Edmond Martin, chief investigator and principal of Texas-based forensic accounting firm Sage Investigations, sees forensic professionals as problem-solvers, public servants and observation masters who are regularly called upon for consultation or expert testimony. From business owners stealing funds from one another to CFOs taking advantage of their company's weak financial systems, Martin has seen it all in his work supporting attorneys and businesses for over two decades in examining financial records to find out where the "big money" went.
It is common for forensic accountants to have a background with federal agencies such as the IRS or the FBI, and Martin himself worked as an IRS special agent to investigate white-collar crimes such as Ponzi schemes, income tax violations and money laundering. From his experience, he learned there are a lot of instances where there's no direct evidence of what's being done, and it's the forensic accountant's responsibility to remain skeptical, even more than traditional auditors or CPAs.
"Management generally provides CPAs with access to financial statements, books and records for them to examine cash balances and other factors," explained Martin — but fraud isn't always visible in the books. "My colleague just worked on a case where they had barrels of oil containers, but most of the containers were water. The CPAs missed it, and it's our role to dig deeper."
Being a forensic accountant sometimes means looking for discrepancies between a defendant's deposition and what was observed in their accounting records, which demands strong writing and analytical abilities. Martin described them as having blinders on, because they limit themselves to strict rules and considerations, such as who is impacted by a case.
Each state has a regulating body for forensic accountants. While private investigators such as Martin are mostly limited to their state of licensure, forensic accountants can operate anywhere in the world. Founded in 1989, Sage Investigations has been involved in cases all around the United States, from California to New Jersey, and has been using contractors to conduct private investigations. Most of them are retired IRS specialists or controllers, which allows the firm to charge its clients less while entrusting their cases to knowledgeable hands.
"It's an exciting field that requires multiple skills and intense training, which is why I like working with people who have handled this type of case before," said Martin. "It allows us to have a good relationship with our partners because they bring a lot of value to our company, and carving a little niche as a private investigator/forensic accountant causes clients to refer us to others because they know we have the expertise."
The forensic accounting field has grown tremendously since Martin first joined it, and there are currently 80,000 forensic accountants around the world. He said that organizations like the Association of Certified Fraud Examiners are a great way to reach out to experts for assistance. When Joe Wells founded the association in 1988, Martin immediately understood that his friend had created something valuable and got the CFE certification himself, because he thought it brought the necessary skills to adequately support clients.
Decades later, Martin gets calls from all around the country, and the success of the firm allows him to offer a 20-minute free consultation for those who simply want to test the waters. Nothing is ever the same for a forensic accountant: They can examine multimillion-dollar companies, school districts and even cities, and they can help people who've been overcharged during the construction of their house or ripped off in a business partnership. While Martin said there is never a tedious moment in his line of work, there are some times when he wished it offered a little less excitement.
"Individuals violating their contract operating agreement and kicking out their investor? Pretty fun to investigate," said Martin. "But being deposed nine hours at a time? Not so much. So it's not for everybody, but with time you can begin to choose what you do, and we don't go to trial very often."
This is the latest installment in our "Riches in Niches" series covering accounting firms that are finding success in specific verticals. You can see other installments here:
