Meet the Forensic Accountant: The Crime-Fighting Superhero Who Sniffs Out Fraud and Occupational Abuse.

While accountants are traditionally seen as more Clark Kent than Superman, a new image is emerging thanks to the crime-fighting branch of the industry: forensic accountants. Part accountant, part investigator and all business, they’re the people you call when the numbers just don’t add up.

 
Forensic accountants work on law-related financial matters. One of the industry’s fastest growing specialties, forensic accounting is a broad category that encompasses many types of malfeasance. These brilliant, highly skilled and impeccably credentialed experts ferret out clues and come up with damning evidence with a persistence white-collar criminals dread.
 
“The forensic accountant determines the why, who, what, where and how someone misappropriated assets or manipulated financial statements,” says Bob Taylor, managing partner for the Cincinnati office of Grant Thornton LLP.
It’s the sexy side of accounting — dealing with everything from employees who use company funds for online gambling to husbands hiding assets from soon-to-be ex-wives.

Micky Minnich, a Cincinnati-based computer forensic examiner with BKD LLP’s rapidly growing Forensics and Dispute Consulting Division, who also runs the firm’s computer forensics lab, says it’s an exciting way to make a living. “I’ll never get bored because every case is something different,” she says. “I love my job.”

Minnich is a self-described “computer geek” who investigates cases across the country. She is expert at uncovering electronic evidence.

“You do get a real jaded perspective,” she says. “You dig through enough people’s computers, and you really get to see their dirty little secrets.”

Although there may be no typical day — or criminal — in the life of a forensic accountant, almost every case falls into one of the four basic categories established by BKD’s Forensics and Dispute Consulting division: fraud prevention and investigations, business valuations, computer forensics and electronic data discovery, and litigation support, expert testimony and consultation.

Whether you own the corner deli or Enron, if you have one employee or 1,000, you’re at risk for fraud and occupational abuse.
Minnich worked on a local embezzlement case in which a trusted bookkeeper stole $6 million from a manufacturing firm. The employee bought some big-ticket recreational items for herself and her husband using company funds. She stole money to pay her daycare, utility and credit card bills. When the company hired BKD to investigate, Minnich sifted through emails and compared signatures on checks. The fraud was obvious and the bookkeeper was in big trouble.

Minnich’s colleague, John Mallery, a managing consultant in the BKD Forensics and Dispute Consulting Division, speaks across the country on computer forensics and fraud issues. “It never surprises me what people can do,” he says. “I’m often more surprised when we don’t find anything.”

And even though employee and management dishonesty may be as old as business itself, the reality is that in today’s economy it’s a multi-billion dollar problem.

According to the Association of Certified Fraud Examiners (ACFE), a member-based global association dedicated to providing anti-fraud education and training, the typical business loses five percent of its revenue to occupational fraud. And those numbers could be deceptively low. Thanks to unreported crimes — the cases in which the victim company fires the thief but doesn’t press charges to avoid bad publicity or simply never notices the money is gone — the true dollar amount lost is impossible to calculate. But in a 2006 study by the ACFE involving approximately 1,000 businesses, the median loss caused by occupational fraud and abuse was $159,000. With nearly 25 percent of the cases reporting losses of $1 million or more, there is no shortage of work for good fraud examiners and forensic accountants.  

CRIME-FIGHTING NUMBER CRUNCHERS

But exactly who are they, these superhero number crunchers? Like any good crime fighter, their identity is multifaceted.
“An effective forensic accountant must be very bright, skeptical, thorough and one who does not accept the first answer,” Taylor says. “He or she likes to ask questions and is able to look behind the numbers. Forensic accountants do not think linear; they think outside the box.”

It is a job that definitely requires accounting expertise, but even more in addition. These professionals need credibility, a squeaky clean background, curiosity, exceptional interviewing, listening and communication skills, confidence, sound professional judgment, technological savvy, and always, a cool head.

CEOs tempted to buy a convertible with company funds, business owners fudging the ledgers to lure in unsuspecting buyers, bookkeepers wondering if a couple thousand dollars disappearing from the budget and into their wallets would ever be missed: be warned. This is a new breed of super-accountant, and she’s armed with a passion for justice, the best high-tech tools, and a nose for inconsistencies.
“It’s not normal, everyday debits and credits, that’s for sure,” says Joe Rippe, a founding partner of Cincinnati’s Rippe & Kingston and an expert in business valuations and mergers and acquisitions.

Today, the right credentials are required for any branch of forensic accounting. Some of the best fraud examiners are certified by the ACFE, which has about 45,000 members. According to the organization’s web site, CFEs must meet stringent academic, professional and character requirements; comply with the ACFE Code of Professional Ethics; and build their skills through ongoing professional education.

Rippe, who in addition to being a CPA is an ABV (Accredited in Business Valuation), a CVA (Certified Valuation Analyst) and a CM & AA (Certified Merger and Acquisition Advisor), says he has seen a shift in the legal system over the past 15 years. Judges and lawyers have a clearer understanding of which accountants should be given expert witness status. Rippe suggests the typical CPA is no longer automatically qualified.

“Today if you testify on valuation issues and you don’t have advanced valuation credentials, the opposition is really going to challenge you on whether or not you are really qualified as a true expert,” he states.

NOT A JOB FOR THE FAINTHEARTED

Even with strong experience and impeccable credentials, those who testify in court face tough scrutiny. “You essentially have to be perfect,” Mallery says.

Mallery is used to in-depth questions about his background and credentials from opposing counsel. He’s been called stupid and told he doesn’t know what he is talking about, all in an attempt to get his testimony thrown out. But so far he says his record is perfect — he has never been removed from a case. “You definitely need to have the personality where you can handle it.”

This is not a career for the flawed — or the fainthearted. “You’re not doing battle, but you have to be constantly prepared,” Mallery says. “That’s the toughest part of your job.”

Rippe agrees “You can bet the other side is going to do whatever they can to impair or discredit your testimony.”

And that is why these accountants and fraud examiners fiercely guard their integrity. Rippe was hired recently by a law firm to testify about a business valuation. He asked for standard valuation documents such as tax returns and financial statements. He also requested a site visit. Their lawyer flatly refused. “You don’t understand,” he told Rippe. “I’m going to give you a value and you’re going to testify that it’s accurate.”

Rippe dropped out of the case on the spot. Not because he was sure the lawyer was wrong in his valuation, but there was no way he was willing to testify about anything he hadn’t independently established. “Credibility is everything,” he says.
 
A SUPERHERO EDUCATION

So where do these super accountants come from?

Many, like BKD partner Steve Farrell, have taken substantial accounting experience, combined with a passion for litigation and business valuations, and turned it into a new kind of career.

“What I love the most about this field is that each case is different and interesting,” Farrell says. “Although I did enjoy working with clients to solve tax or accounting problems, I’m not doing the same things over and over again with the same clients, year after year. It is very rewarding to assist clients with winning appropriate settlements or defending damage claims.”

Universities across the country are scrambling to educate their accounting students about fraud and forensic accounting.

“Formal education is certainly helpful, and I’m glad the schools are now providing this type of training,” Farrell says. “However, on-the-job training is important to get really good at providing this service to clients.”

Bob Kramer, adjunct professor of accounting, teaches a fraud examination course at both the University of Cincinnati and Northern Kentucky University. He brings to the classroom a background that sounds more D.C. than Cincinnati. Retired after 36-plus years in accounting and auditing, he has worked for the Department of Justice, the Department of Treasury, the IRS, the Department of Defense and the ATF. He has impeccable credentials, being a CPA, CFE and a Forensic CPA. This spring, he is introducing a forensic accounting course at UC.

“I think fraud is epidemic. People need this kind of training to recognize it,” he says.

Ashley Kramer, 22, a senior accounting/finance major at UC, says the class has taught her a great deal about the scope and magnitude of fraud. “A lot of it has been an eye opener,” she says.

Professor Bob Kramer says the courses are designed to cover all the ways people can take financial advantage of their employers — or at least as many as imaginable.

“Every time I think I’ve seen it all, I run into a new way to steal,” he says. Kramer tells his students, “I don’t want to make you jaded, but think like a crook to catch a crook. How could somebody beat the system?”

In many ways, it’s an appealing question for young accounting students. In the wake of scandals such as Enron and Worldcom, those who choose to dedicate their lives to numbers find an irresistible tug toward this challenging and financially rewarding profession.

“Forensic accounting is a relatively new field,” Kramer says. “As positions in other areas of the accounting profession such as taxation and cost accounting become more scarce, job opportunities in this field are expanding.”

Jason Robbins, 28, is currently pursuing his CPA at UC. He said the fraud examination course has captured his attention. “I’ve always considered myself to be a critical thinker and a problem solver,” Robbins says. “I think I’d like to use my future accounting skills to catch criminals.”

And jobs shouldn’t be hard to come by.

“The opportunity, pressure or incentive to commit fraud is on the rise,” Grant Thornton’s Taylor says. “And as technology advances, fraud is becoming easier to commit. Auditors cannot catch everything with their programs, and unscrupulous people are getting bolder.”

According to Taylor, Grant Thornton established its forensic accounting unit six years ago. Though the firm has forensic accountants across the Midwest, it hasn’t yet brought one full-time to Cincinnati. But that may be about to change.

“We believe having a local office presence in Cincinnati is important to the firm,” he said. “Cincinnati, sad to say, is not free of people taking advantage of others.”