors]
Francine tackles PwC and KPMG’s defense strategy involving in pari delicto to avoid their roles in fraud cases.

The way I see it, the in pari delicto doctrine is being used like a pair of needle nosed pliers by audit firm defense lawyers to diffuse a bomb – huge liability for some of the biggest frauds in history. The in pari delicto doctrine attempts to pull the auditors’ tails from the fire by excusing any of their guilty acts due to the approval of those acts by potentially equally guilty executives.

Sam Antar at Stanford: Jr. Deputy Accountant Gets a Live Dose of the Criminal Mind

Last week, I took the day off from work and headed down the 101 to sit in on former Crazy Eddie CFO and self-proclaimed criminal Sam E. Antar speaking to Stanford MBA students on, what else, fraud and the criminal mind. Sam is a friend of both JDA and Going Concern and it was excellent to see him recount the Crazy Eddie story to an auditorium of future MBAs.

Ironically, he showed up wearing an SEC baseball cap, which is akin to JDA owning a Federal Reserve hoodie (I do) and didn’t waste a second getting to the point of his visit.

“I’m gonna be the guy that fucks you guys up,” he told the room before beginning the presentation, “I’m a racist and a scum bag but I hate everyone equally.”


I could literally see the audience squirm in response. I already knew Sam was a tad offensive and was counting on getting an extra dose of it; there was no squirming in the media corner.

“Political correctness helps the criminal, not you,” he explained, “It limits your behavior, not the criminal’s.”

Right.

Sam went into auditor standards like the fraud triangle though insisted there is no such thing as rationalization. “Criminals know right from wrong. We don’t plan on failure.”

We even got to see a vintage Crazy Eddie ad spot as Sam’s presentation was spliced with images from the 2006 Court TV episode of Masterminds detailing the Crazy Eddie fraud. That’s for the sections that Sam doesn’t tell you; the details are plentiful in his spiel though don’t let that catch you off guard, he insists he is still just as dangerous as he was before he was caught.

You can get the Crazy Eddie backstory from Sam’s Web site (if you aren’t fortunate enough to be able to play hooky and see him spook Stanford MBA students in person) here, here, and here. If you get the chance, I highly recommend checking him out live (leave your valuables in the car).

And then there’s the video of Sam and Eddie meeting up decades after their fraud was discovered — and Sam gave up his family (and, consequently, himself) — that I recommend you not miss.

So long as there are unqualified auditors being piled into audits they aren’t trained to perform, there will be guys like Sam E. Antar figuring out a way to distract, deter, and delude them, no matter what it takes. For Crazy Eddie, it didn’t take much. What’s to say things have changed?

Sam Antar Photograph by Buck Ennis for Crain’s New York Business and Investment News.

Bad News: Forensic Accountants Are Crooks Too

Allegedly of course! Despite our best wishes for a forensic accountants to be fraud-busting crusaders that pursue truth, justice and all that crap, this corner of the profession is not immune from shiesty characters.

Lewis Freeman, “Miami’s go-to forensic accountant”, has been charged with embezzling $2.6 million from his clients. The Miami Herald is reporting that Lew has pleaded not guilty but is planning to change his plea to guilty “within a few weeks” while his attorneys try to negotiate a lighter sentence. The Herald also reports that two other employees of his firm, including the CFO, will be charged as co-conspirators in the case.


When you think about it, this really exposes Freeman as not being a very smart guy, just smarter than the people he was ripping off. As criminal mastermind Sam Antar told us in an email, “Lewis Freeman may have been considered ‘Miami’s go-to forensic accountant’ but he was not a very bright guy. He simply took old money from his client’s trust accounts and replenished it with new money. As a forensic accountant, he should have known that ultimately such Ponzi schemes end up collapsing over time.”

Despite this, Freeman was able to carry on the scheme for approximately a decade, swindling up to 250 victims.

Wondering what this latest development meant in terms of fraud involving forensic accountants, Sam told us, “Forensic accountants turned white collar criminals present a real challenge for law enforcement, since they (excluding Lewis Freeman) are far more sophisticated in their knowledge of anti-fraud measures and are more innovative in exploiting weaknesses in internal controls than the common white collar criminal.”

And don’t worry, they’re out there, “Freeman is probably not the only forensic accountant turned Ponzi schemer out there. The smarter and more sophisticated one’s have not been caught yet,” Sam said. Got it. Suspect everyone.

We first mentioned Lewis Freeman last fall when his firm was under investigation by the FBI and that his firm briefly served as the Chief Restructuring Officer for the Palm Beach Funds that were part of the Tom Petters orgy of fraud.

The bright side is we can’t foresee any scenario where the image of accountants gets worse.

Miami’s ‘go-to’ forensic accountant pleads not guilty to fraud [Miami Herald]

(UPDATE) Fooling Auditors Is So Easy, a Caveman Could Do It

Thumbnail image for sachdeva_sue.jpgIn the spirit of O.J. Simpson, Tracy Coenen explains today, that if Sue Sachdeva stole $31 million and spent most of it on some high-end threads and then sold the crap she didn’t want, it would’ve been a snap.
We’re not talking Enron type stuff here, just making off with cash:

All it takes are three steps to make this fraud nearly undetectable in a company in which the other members of the executive team aren’t paying attention. (And don’t worry, dear readers, that I may be giving away any secrets to committing fraud and covering it up. Any serious fraudster already knows these three things.)
1. Keep the fraud off the balance sheet.
2. Keep all transactions below the scope of testing by the auditors.
3. Don’t commit fraud during the last month of the fiscal year and the first month of the following fiscal year.
Can it really be this simple?


Here’s the quick and dirty:
Point 1 – Tracy notes that 80% of audit procedures focus on the balance sheet so if Suze was slamming all the bogus transactions amongst 4 or 5 income statement expense lines, no one would get wise to it.
Point 2If she did it, Suze probably knew what GT’s scope was (it’s supposed to be super-secret). She could plan the amount of her transactions to fall under this scope every time.
Point 3 – Auditors probably spent most of their time looking at bank statements for the last month of the fiscal year and the first month of the subsequent fiscal year. The rest of them don’t get much attention.
So there you have it. Throw in the incestuous management team, auditors that may be trying to get on each other and you’ve got a slam dunk.
UPDATE 7:38 pm: We got to wondering if Tracy’s statement “Any serious fraudster already knows these three things” were true, so we asked one. Crazy Eddie CFO, Sam Antar indulged us:

[Tracy] is correct. The fraudster always has the initiative because they are judgment oriented in their approach to crime, while auditors are process oriented in their approach to audits. In other words, fraudsters know how to think out of the box to solve problems and achieve their goals, while auditors rely too much on process and procedure to accomplish their missions. In the criminal’s world, judgment is more powerful than process.

We’ll leave it there (that’s right CNN).
Koss Corp.: Commit the fraud and cover it up [Fraud Files Blog]

Sam Antar Wants You to Think Like a Crook

Sam Antar.jpgIn early December, the JDA gave us a little taste of how the mind of a crook works when she interviewed Sam Antar, the former CFO of Crazy Eddie’s.
We caught up with Sam again recently and in case you had decided that he had redeemed himself by speaking to universities, government agencies, and businesses telling those people how to detect fraud, Sam would take issue with that.
“I’m the same crook that I was when I was the CFO of Crazy Eddie’s. I haven’t changed. I got caught,” Sam told us. Sam doesn’t believe in redemption but he will tell you that he’s reformed, “A criminal is like an addict. You’re either in recovery or you’re not.”
In addition to his feelings on his past criminal behavior, Sam has strong opinions about the audit profession and how the current accounting curriculum does not adequately prepare young auditors for the masterminds they’re up against. “To catch a criminal, you’ve got to think like a criminal.”


Sam would never suggest that you all take a turn at white collar crime in order to become better auditors. That would disappoint your parents.
So what are his ideas? Here’s a few things to get you started:
• Sam believes that the current curriculum should be expanded to include criminology, criminal psychology, forensic accounting, and courses that focus on internal controls.
• With this expanded curriculum, an advanced degree program should be implemented for those students that wish to become CPAs.
• In addition, Sam believes that the CPA exam should be expanded to include a section dedicated to fraud.
We did some looking around and found that two schools: Carlow University in Pittsburgh and Franklin University in Columbus, OH both offer undergraduate degrees in Forensic Accounting and that two more: St. Thomas University in Florida and University of Charleston in South Carolina offer graduate degrees.
As long as white collar fraud remains front page news, there will be people asking “where were the auditors?” Right or wrong, that is the reality of the situation. You can fight it tooth and nail but ultimately the market will demand more forensic audits for high risk clients. Even if the odds of you finding a single fraudulent transaction in your entire career is nil, shouldn’t you be prepared for that chance?
Sam thinks so. And he convinced (or maybe just conned?) us. You still got it, Sam.
Photo by Buck Ennis for Crain’s New York and Investment News.