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Businesses of different sizes and even the government can be affected by fraud.
For small businesses, there is the possibility that such an event can lead to the closure of the organization. Large corporations might experience irreparable losses and reputation damage as a result.
When fraud occurs in an organization, a forensic accountant is usually hired. Therefore, in this article, we’ll reveal who a forensic accountant is and what they do. Furthermore, we’ll guide you through the process of hiring one in Los Angeles or anywhere in the world.
What does a forensic accountant do?
A forensic accountant refers to a professional who has been trained beyond the regular accounting college degree.
These individuals are usually certified public accountants (CPAs). You can visit https://www.accounting.com/ to learn how to become a CPA. Forensic accountants are experts when it comes to auditing financial statements.
As a result of this training, these specialists can easily understand the complexities and intricacies of financial transactions.
Although most organizations seek their help when a fraud has been committed, these professionals can also aid in preventing fraud. Forensic accountants do this by identifying the weaknesses in the organization’s financial system.
Factors to Consider Before You Hire a Forensic Accountant
When fraud occurs in your organization, hiring these specialists should not be the first thing on your mind or the first action you take.
Before you do so, talk with the legal counsel of the company. The attorney will then guide you on the appropriate steps to take. Here are the factors to consider before you hire a forensic accountant:
1. Decide Whether Charges Will be Pursued
As we said, fraud can damage the reputation of a company. Moreover, litigation costs might end up being more than the amount embezzled. Therefore, the organization must consider these issues because if the charges are pursued, then the scam will come to public light.
If you choose to press charges, the accountant you hire must be qualified to stand in as a witness. How do you determine that the forensic accountant is qualified in this regard? Very simple, they must have testified in a court as a witness in the past. Doing this will ensure you don’t have to change the financial expert when it’s time for the courts as that can be costly.
2. Let your Attorney Hire an Accountant
If charges are pressed, the attorney is the best person to hire the financial expert. The fact that they’ll be handling the legal aspect of the case means that they need to have all the details before they go to court.
Furthermore, good legal counsels usually have contacts or the ability to reach experts in the financial field. Following this step will ensure the attorney is fully in the loop to enable them to present a rock-solid case.
3. Use Google to Search
In case your lawyer cannot get a financial professional on his own, you can use Google to search. In Los Angeles, there are lots of forensic accounting companies you can hire. Some might be individual firms, while others are CPA-extension firms.
When you find these firms, ensure that you research them thoroughly. Find out the kind of fraud they’ve investigated in the past; it’s essential to choose an expert who has dealt with the fraud type you’re dealing with. You can visit this site to check out some types of business fraud. If you cannot find this out yourself, have your attorney contact them and find out from them directly.
You can also check online for any case studies they might not have posted. While this is not common practice, some firms do it. They however protect the identities of the clients. If you find such a case study, take your time to review it to determine if it’s similar to yours.
Be reminded that you need to have your attorney fully involved in this. Therefore, all contacts and hiring should be carried out by your legal counsel. The reason is the same as when we advised that they do the hiring.
4. Hiring Cost
Forensic accountants are specialized professionals; therefore, they don’t come cheap. Their charge is usually by the hour, and they’ll not give you the exact cost but a range. The exact cost cannot be determined because of the variables that the case might involve.
Variables that might affect the final cost include the number of frauds, the number of accounts affected, manipulation of source documents, etc. When all these are looked into, the case might get lengthier than originally imagined. As a result, the accountant cannot tell you how many hours they’ll need.
With that said, if a financial expert gives you a set fee, don’t hire them. This might seem harsh, but it is for your good. Accountants who do this usually delegate the work to junior accountants who might not be trained to handle such tasks.
How to hire a forensic accountant
Hiring a forensic accountant can be crucial in unraveling financial complexities and discrepancies, especially in legal or investigative matters. Here’s a step-by-step guide to help you navigate the process:
1. Define the Scope of Your Engagement:
- Identify the purpose of needing a forensic accountant. Are you investigating potential fraud, seeking asset valuation in a divorce case, or preparing for litigation?
- Knowing the specific needs will help you target your search for a qualified professional with relevant expertise.
2. Identify Potential Forensic Accountants:
- Seek recommendations from lawyers, accountants, or financial advisors familiar with forensic accounting services.
- Utilize professional organizations like the Association of Certified Fraud Examiners (ACFE) or the American Institute of Certified Public Accountants (AICPA) to find accredited forensic accountants.
- Online directories and databases can also be helpful resources, but be sure to verify credentials and experience carefully.
3. Evaluate Qualifications and Experience
Shortlist a few potential candidates based on their:
- Professional certifications: Look for Certified Public Accountants (CPA) with a Certified Fraud Examiner (CFE) designation or a Certified in Financial Forensics (CFF) credential.
- Industry experience: Choose an accountant with expertise in your specific sector, such as healthcare, finance, or construction.
- Litigation support experience: If your case involves legal proceedings, ensure the accountant has experience presenting findings in court.
- Communication skills: The ability to explain complex financial matters clearly and concisely is essential.
4. Request Proposals and Fees
- Contact your shortlisted candidates and clearly explain your needs and desired scope of work.
- Request detailed proposals outlining their methodology, timeline, and estimated fees.
- Compare proposals carefully, considering not just cost but also the proposed approach and qualifications of the assigned team.
5. Select the Forensic Accountant
- Choose the accountant who best demonstrates expertise, experience, and a clear understanding of your specific needs.
- Feel comfortable with their communication style and rapport.
- Negotiate fees and finalize the engagement agreement in writing.
6. Engage the Accountant and Begin the Investigation
- Provide the accountant with all necessary documents and information related to your case.
- Maintain clear communication and cooperation throughout the investigation process.
- Be prepared to answer questions and provide clarifications as needed.
Hiring a forensic accountant is an investment. Their expertise can save you time, money, and emotional distress in the long run.
Forensic accountants can save the day when your company is defrauded. Not only that, they can help you prevent fraud in the first place.
As important as they are, you must be cautious when hiring them. Therefore, this article has discussed factors you need to consider before you hire these experts.
I am Adeyemi Adetilewa, an SEO Specialist helping online businesses grow through content creation and proven SEO strategies. Proficient in WordPress CMS, Technical Site Audits, Search Engine Optimization, Keyword Research, and Technical Writing (Portfolio).
Founder and Editor-In-Chief of Ideas Plus Business Magazine, an online business resource for entrepreneurs. I help brands share unique and impactful stories through the use of public relations, advertising, and online marketing. My work has been featured in the Huffington Post, Thrive Global, Addicted2Success, Hackernoon, The Good Men Project, and other publications.