Forensic Accounting and Forensic Technology in Professional Services
Market Overview
The forensic market has seen a great deal of activity in recent years and this is set to continue. The growth of regulatory compliance requirements and the increase in fraud has seen a related growth in demand for forensic accountants and forensic technologists both within and outside the profession. The creation of the Specialist Organised Crime Agency in April 2006 has also intensified the spotlight on forensic and anti-fraud matters.
Both specialist and generalist accounting firms are keeping a keen eye on the revenue growth generated by forensic work. From the 'Big 4', and the Top 20 to the specialist boutiques, forensic groups have cited an intention to at most triple their headcount by 2008. Some of the biggest non-conflict players involved in risk and commercial intelligence are also expanding their forensic arms. This demand has had an inflationary impact on salary demands.
Most demand is at the newly qualified level. Top academic qualifications are key. For the more established forensic boutiques, nothing less than a 1st class degree will suffice. For the Big 4, a 2.1 is the accepted minimum. Preferred candidates will be ACA qualified, with an audit or relevant corporate recovery background (i.e. with experience of asset tracing). Candidates to look out for are those with analytical prowess, an innately inquisitive nature, and a robust personality. Candidates fluent in more than one language are now preferred. As most UK forensic boutiques intend to build market share across West and Eastern Europe, they will pay a premium for such candidates.
Many of the major forensic players are also bolstering their accounting services with non-accounting forensic or investigative services. Candidates for these roles can come from a skill specific background (quants analysis, economics, journalism) or have an industry specialism such as oil & gas, pharmaceuticals or construction. New specialisms such as crime in financial services are creating demand for non-accountants with a banking compliance and risk experience.
There has been a significant increase in demand for IT forensic specialists at both junior and experienced levels. Due to the ever changing and highly specialist nature of this work, Michael Page is registering candidates from a global pool including Australia, Asia and in particular South Africa, which is considered to be some years ahead of the UK in the application of forensic technology in regulatory and criminal investigations.
What does Forensic Accounting within a public practice involve?
The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting. It can be summarised as quantifying losses arising from an incident, such as floods, fires, motor accidents, thefts and earthquakes.
Forensic Accounting therefore ranges from helping investigate fraud allegations to assessing the financial impact of a disaster. The two main areas of work are litigation support and insurance.
Forensic Accountants are trained to look beyond the numbers and deal with the business reality of the situation.
What does a Forensic Accountant do?
A Forensic Accountant is often retained to analyse, interpret, summarise and present complex financial and business-related issues in a manner that is both understandable and properly supported.
Forensic Accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organisations.
A Forensic Accountant is often involved in the following:
- Investigating and analysing financial evidence
- Developing computerised applications to assist in the analysis and presentation of financial evidence
- Communicating their findings in the form of reports, exhibits and collections of documents
- Assisting in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence
In order to properly perform these services a Forensic Accountant must be familiar with legal concepts and procedures. In addition, a Forensic Accountant must be able to identify substance over form when dealing with an issue.
How can a Forensic Accountant be of assistance?
A Forensic Accountant can be of assistance in various ways, including:
Investigative Accounting
- Review of the factual situation and provision of suggestions regarding possible courses of action
- Assistance with the protection and recovery of assets
- Co-ordination of other experts, including: Private Investigators, Forensic Document Examiners, Consulting Engineers
- Assistance with the recovery of assets by way of civil action or criminal prosecution
Litigation Support
- Assistance in obtaining documentation necessary to support or refute a claim
- Review of the relevant documentation to form an initial assessment of the case and identify areas of loss
- Assistance with Examination for Discovery including the formulation of questions to be asked regarding the financial evidence
- Attendance at the Examination for Discovery to review the testimony, assist with understanding the financial issues and to formulate additional questions to be asked
- Review of the opposing expert's damages report and reporting on both the strengths and weaknesses of the positions taken
- Assistance with settlement discussions and negotiations
- Attendance at trial to hear the testimony of the opposing expert and to provide assistance with cross-examination
What types of assignments does a Forensic Accountant perform?
Detailed below are various areas in which a Forensic Accountant will often become involved:
- Criminal Investigations
- Shareholders' and Partnership Disputes
- Personal Injury Claims / Motor Vehicle Accidents
- Business Interruption / Other Types of Insurance Claims
- Business / Employee Fraud Investigations
- Matrimonial Disputes
- Business Economic Losses
- Professional Negligence
- Mediation and Arbitration
What characteristics should a Forensic Accountant possess?
A capable Forensic Accountant should have the following characteristics:
- Curiosity
- Persistence
- creativity
- Discretion
- Well organised
- Confidence
- Sound professional judgement
A Forensic Accountant must be open to consider all alternatives, scrutinise the fine details and at the same time see the big picture. In addition, a Forensic Accountant must be able to listen effectively and communicate clearly and concisely.
What does Forensic Technology within a public practice involve?
Forensic technology or computer forensics was essentially concerned with the recovery and rebuilding of computer records and data as evidence in legal proceedings. However, in the past 6 years its significance to other areas of business has increased. Computer forensics is now a skill increasingly sought across the Professional Services sector in support of insolvency and forensic accounting investigations and corporate intelligence.
Data Protection and Management
- Data-recovery services to help access information that may have been lost due to hardware or software malfunction
- Preventative analysis of systems to detect the existence of network intrusions or fraudulent transactions. For instance, unwanted computer use can sometimes be detected by analysing unusual patterns or repeat transactions
- Data storage and management advice, to ensure information can still be recovered in years to come, despite changes in technology
- Protection of computer systems to minimise the possibility of attack from viruses and hackers. In many instances, organisations do not regularly update their security systems
- Transform paper documents into an electronic format that can be searched quickly and easily. This may have significant cost benefits in circumstances whether there are volumes of information that are required to be accessed or searched frequently
Investigation Services
- Breaches of intellectual property rights, such as copyright and trademark infringement and the copying of customer lists, research and development work
- Employee and management frauds
- Improper use of IT resources by employees and breaches of workplace IT policy
- Creation of fraudulent documentation, including the theft and alteration of documents using desktop publishing technology to create a fictitious identity so as to gain credit, open accounts, gain access to secured facilities and so on
- Identity theft and the assuming of the identity of another person and to undertake business transactions in another person's name
- Traces for the source of threats sent electronically
- Surveillance and recording of computer use, keystroke-by-keystroke. This may be of particular use with respect to staff that have received notice of termination.
Employment-related services
Reviewing employees' use of internet and other online activities for:
- Distribution of offensive material and other intrusive communications
- Harassment and discrimination
- non-work related practices, such as conducting a private business
- unauthorised disclosure of confidential information
- violation of security procedures or policies
- falsifying documents
- breach of privacy
- identify breaches of occupational health and safety laws
- Electronic tampering and attempts made by employees to access protected areas
Fraud
Companies suspecting or knowing a fraud has been committed may wish to engage a forensic investigator to:
- Keep the incident internal and confidential and accordingly will not engage the police or solicitors
- To determine the extent or impact of the act committed
- To determine whether there is sufficient evidence to justify prosecution, and if not, to withdraw whilst keeping it out of the public domain
Insolvency-related services:
- Imaging relevant computers of a company day-one, in order to obtain books and records of a company that may otherwise be withheld
- Review activities of a director in relation to insolvent trading activities
- Detect voidable transactions made by a company, its directors or other company officers
- Identify preferential payments by reviewing transactions made by accounts payable
- Protect the IT functions of a company from manipulation, especially when trading on the business
- Conduct complex searches on a computer system to minimise the time spent on looking through volumes of records
- Identify assets of a company
A Computer Forensics specialist should be able to display the following attributes:
- Knowledge about the major aspects of computer forensics software and tools and the procedures required to extract, preserve and record evidence
- An appreciation of the importance of keeping up with developments and techniques in computer forensics
- Experience in analysing computer evidence and knowledge of how and why the software processes the data
- Formal training in computer forensics, membership to professional forensics bodies and peer group presentation, seminar and symposia experience
- Experience in giving evidence in Court as an expert witness
- High level of investigative 'policing' skills, not specifically related to technical issues
- Ability to interpret, and present the pertinent details of an enquiry in a clear, meaningful and convincing manner
- Excellent report writing and communication skills. Ability to be convincing and credible in explaining technical issues in layman's terms
For further information about Forensic Accounting & Investigations and the services we offer in this sector, please contact Rachael Bunton on 020 7269 2306 or email rachaelbunton@michaelpage.com
