Press Room
1 February | 2007
Forensic Accounting: Exponential Growth
By Jeff Stimpson

"Fraud is a growth industry, unfortunately. There's never been a shortage of bad people doing bad things," says Andrew Bernstein, former director of forensic practices at Big Four firms and director of forensic and valuation services with Miami-based Berkowitz Dick Pollack & Brant. "Regulatory agencies have been more active than ever in the last five years identifying and rooting out not only the fraudsters, but identifying the potential for fraud to exist."

Though "forensic" is a broad term, according to Michael DiGiacomo, director of consulting at Grassi & Co., Lake Success, N.Y., different engagements that would require a forensic accountant include investigating fraud, investigating the books and records relating to a shareholder or partnership dispute, or preparing damage analysis and testifying before an arbitrator, mediator, or court. "Our engagements are much more focused on specific allegations or events, compared with an auditor offering an opinion on a company's financial statements," he adds.

"Our role is to verify, corroborate, or disprove financial allegations. The forensic accountant must understand the transaction trail, and know how to identify sources of financial and other information to evaluate conflicting information sources," says Paul McPherson Brunner, CEO of Denver-based RGL - Forensic Accountants & Consultants.

"Forensic accountants untangle events and details that are tangled by design," says partner Barry Mukamal of the forensic accounting practice at Miami-based Rachlin Cohen & Holtz. Adds Bernstein, "You're trying to piece together a puzzle where you don't have the picture on the box to know what it's going to look like. The facts are not settled, and actually it's the facts that are in dispute."

"I liken it to 'CSI' or 'Law and Order,'" says Terry McCarthy, audit partner with Green & Seifter, in Syracuse, N.Y., "but instead of figuring out the trajectory of a bullet, you're trying to find out how a transaction occurred."

Runs the Gamut
Many firms maintain specialist forensic accounting departments. Within these groups, there may be further sub-specializations such as insurance and personal injury claims, fraud, construction, or other types of audits. Many CPAs in this field are Certified Fraud Examiners (CFEs), a designation from the Association of Certified Fraud Examiners that includes, other requirements, passing a four-part exam, and maintaining CPE on anti-fraud techniques.

Says Martin Leventhal, partner at New York-based Rosen Seymour Shapss Martin & Company, "The increasing awareness of a new type of auditor has stimulated inquires to what we do and how we do it, and led to more engagements."

"We do anything from a fire department that's had $2,000 stolen from their treasury to several million-dollar engagements," McCarthy says, adding that the firm frequently gets referrals from trustees of entities that "went bankrupt pretty quickly." Businesspeople are also becoming generally more aware of fraud, he adds, and less shy about whistle-blowing.

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