New Credential For Forensic CPAs: A Good Thing

There's exciting news on the accounting front! The AICPA recently announced that it will offer a new specialized credential for CPAs beginning this fall. The new credential will be known as "Certified in Financial Forensics," or simply, CFF. The CFF joins the three other specialized credentials offered by the AICPA, which include: Accredited in Business Valuation, Certified Information Technology Professional and Personal Financial Specialist.

Personally, I'm pleased with the news of the credential. I entered the specialized forensic accounting field long before the popular TV series, CSI, made forensics cool. In fact, at that time, forensic accounting was a specialty pursued by only a small number of accounting firms. Today, it couldn't be more different. Just about every public accounting firm advertises that they now offer some type of forensic services in addition to their traditional accounting services. By contrast, forensic accounting represents 100% of my firm's work.

One can appreciate the difference between a specialist and a dabbler. For instance, if you are going in for brain surgery, would you trust someone who performs such surgeries from time to time, or would you demand a specialist? The question is rhetorical and the answer is, of course, obvious. With regard to forensic accounting, it is my hope that the new CFF credential will help to separate the forensic practitioners from the part-time pretenders.

The foregoing statements bring to light an interesting concept. Just what is the difference between a forensic accountant and a traditional accountant? We'll first explore the role of the traditional accountant. Traditional accountants perform services such as preparing financial statements (a service known as a compilation), preparing tax returns, and auditing (i.e. validating) client-prepared financial statements. In performing these services, the traditional accountant follows established rules, standards and laws. For instance, when performing an audit, the accountant will use what is referred to as an "audit program." The audit program lists a step-by-step set of procedures for performing the audit. When preparing a tax return, the accountant uses the forms provided by the IRS along with the rules of the tax code. In summary, the traditional accountant prepares standard reports or forms, and does so in strict compliance with specific rules.

For the forensic accountant, there is far less emphasis on preparing records. Instead, the forensic accountant focuses on analyzing records. For instance, a forensic accountant may analyze records to determine any of the following: if a fraud has occurred; how a fraud occurred; the projected sales and expenses results for an interrupted business; the level of inventory on-hand prior to a casualty; or the amount of cash stolen from a business. In a nutshell, the forensic accountant performs analysis to answer "what happened and how?" in the case of a fraud; or in the case of a business interruption, the forensic accountant answers the question, "what would have happened and why?"

Unlike the traditional accountant, the forensic accountant does not have a defined set of rules to follow. Since the circumstances of each case are different, it is up to the forensic accountant to determine the steps to follow, the methodologies to employ and the most appropriate manner upon which to communicate his or her findings.

Another area of difference between traditional and forensic accountants pertains to creativity. Due to the rule-based structure of their engagements, traditional accountants have very little latitude to exercise creativity. It's completely different for the forensic accountant. Not only does the forensic accountant not have a "rule book," he or she is often faced with incomplete information. Thus, the forensic accountant needs to be skilled in "figuring things out." This may involve solving for variables, much like an algebra equation. Forensic accountants also creatively find answers and fill gaps through accessing public records or performing industry research.

When a traditional accountant performs work for a client, he or she is rarely questioned. Often, his or her work is accepted by the client since he or she is "the expert." A forensic accountant does not enjoy this luxury. The work of a forensic accountant is questioned frequently and scrutinized heavily. Why? It all boils down to the nature of an engagement. A forensic accountant is hired when something goes wrong. And when things go wrong, there are often times parties on both sides of the situation do not agree. Therefore, the forensic accountant must be meticulous in documenting his or her opinion, and extremely well versed in defending that opinion. Since the traditional accountant is rarely questioned, he or she may not have honed these skills.

Given the contrast between a traditional and forensic accountant, one can appreciate the need to designate expertise and specialization within the accounting profession. The new CFF credential will help do just that.