Forensic Accounting: Deterrence Tool

Two weeks ago, our office had a “Bring Your Child to Work day.” As part of the program, I spoke to a dozen young people (ages 8 to 17) about what accounting is and what accountants do.

Some of the youngsters asked me about forensic accounting.They heard about it and thought it could be a glamorous undertaking. One also expressed an interest in law enforcement.

Forensic accounting is exciting and a fine path for any person contemplating it. Law enforcement is a noble calling and is also something that should be encouraged. The two can be combined as the FBI and other law enforcement agencies have many CPAs in their ranks.

I am certified to do forensic investigations as are many others at WS+B. Also, I presented a speech last year to accountants wanting to add this to their services, so I established my credentials with them pretty well. Further, I told them they could call on me anytime to talk about future plans, but I enacted a price. I told them if they wanted to reach out to me again they had to find three newspaper articles about an embezzlement, fraud or gross error.

That being said, last Tuesday there were three articles in the New York Times about glaring frauds or stupid errors. It seems Bank of America made a $4 Billion error overstating their capital; another was about contractors that were sentenced to 20 years in jail for fixing time records with the City of NY; and the third was the federal government looking to bring in new people to run the health care websites because of the immobilized websites last fall.

From my way of thinking all of these could have been avoided with proper procedures, controls, reporting and oversight, and with someone in charge of this. When no one cares, cracks are opened and possibly otherwise honest people do things they shouldn’t or people just get sloppy and do not pay attention to what they are supposed to be accomplishing.

When many misstatements are uncovered, forensic accountants become the “tabulators” of the enormity of the system failures. I suggest that forensic accountants be called in early on to create the systems that will make it extremely difficult to break through or that will deliver a message of the certainty of disclosure once a line is crossed. Deterrence provides strong safeguards.

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