Ask FERF about ... forensic audit services.

The auditor's responsibility for detecting fraud continues to be viewed as an "expectation gap," two years after the American Institute of Certified Public Accountants (AICPA) issued SAS 99, Consideration of Fraud in a Financial Statement Audit. The debate was rekindled recently by the Public Company Accounting Oversight Board's (PCAOB) Standing Advisory Group, and in the AICPA's recent Discussion Memorandum (DM), "Forensic Services, Audits, and Corporate Governance: Bridging the Gap."

To frame the debate, the DM raised nine questions relating to whether there should be new requirements for auditors to detect fraud and related implications on auditor independence, legal liability, training and certification.

Regardless of whether (or when) professional standards change, a new specialization in forensic audit has grown, fueled in part by The Sarbanes-Oxley Act's focus on internal control, certification of financial statements and increased criminal penalties for securities fraud.

Companies are increasingly turning to forensic auditors to investigate identified or suspected fraud, provide evidence of how it was perpetrated and by whom, and assist in quantifying damages for insurance recovery or litigation. Outside counsel leading investigations will directly engage a forensic audit firm (as opposed to having the forensic auditors engaged by the company itself) so their work will fall under attorney work product (protected by attorney-client privilege). Companies are also using forensic audit services proactively, to supplement their primary auditor by providing a "fresh look."

In choosing forensic audit professionals, one consideration is the background the firm and its individual members have (such as CPAs, CFEs (Certified Fraud Examiners), JDs (attorneys) and ABVs (Accredited in Business Valuation, offered by AICPA). Training is also available through academic programs such as New York University's Certificate in Forensic Accounting.

A number of other colleges offer full- or part-time specializations in forensic accounting, and the Department of Justice funded a grant for West Virginia University, located near the National White Collar Crime Center, to coordinate development of a national model curriculum.

Based on its research, Financial Executives Research Foundation (FERF) provides the information below from a sample of forensic audit service providers. The list is not exhaustive, and companies are shown in alphabetical order.

RELATED ARTICLE: Forensic Audit Service Providers

FTI Consulting www.FTIConsulting.com (Click on Forensic and Litigation Consulting) FTI Consulting, with offices throughout the U.S. and London, brings a multidisciplinary approach to complex investigations and litigation. It's team includes veterans of the audit and consulting divisions of accounting firms, bankers, brokers, entrepreneurs, board members, former law enforcement officials, PhD economists, behavioral scientists, former chief executives and advisors, organizational theorists and visual communication experts.

KPMG Forensic www.us.kpmg.com (go to Services, Assurance, KPMG Forensic) KPMG Forensic is a global practice comprising multidisciplinary professionals from KPMG member firms who can assist clients in their efforts to achieve the highest levels of business integrity through the detection, prevention and investigation of fraud and misconduct. Their team is experienced in forensic accounting, law enforcement, fraud and misconduct risk assessment, anti-fraud risk controls, asset tracing, computer forensics and forensic data analysis.

Kroll Zolfo Cooper www.krollzolfocooper.com (Click on Services, Forensic Accounting) Kroll Zolfo Cooper, LLC (KZC), part of investigative firm Kroll Worldwide, with offices throughout the U.S. and overseas, provides clients with independent, objective advice related to forensic accounting and litigation issues. Their team includes CPAs, business valuators, financial and visualization experts, as well as specialists within the areas of law, investigative methods, demonstrative evidence and data analysis.

Navigant Consulting www.navigantconsulting.com (Click on Services Offerings, Litigation & Investigations)

Navigant Consulting, with offices throughout the U.S., Canada and in London, is a consulting firm that assists clients with complex, risky and highly visible litigation and investigations. Its national practice has evolved from combining practices of consulting firms (including PENTA Advisory Services and Peterson Consulting) and adding top-level professionals from international accounting firms and accounting regulators.

Sobel & Co. www.sobel-cpa.com (Click on Client Services)

Sobel & Co. is a regional accounting firm based in New Jersey which, as a member of PKF North America Network (www.PKFnan.org), is able to provide specialized resources to, and access resources from, other member firms on national and international engagements. Its litigation support practice concentrates on forensic accounting, and many of its professionals formerly worked in law enforcement. Clients range from small businesses to the Fortune 100.

Edith G. Orenstein ([e-mail]) is a Manager of Research with Financial Executives Research Foundation.

contributed by FERF