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How to hire a forensic accountant.
Fraud can affect any business and any person—from the largest public company to the smallest mom and pop store. Financial institutions to construction to governments, all industries are susceptible to fraud. Many times, the impact is greatest for smaller businesses.
In fact, fraud has been known to cause small businesses to close. The need to catch and combat fraud falls on the forensic accountant. In this post, I will explain why a forensic accountant is important and how to hire one for your situation.
I’ll include tips for every business owner and organization shareholder, whether they’ve worked with a forensic accountant before or not.
What is a forensic accountant, and why do they matter?
A forensic accountant is someone who has received additional expert training above the standard college accounting degree. Most forensic accountants are certified public accountants and they have a strong background in financial statement auditing.
The additional training allows the financial professional to understand complex financial transactions. These accountants not only specialize in fraud, they can identify weaknesses to help prevent fraud.
This is the professional hired to investigate suspected fraud and theft.
Steps to consider when hiring a forensic accountant.
Before you decided to pursue hiring a fraud professional, speak with company legal counsel. An attorney will provide guidance on immediate steps that need to be taken.
Those steps include securing all information as well as what can and cannot be said in public.
The first step is to decide whether the company will pursue charges against the suspected embezzler. Not all businesses will pursue charges. This is due to fear of reputation or the cost to litigate.
If the company decides to pursue charges, then the expert needs to be qualified as an expert witness. To be considered an expert, the accountant should have previously testified before a court of law.
This first step is important in selecting a financial expert because having to change accountants before the trial can be costly.
Consider utilizing the legal counsel’s expert witness contacts. Usually the person who hires a accountant will be the lawyer. This is because the attorney will be working hand in hand with the accountant who will discuss the completed report and results with them. This step is imperative as the attorney needs to fully understand the impact of the fraud and if there are any other ramifications.
The attorney will then utilize the report to adjust how they present the case.
Step 3 – Utilize Google searches.
Utilize Google searches. There are several forensic accounting firms in the country. Some firms are extensions of a CPA firm and some are stand-alone firms.
When reviewing the firm, see what type of fraud they have investigated. There are many types of fraud, from employee embezzlement to insurance fraud.
It is key to pick a professional who has encountered the same type of fraud being experienced. If unsure about this, contact the firm and discuss it with them.
Additionally, review any case studies posted online or in their company literature. Not all firms will post case studies, but if they do, read through to see if they match up to the case in question.
Keep in mind that the professional must be generic with the case studies to prevent revealing the identities.
Step 4 – Cost of hiring a forensic accountant
The cost of hiring is no different than the cost of hiring an attorney. The practice of forensic accounting is specialized.
The costs tend to be in line with other specialized industries. Many forensic financial experts will charge by the hour and give a cost range.
The reason is it is difficult to quote an exact fee is due to all the variables involved.
- Did the fraud occur in more than one year?
- Were more accounts affected than originally thought?
- Did the perpetrator manipulate source documents to conceal their actions?
As the case progresses, these questions get answered and sometimes the case must expand. Until these and other questions are answered, the total number of hours is unknown.
Be cautious of any forensic accountants that advertise set fees. To make these economics work, they must utilize junior accountants who may or may not even be trained in advanced accounting.
Tips for Hiring a Forensic Accountant
- Make sure to contact the company’s legal counsel and secure all information, both electronic and hard copies.
- Discuss with company personnel whether the company will pursue charges. This will make selecting the correct expert more efficient and cost effective.
- Verify the accountant can investigate the type of fraud the company suspects.
- Understand the cost will be equivalent to hiring a specialist in any other field.
The discovery of suspected fraud causes emotions to run high. Approach the situation as objectively as possible.
Then secure all information and discuss the situation with legal counsel.
Evaluate the situation and hire a trained financial professional to utilize their specialized skills to determine the full extent of the fraud.