This guide is designed for individuals and businesses needing assistance:
Introduction
The accounting and finance world can be complex and overwhelming. When possible theft, embezzlement, or economic damages come into play, the complexity grows exponentially. Even seasoned accountants don’t have experience digging into the forensic side of the business.
Hovland Forensic & Financial is a Colorado-based certified forensic accounting firm serving businesses and attorneys throughout Colorado and nationwide.
The first reaction of most who are staring at possible loss from fraud is often to speak with an attorney. This is an important first step.
However, it is only one-half of the equation. An attorney will give legal advice, but for them to properly litigate a case they need independent financial data.
This is where the forensic accountant gets involved with the case.
Dealing with fraud or a financial dispute right now? A forensic investigation typically begins within 24–48 hours of engagement. A certified forensic accountant can start immediately to preserve evidence and protect your legal position. Schedule a free confidential consultation →
Forensic accounting is a specialty practice where accounting, auditing and investigative skills are used by an accountant. The forensic accountant provides accounting analysis suitable for use in legal proceedings and to quantify damages related to fraud and embezzlement. The forensic accountant also provides technical assistance in matters involving personal injury, lost wages, business disputes, lost profits, bankruptcy, and more.
Forensic accountants utilize accounting and auditing knowledge to provide litigation support and investigative fraud or embezzlement. Their expertise reviewing internal controls and auditing financial statements make them the ideal professional to investigate financial activities, whether in a business or between individuals. Certified Forensic Accountant (CRFAC) – Issued by the American Board of Forensic Accounting [link]
Certified Fraud Examiner (CFE) – Issued by the Association of Certified Fraud Examiners [link]
Certified in Financial Forensics (CFF) – Issued by the American Institute of Certified Public Accountants [link]
Master Analysist in Financial Forensics (MAFF) – Issued by the National Association of Certified Valuators and Analysts [link]
All of these designations require the accountant to have the financial expertise to investigate fraud.
The forensic accountant also develops experience with each case they investigate. The accountant will list out their experience in previous cases in their Curriculum Vitae (CV). This is the professional resume for a forensic accountant. It should be noted that the forensic accountant can only list out the cases that went to court. Many times cases will settle before court. When that happens, the forensic accountant can only generically talk about the case and cannot list it on their CV. Most forensic accountants will list out case studies on their website. While these cases will be written generically, they give an idea as to the types of cases the accountant has investigated that may not be on their CV. Finally, the forensic accountant also obtains additional experience through their required continuing education. With the forensic accounting designation comes required yearly classes. These classes help the accountant strengthen their current skills plus add new concepts in detection. 
Source: nacva.com/faa As noted in the above diagram, the investigation process has several steps. Keep this in mind when hiring a forensic accountant. 
Forensic accounting firms specialize in forensic accounting and litigation support. Most firms will conduct embezzlement investigation, and some will have a subset specialty in digital forensics. The firms can be astandalone forensic accounting firm, or a department within a larger public accounting practice. As with any profession if a firm specializes in forensic accounting, they will have more experience and knowledge versus a small public accounting practice that is dabbling in the profession.Regardless of the structure, verify the individuals performing the investigation are either certified in forensic accounting or fraud examinations.
After the conflict of interest has been cleared, the forensic accountant will send out an engagement letter. This letter will clarify what procedures the accountant will perform and the report to be issued.
It is important to note that the accountant will focus strictly on the perceived embezzlement. This is done so all parties are fully aware of what exactly is being completed.
This prevents any assumption on areas the accountant will examine. If additional fraud is discovered, the engagement letter will be amended to disclose the new procedures and tasks to be performed.
Forensic accounting rates in Colorado and nationwide typically range from $250 to $600+ per hour depending on the firm size, the credentials of the person actually doing the work, and the complexity of the engagement. Hovland Forensic & Financial bills a transparent flat rate of $250 per hour for all services with no retainer surprises.
| Case Type | Typical Total Cost |
|---|---|
| Simple embezzlement review (1 year, single account) | $2,500 to $5,000 |
| Mid-range fraud investigation (2 to 4 years, multiple accounts) | $5,000 to $15,000 |
| Complex multi-party litigation support | $15,000 and above |
| Expert witness rebuttal report | $2,500 to $7,500 |
| Deposition or trial testimony | $250/hour plus travel at actual cost |
For a full breakdown of what drives investigation costs and how to estimate your specific case, see our complete Forensic Audit Cost guide.
When analyzing the data, the accountant will utilize multiple tools and techniques. Common tools used range from data extraction software such as Idea to standard Microsoft Access database.
The main criteria in this analysis is the information needs to be in a usable electronic format. If the information is all hard copy and PDF scans, then the investigation will take considerably longer.
Techniques the accountant will utilize range from gap sequencing to Benford’s Law. There are over 100+ techniques available to a forensic accountant.
The techniques used are dependent on the type of fraud being investigated.
A typical forensic report will have 5 main parts:
Dealing with a fraud situation in Colorado? Get a free confidential consultation →
Fraud comes in many forms. For most forensic investigations the type of fraud most often investigated is embezzlement. Per Merriam-Webster, embezzlement is “to appropriate (something, such as property entrusted to one’s care) fraudulently to one’s own use”. Embezzlement usually revolves around the theft of cash from a business, estate, or individual. When investigating embezzlement, the forensic accountant will first get an idea of the internal control weaknesses. As mentioned in Chapter 1, almost half of all fraud happens because of a breakdown in internal controls. An understanding of the internal controls will assist in identifying the primary suspects and accounts susceptible. Think of this as the low-hanging fruit of an investigation. Suspects in embezzlement want one particular asset over all others—cash. Because of this, many of the investigation procedures will focus on cash in and cash out of the bank account. The forensic accountant will always request access to the bank statements, canceled checks, and deposit slips. The reason is accounting records can be manipulated and invoices forged. However, the original bank statements and the canceled checks will provide support for the flow of funds. Almost 40% of all occupational fraud is discovered by a tip. Fraud could happen over several years before being discovered. Because of this, a typical embezzlement case can span several years. This means that the forensic accountant will need access to the information for all the years possibly affected. Some historical records won’t be available. Without the records, the forensic accountant cannot investigate. They can only document the years with missing information. Forensic accountants should never speculate on missing information. All charts, numbers, and calculations in their report should be supported with actual documentation. Embezzlement investigations are the most performed work of a forensic accountants due to their unique skills and expertise in accounting, auditing, and detection.Dealing with a fraud situation in Colorado? Get a free confidential consultation →
Asset misappropriation is the most common form of occupational fraud and covers a broader range of schemes than embezzlement alone. While Chapter 3 focused specifically on the theft of cash, asset misappropriation encompasses any fraud where an employee misuses or steals company resources for personal gain, whether that is cash, inventory, equipment, or even company time.
According to the Association of Certified Fraud Examiners (ACFE), asset misappropriation accounts for the overwhelming majority of occupational fraud cases worldwide. Despite being the most common form of fraud, it is also one of the most preventable when the right internal controls are in place.
For Colorado businesses, understanding the different types of asset misappropriation and the warning signs associated with each is the first step toward protecting company assets.
Payroll Fraud
Payroll fraud occurs when an employee manipulates the payroll system for unauthorized financial gain. Common payroll schemes include ghost employees (fictitious workers added to the payroll whose paychecks are redirected to the fraudster), falsified hours, unauthorized pay rate increases, and continued payroll payments to terminated employees.
Payroll fraud is particularly difficult to detect in small businesses where a single employee controls both the payroll processing and the bank reconciliation. Separation of duties is the most effective control against payroll fraud.
Expense Reimbursement Schemes
Expense reimbursement fraud involves employees submitting false or inflated expense reports for personal reimbursement. Common schemes include fictitious expense claims, inflated receipts, duplicate submissions of the same expense, and personal purchases billed to the company as business expenses.
This type of fraud is often dismissed as minor due to the relatively small dollar amounts per transaction. However, expense reimbursement schemes frequently go undetected for years, and the cumulative losses can be substantial.
Inventory Theft
Inventory theft involves the unauthorized taking of company product, equipment, or supplies for personal use or resale. Schemes range from straightforward physical theft to more sophisticated approaches such as falsified inventory counts, off-the-books sales where cash is pocketed rather than recorded, and fictitious write-offs used to conceal missing inventory.
Inventory theft is most common in businesses with large physical inventories and limited oversight of warehouse or storage operations. Regular independent inventory counts and reconciliation to sales records are critical controls.
Vendor and Billing Schemes
Vendor fraud involves the manipulation of the accounts payable process for unauthorized payments. Common schemes include fictitious vendor invoices (where payments are directed to a shell company controlled by the employee), overbilling by a real vendor in exchange for kickbacks, and the approval of duplicate invoices for the same goods or services.
Billing schemes tend to produce the largest individual losses of any asset misappropriation category. A forensic accountant will scrutinize vendor lists, payment histories, and vendor setup documentation when investigating suspected billing fraud.
Recognizing the warning signs of asset misappropriation early can significantly limit financial losses. The following red flags should prompt further investigation:
No single red flag confirms fraud. However, when multiple warning signs appear together, a forensic investigation is warranted.
The investigation of asset misappropriation follows the same structured methodology outlined in Chapter 2, with specific procedures tailored to the type of fraud suspected.
For payroll fraud, the forensic accountant will reconcile payroll records to personnel files, verify the existence of all employees, and trace payroll disbursements to confirmed bank accounts.
For expense reimbursement fraud, the accountant will review submitted expense reports against supporting receipts, cross-reference submission dates and amounts for duplicates, and compare claimed business expenses against company policy.
For inventory theft, the accountant will perform or review independent physical inventory counts, reconcile inventory records to purchase orders and sales records, and analyze write-off patterns for anomalies.
For vendor and billing schemes, the accountant will analyze the vendor master list for suspicious entries, review payment approval workflows, trace disbursements to confirmed legitimate vendors, and examine any vendors added or modified by employees with payment authority.
In all cases, the forensic accountant will document findings in a court-ready report supported by exhibits, following the same reporting structure described in Chapter 2.
Prevention is significantly less costly than investigation. The following controls reduce the risk of asset misappropriation in any organization:
If you suspect asset misappropriation within your Colorado business or need a forensic accountant to support litigation involving fraud claims, Hovland Forensic & Financial provides confidential investigations and court-ready reports for clients throughout Colorado, including Denver, Colorado Springs, Fort Collins, Boulder, Pueblo, and Grand Junction, as well as clients nationwide.
Forensic accountants assist their clients in bankruptcy proceedings through: 
Economic damages are damages that usually involve wrongful death, personal injury, wrongful termination, or lost profits. Each of these areas revolves around the notion that but for the action(s) of another party, the affected party would be in a different position. Under economic damages is the concept of ‘but-for’. There are four methods for calculating economic damages under the ‘but-for’ concept. Generally, these methods focus on: 
A wrongful termination case tends to revolve around an employee being terminated and having to find work at lesser pay. It is important that the accountant stay strictly within the financial aspects of the case and not venture into whether the termination was appropriate. That is for the court or jury to decide. Regardless of the type of case, the accountant needs to be able to support a future point in time where the affected party is made whole again. This will be a detailed calculation and usually works towards a point in the future. This future point can be as short as a couple of months or several years. The accountant will need to supply detailed calculations on how they arrived at the future endpoint.
As noted in previous chapters, an expert witness’s report will always be rebutted by the opposing side. The important item to understand in the rebuttal report does the opposing expert refute anything in the original report. A rebuttal report will usually list out deficiencies or questions the original report did not address. Understanding what the rebuttal report is saying is crucial. For example, assume an original report indicates the theft of $1,000,000 cash from a company. Now assume the rebuttal report talks about fixed assets and tax returns, but never specially mentions the $1,000,000 in cash. In this situation, the rebuttal expert has not refuted the $1,000,000 of missing cash. Sometimes the rebuttal report fails to refute the main issue, especially if the evidence clearly shows the occurrence. A rebuttal report can find flaws in the original expert’s report. A good rebuttal report will bring up questions or note information in the original report that either changes the original expert’s report or completely refutes any or all amounts. Therefore, it is important that any report, whether it is the original report or a rebuttal report, contains supporting documentation and schedules.What Makes a Strong Rebuttal Report
A strong rebuttal report does more than list disagreements with the original expert’s conclusions. It systematically addresses each material finding, identifies the specific methodological or factual basis for the disagreement, and provides alternative calculations where appropriate.
The most effective rebuttal reports share four characteristics:
Specificity. A rebuttal that says an expert’s methodology was flawed without identifying exactly which calculation was flawed and why carries little weight with a court. Every criticism in a rebuttal report should be tied to a specific number, assumption, or methodology.
Alternative calculations. Where the original expert’s figures are disputed, a strong rebuttal does not simply argue the number is wrong — it provides the correct calculation with supporting documentation. This gives the court something concrete to consider rather than competing assertions.
Source documentation. Every alternative figure in a rebuttal report should be traceable to source documents. The same standard that applies to the original report applies equally to the rebuttal.
Daubert readiness. Rebuttal testimony is subject to the same Daubert standards as original expert testimony. A rebuttal report built on sound methodology, reliable data, and defensible calculations is significantly harder to exclude than one built on opinion alone.
When to Hire a Rebuttal Expert
Attorneys should retain a rebuttal forensic accountant as early as possible after the opposing expert’s report is received. Rebuttal reports take time to prepare properly and court deadlines for rebuttal disclosures are typically tight.
The earlier a rebuttal expert can review the original report, the more thoroughly they can identify weaknesses, request additional discovery if needed, and prepare a report that gives litigation counsel the best possible foundation for cross-examination.
Hovland Forensic & Financial provides rebuttal expert witness services for Colorado attorneys and counsel nationwide. Our rebuttal reports have a zero Daubert challenge record. Learn more about our expert rebuttal services →
Dealing with a fraud situation in Colorado? Get a free confidential consultation →
If fraud is suspected:
Understanding the different aspects of forensic accounting will help individuals and organizations recognize when it is time to bring in an expert.
Approximately one-half of all fraud happens because of weak internal controls.
Consider having a forensic accountant review the internal controls at your organization. A small cost of prevention will guard against the significant cost of an investigation.
Hovland Forensic & Financial provides forensic accounting investigations, expert witness testimony, and litigation support for businesses and attorneys throughout Colorado, including Denver, Colorado Springs, Fort Collins, Boulder, Pueblo, and Grand Junction, as well as clients nationwide.
Ready to speak with a Colorado forensic accountant? Hovland Forensic & Financial offers a free confidential consultation for businesses and attorneys throughout Colorado and nationwide. Schedule your free consultation →
