IT IS NOT SURPRISING that, in the public’s perception and indeed sometimes that of accountants themselves, the scope of the forensic accountancy profession is usually limited to that of fraud investigation. After all, that is the focus of most journalistic coverage provided by both national and specialist press. However, as with most professions, the scope of expertise is much broader.
The main two strap lines used by accountancy firms for forensic accountancy services are “investigation” and “dispute resolution”.
These encompass a wide range of disciplines but most of the work involves the quantification of damages – evaluating what a business or person has lost; after all, legal action is not only taken to champion a principle or human cause but seek compensation too.
For the forensic accountant, this quantification process can encompass a broad range of circumstances. In the corporate world, losses can arise from a breach of contract, an intellectual property dispute, a natural disaster or professional negligence (and not just relating to accountants), a regulatory dispute or a compulsory purchase order. In the personal world, think of divorce actions and other civil disputes arising from motor and aviation accidents, industrial disease and medical malpractice. Indeed, litigation can reveal many of the unfortunate aspects of commerce and personal living.
Although all the above focus on the same aspect – evaluating the cause and effect of a particular incident – it is the variety of work that seems to appeal most to forensic accountants, not just in terms of the subject matter of an action, but the diversity arising from geography and industry sector. Our work in the forensic sector has taken our practitioners to every continent worldwide – working on such high profile events as evaluating damages from signature events like the first Gulf War, the World Trade Centre attacks, the Prague floods, the Indian tsunami, the Chilean earthquake and the Crossrail project.
As with lawyers, for whom the application of law will provide the framework, but is not always central to a case, so for forensic accountants – pure accounting is not always immediately required. In evaluating any dispute, the knowledge of accounting systems and what records would be available to analyse are important, but also the ability to undertake financial analysis thereon.
The traditional route to becoming a forensic accountant has historically been via audit. Indeed, for many it remains so. But the role and mindset of an auditor is very different and it can take some adjusting to. One analogy to explain the difference is to consider the presentation of a common accounting record, say an invoice. The accountant or auditor may verify by checking it to a ledger or that the VAT has been correctly applied, whereas the forensic accountant will ask why was it issued in the first place.
Nowadays, boutique forensic accounting firms will offer training contracts. After a three year training contract a student becomes a qualified accountant, but one that has three years forensic experience – a valuable person for any firm.
Can the skills be taught? To some extent they can, but it is largely an intuitive process – a mindset. Inevitably, the best training is to work on an assignment – there is no substitute. But that is not to say that the classroom cannot be a useful tool to establish, for example, the basic framework of calculations, the legal context and expert procedure. There are various expert organisations (such as the Academy of Experts and the Expert Witness Institute) that provide training courses for expert skills, but it is only recently that the ICAEW has tried to bridge the gap between experience and the textbook in promoting a specific forensic accounting accreditation – it remains to be seen how successful that process will be.
Ultimately, it is the variety and range of experience that makes forensic accounting appealing – not only the type of dispute but the industry and geographic location in which it arises.
James Stanbury is a partner at forensic accounting consultancy RGL Forensics
So what qualities does a firm look for in a budding forensic accountant? Although accounting skills are clearly important, what can prove to be more important is:
• curiosity (not only being interested in diversity but also not giving up until you have the answer you need);
• lateral thinking (not only in the approach to a calculation but in evaluating the cause and effect of a particular incident);
• problem-solving (as most assignments are a problem to a client and need solving);
• commercial awareness (to understand the financial context in which the work is done);
• presentational skills (whether they are demonstrated in written reports or in oral hearings in court as an expert witness).
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