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Litigation, Valuation & Dispute Resolution

New Program Helps CPAs Detect Fraud

Bernadette Starzee 05.01.2014 | Long Island Business News

The American Institute of Certified Public Accountants launched a new mentoring program in March, as many accounting firms look to grow their forensic practices.

The Certified in Financial Forensics Mentor Program will pair protégés – professional accountants interested in developing skills and business practices in forensic accounting – with members with forensic experience.

The AICPA launched its Certified in Financial Forensics credential about six years ago.

“We felt the CFF credential has been in existence long enough that we now have enough experienced mentors among our membership,” said Eddy Parker, a senior technical manager for the AICPA, in explaining the timing of the program’s launch.

Another factor is the steady growth in forensic work. Last year, research firm IBISWorld projected that revenue for the forensic accounting services industry would grow at an average annual rate of 6.7 percent through 2018.

Continued weakness in the economy makes thievery more tempting, said Barry Pulchin, a partner and director of forensic accounting and valuation services for Prager Metis CPAs in Plainview.

“You have brother stealing from brother; people stealing form the public in securities fraud; and people perpetrating many types of intricate financial schemes,” he said, pointing to the necessity of initiatives such as the AICPA’s mentoring program.

“Those of us with years of experience know how complex and intricate records can be, and the process of doing forensic work is getting harder and harder,” he said, noting this trend is coupled with an influx of accountants looking to gain forensic expertise.

“More people are entering the field because of the project-based engagements, which command a higher billable rate,” he said.

Forensic work is an area of concentration for Mineola accounting firm Cohen Greve & Co.

“Audits are becoming a commodity, and forensic accounting is a great avenue for firms to get into for the cash flow,” said managing partner Timothy Sherman. “It’s a business line that allows accountants to apply their audit knowledge coupled with forensic training.”

An added bonus: Forensic work is particularly appealing to young people, helping firms with forensic practices attract young talent, Sherman said

But forensic work requires extensive training and well-developed skills.

“Many people trying to enter the field are falling flat on their face – forensic accounting goes beyond auditing and tracing numbers to looking for what you don’t see,” Pulchin said.

That’s where the AICPA hopes its mentoring program will help. It’s modeled after a six-year-old mentoring program tied to the organization’s Accredited in Business Valuation certification.

“Some of the relationships in the ABV program have lasted the full six years and developed into business relationships,” Parker said.

Mentors are paired with protégés in different geographic regions, “so you’re not training the competition,” he said.

Mentors dispense practice management advice and counsel up-and-coming accountants on the tools they need to succeed in their careers.

“We leave it up to the protégé to define the relationship,” Parker added. “But we ask mentors to have at least quarterly calls with the protégé.”

As Pulchin noted, it’s part of a CPA’s code of professional ethics to guide and mentor newcomers to the profession.

“Giving back to the profession” is pretty much what’s in it for the mentors, Parker concurred, adding, “We try to look for people who are passionate about working with the younger accountants.”

Compared to performing an audit, investigating a fraud is an entirely different animal.

“With audit work, you issue an opinion, whereas the objective of the fraud examination is to determine if fraud has occurred and who’s responsible for it,” said Paul Ribaudo, a principal at Berdon in Jericho. “For an audit, you work with a certain level of professional skepticism, but with fraud, you’re looking for proof and attempting to collect evidence to either refute or support an allegation.”

For its forensic team, Marcum in Melville looks for “people who can think and talk on their feet, and who are skeptical and analytical,” said James Ashe, partner-in-charge of the national advisory services division, which includes the forensics practice.

“It’s a totally different skill set than you get from a traditional accountant,” he said. “You are dealing with parties whose actions are minimally ethically or morally wrong and potentially illegal. You have to understand people’s behaviors and be able to interpret/react to what you observe.”

This includes body language, tonality of voice and the chosen phrasing, Ashe added.

“You then have to be able to communicate to other people what you’ve perceived,” he said.

In addition to fraud examinations, forensic work includes engagements related to shareholder and merger-and-acquisition disputes, divorces and other matters that may come before a judge or mediator, according to Parker.

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