The economic downturn, combined with fallout from the scandal related to Andersen's role in the collapse of Enron Corp., have raised the profile of one accounting specialty.
Like a forensic pathologist who dissects a corpse to determine the cause of death, forensic accountants dissect the books, looking for paper trails that lead to corporate crooks.
Demand for forensic accounting is likely to rise as a slower economy shrinks profits, says Thomas L. Kabler, a partner in the Chicago accounting firm Gleeson Sklar Sawyers & Cumpata LLP.
"When times are good, a lot of sins can be hidden," Mr. Kabler says.
Shareholders — many of whom are poring over balance sheets in the wake of Houston-based Enron's implosion — will pressure executives to account for every penny. And where there's number trouble, there will be forensic accountants.
"Typically, we're brought in by law enforcement, government agencies, law firms or corporations to investigate allegations of white-collar crime," says Craig Greene, a forensic accountant with Rome Associates LLP who is both a CPA and a certified fraud examiner (CFA).
He may also be hired to testify on the value of a partnership during a breakup, to calculate damage claims, to uncover assets in a divorce and to investigate other disputed financial matters in a lawsuit.
"Anytime there is divorce involving business ownership, there is the ability not to report all of the income or overstate some of the expenses," says Jerome H. Lipman, owner of Chicago accounting firm Jerome H. Lipman & Co.
Messrs. Green and Lipman earned their CFA designations from the Assn. of Certified Fraud Examiners, a 25,000-member organization in Austin, Texas.
The association, which also certifies other professionals fighting white-collar crime, says 80% of workplace fraud involves asset misappropriation. Cash is stolen in 90% of those cases.
Typically, a tip from an employee, customer, vendor or anonymous source brings financial investigators into the picture. Sometimes, though, companies accidentally discover that a once-trusted employee has been taking them for an expensive ride, using his or her authority to handle company finances for personal gain.
"One case we were on, the client came to us and said, 'We think the controller is double-dipping on his expense report,' " says Mr. Kabler. "The controller was on vacation and they knew his car lease was up for renewal. An individual went looking and found an expense report. They found that he was deducting the lease payments on the expense report, but the company was paying the lease."
And there was more: The investigation at the north suburban company discovered $850,000 missing. With full reign over the company's finances, the controller had concealed checks that he wrote to himself from payroll accounts and money withdrawn from pension and profit sharing plans. The controller was prosecuted, says Mr. Kabler, who won't name the client.
Internal controls can discourage fraud, says Richard C. Gordon II, a partner at accountancy Topel Forman LLC in Chicago. Simple things — such as spreading work among several employees so no single person has widespread responsibility for handling money and accounts — makes scams harder to pull off.
But most companies don't work that way, and they're often reluctant to prosecute employees. Sometimes, Mr. Gordon says, that's disappointing. But he reminds himself that he's not there to judge guilt or innocence, just to uncover the facts.
"It's not our responsibility to call the cops," he says. "That's management's call."
©2002 by Crain Communications Inc.
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