Forensic accounting is hot for a number of reasons. The most obvious is that as a specialty it has become very lucrative. So much so, I know of firms that have stopped during traditional tax and accounting work. Also, accounting and auditing standards are increasingly delineating new obligations with regard to practitioners’ duty to protect against fraud.
Firms can institute processes and procedures to discover fraud and study lists of best practices, but there is only one real way to learn, and that is by actual experience. Personally, I like to learn from other people’s experiences first so I know basically what I should be watching out for.
Primers on forensic accounting are good, but they generally talk in the theoretical sense. That’s why I like a new book entitled, Fraud Casebook: Lessons from the Bad Side of Business (published by John Wiley & Sons). It describes 62 different fraudulent schemes directly dealt with by members of the Association of Certified Fraud Examiners (ACFE), and is edited by Joseph Wells, ACFE founder and chair (the 63rd individual in the trenches).
With each of the 62, you get a unique view of the steps that were followed by the forensic accountants as asset misappropriation, corruption, financial statement irregularities, and other frauds were discovered. Just as important is that each forensic accountant details with Wells' help the lessons they learned and what preemptive steps could have been taken to preclude that fraud from occurring. You get a real insider’s view. In reading a few, I was amazed not so much at the fraud being committed but at how third parties, such as investment bankers and employees at the company where the fraud was being committed, actually furthered the fraud unwittingly, purposely, or by looking the other way because of fear of losing their job or a financial benefit.
For example, in one situation, the forensic accountant reports, “The demeanor of the staff was unsophisticated, yet as compared to all other banks, this institution’s published financial information would strongly support an argument that its employees were financial geniuses.”
The real benefit of the book is you get to feel exactly what it is like in the forensic accounting trenches, which is where most practitioners are going to be working.
