In forensic accounting, accountants and lawyers may be close partners; and in fact, attorneys are often the reason accountants enter the field of forensic accounting to begin with. All three accountants featured in these case studies found their way into the field through an attorney who needed help with a particular case. The rest, as they say, is history.
THE SMELL TEST
On record: Michael Plude, partner, Kaskie, Plude & Co.
Defining forensic accounting: Michael Plude came into his career as a forensic accountant in a circuitous way. He started out in industry working as an assistant controller for a manufacturing company. Wanting to advance up the ladder, he obtained his MBA, and then, after a push from management, his CPA and state board license. But after the company was sold, he found himself in public accounting after all, having resisted the pull since graduation.
“I was hired by a firm specializing in bank auditing,” Plude said. “I developed a reputation, and got called by PwC to help update their bank audit procedure. This gave me a good opportunity to see different levels of accounting at a public firm.”
This experience led him to eventually take over the management of Kaskie, Plude & Co. — formerly solely Kaskie — which put him in the right place at the right time when, tragically, a firm client died suddenly, leaving behind his family and a business that needed running.
“A local probate clerk asked me to step in and manage the business while the family got it together,” he recalled. “While managing, I came across an embezzlement, and had to create legal proceedings with some employees who were trying to steal the company. I was using my audit skills while managing the company and something just didn’t smell right. With auditing and financial instincts, you’re always looking for fraud. I was lucky because that training attuned me to looking for fraud, which was something not really on the public consciousness until Enron.”
Plude pointed out that a lot of the time, forensic accounting gets confused with fraud examinations.
“When most people think of a forensic accountant, they first think of a fraud examiner. However, fraud examination is only one aspect of a forensic accountant. The pure definition of a forensic accountant is an accountant who acquired through education and work experience the skills necessary to work within our legal system in the capacity of a financial expert. These financial skills can draw from a range of disciplines such as auditing, taxation and finance. We work in business valuation, contract disputes, embezzlement, white collar crime, bankruptcies and IRS audits, which we get a lot of. We help attorneys assess whether it’s a criminal case, and we work out a plan to litigate damages and keep it out of criminal court.”
Training: As Plude’s history, and those of the other accountants featured below, shows, training for forensic accounting really amounts to years of experience —
outside traditional certifications, such as the Certified Financial Forensics and Certified Fraud Examiner, awarded by the American Institute of CPAs and the Association of Certified Fraud Examiners, respectively.
Plude noted that the ACFE certification focuses on fraud, while the AICPA’s is broader and focuses on other areas in forensics. However, “A CFF certification doesn’t mean you have carte blanche,” Plude said. “You have to have some form of expertise in the area. The worst thing you can do is take a case and not have the background to present to the judge. A lot of firms will specialize in certain areas of forensic accounting for this reason.”
“I’ve been pushing for forensic accounting training at the college level,” he added. “Right now the career path is someone starts at a CPA firm, does work in tax and auditing, and develops a solid foundation in the basics; from there what I usually see and what is usually helpful, is the younger CPA will seek out an older CPA who is accredited in financial forensics, and it becomes a mentoring situation. I’m mentoring an accountant right now who shows great promise. He came in thinking he loved taxes, but as I started working with him, he started developing a desire to get into forensics.”
Delivery of services: Kaskie, Plude & Co. delivers its forensic accounting services through law firms, both small and local, and global. Through these connections, the firm serves a range of clients from Fortune 100 companies to local businesses. “Anybody can get stuck in litigation nowadays,” he said.
The firm is full service, which means Plude has skilled staff with expertise he can tap into for any given forensic case. He may sometimes need to hire an actuary or an attorney. And as far as type of client goes, the firm will take on any client to whom they think they can be of service.
For Plude, forensic accounting is as much about proving innocence as guilt. “I had a client who worked for a casino restaurant, and she was accused of stealing from her employers,” he recalled. “We were able to prove that the financial controls were so weak that they couldn’t pin the crime on her. We’ll serve any client that we feel we can help.”
PROOF WITHOUT WORDS
On the record: Dawn Brolin, executive vice president of business development and compliance, Powerful Accounting powered by Out of the Box Technology
Defining forensic accounting: In a way, forensic accounting requires forgetting all the accounting principles learned over a career and approaching books with an intense amount of skepticism. As Dawn Brolin puts it, “Forensic accounting is really the ability to step outside the daily accounting role you live in and instead put every ounce of doubt in your brain — what you’re looking at is not correct. Don’t assume that when an account is reconciled, it’s right. Think backwards and outside the box.”
Brolin thinks it takes a certain type of personality to be able to both extract key data and decipher it. “I like to win,” she said. “I think that gives me an edge. It’s me against that complaint. I’m not fighting with people — I’m fighting with papers. I just need to get to the truth. I will not put anything in my report if I can’t look in the eyes of a judge knowing it to be true, and I can tell them how.”
Training: Brolin got her training like most forensic accounting specialists do: on the job. In 2011, attorney Eric Green of law firm Green & Sklarz recruited her to reconstruct the books for a civil audit case. “I realized then that reconstructing is about whether I can prove something without words to the auditor,” she said. “You absorb, retain, and move on. You’ll learn from one case, and apply those lessons to new ones.”
Brolin lectures part-time at Eastern Connecticut State University, where she is also an alum. In the college’s master’s program in accounting, she teaches elements of forensic accounting — but other than that, she sees little in the way of exposure to the subject at the undergrad level, and even at the graduate level.
One of the key texts she uses is the “Report to the Nations” released by the Association of Certified Fraud Examiners, a text she calls her “book of blessings.” She also uses it to educate her clients on risk exposure in their own businesses. Using this report, and her own experience, she teaches her students how to look at a financial statement differently.
“Why am I going to teach them again about the balance sheet, when most of them will be working with small businesses and smaller firms, or in audit?” she asked.
Brolin also said that technology training is one of the main pieces lacking in accounting education. “Do they know apps? Yes, but do they know how to use an accounts payable program? No,” she said. “These are tools they can use when they go out into their field of choice, to teach them the tech and the mindset of how fraud exists and where the forensic mindset is when dealing with clients and not being a robot.”
She tasks her students with picking a fraud case, and then figuring out exactly what technology could have been implemented to minimize the risk for that particular case reoccurring. They are then asked to put the control together without the technology, and then with the technology.
“Their eyes are wide open, and they say, ‘Wow, we never thought of it that way,’” Brolin said.
Recruiting: “Hiring starts with somebody who has a passion for knowing facts and not making assumptions,” Brolin said.
She just hired a new staff member who, she could immediately see during the interview process, had “the ability to figure things out on his own,” a key characteristic for an accountant hoping to tackle forensic cases. She put him on a case where he needed to review the entire Outlook file (which amounted to millions of emails) from a company to find the incriminating directive sent from a new partner instructing staff not to allow signature stamps for payment to a particular vendor, and that these payments should only go through him. Brolin’s employee found what he needed within two hours, because he figured out exactly what keywords to search to uncover the email.
Delivery of services: For Brolin, every piece of tech she and her clients use serves a primary purpose: to prevent fraud.
“Our industry is being sold on apps for ‘efficiency,’ but we should be being sold on fraud prevention, accuracy of financial statements, accuracy of a completed tax return,” she said. “If the only thing you’re looking for is efficiency, you’re missing the other two legs of the stool: occupational fraud prevention, and tax fraud prevention. Apps are for protecting clients from potential fraud and having proper substantiation and backup for their financial information.”
A forensic accountant uses every tool available in their tech stack to discover the financial trail for whatever is needed, whether it’s fraud, or making a case for a business valuation. “A forensic accountant says, ‘I don’t have access to that bank statement, so what do I have access to? Canceled checks? Emails? Bill.com? How else could I figure out how to prove something to be true?’” Brolin explained.
One of the key skills a forensic accountant gains over time is fluency in multiple technology platforms, because depending on the case, they will have to pull data from different software, and typically, data analysis software is a key component of sorting through data. But interpreting that data, and going “beyond the books” to figure out what is not being shown, is the most important part, Brolin said.
“Say I’ve requested a copy of a QuickBooks file that was relied upon to do a tax return,” she said. “I get it, but it doesn’t match the tax return. Then the attorney can subpoena workpapers from the CPA. If they don’t provide it under subpoena or they give you a thumb drive with 800 emails and none of them have workpapers, then I can confidently put in my expert opinion, based on lack of workpapers, and based on the QuickBooks files that were relied upon, that something is wrong in between. Is there a second set of books?”
‘NOT ALL BLACK AND WHITE’
On the record: J. Allen Kosowsky, partner, CironeFriedberg
Defining forensic accounting: Like Brolin, Allen Kosowsky got his start in forensic accounting by being asked by a law firm to assist in a case — in his particular situation, where a wealthy individual had come under investigation by regulatory bodies in the United States. This was in the 1980s, so Kosowsky has seen the field evolve from following literal paper trails to utilizing a host of available technologies.
“Back in mid-1980s, not many others were doing what I was doing,” Koswosky recalled. “Through that first case, I kept getting work through law firms. ... Some criminal lawyers needed help with criminal cases under the Koval agreement [where an accountant’s communications with a lawyer in service of a case remain confidential]. That left me with a number of engagements for people who were skimming, taking personal deductions on tax returns, and governmental investigations where there were witnesses that lawyers needed to make sure were clean.”
Kosowsky recalled one case over two decades ago, where he was on the stand representing the city of New Haven, Connecticut, for a case. The judge stopped Kosowsky and asked, “What’s a forensic accountant?” He said the practice segment is a lot better known today.
Training: Kosowsky, who has guest lectured at Fairfield University’s master’s in accounting program, believes that earning training in forensic accounting today is “a whole lot easier than it was five, 10, 30 years ago.” But still, he agreed that the skill set can be hard to train, and may have to come down to instinct.
“To be a good forensic accountant, you need an aptitude for situations that are quite equivocal or not clear,” he said. “Some accountants don’t like that. It’s hard to put into words, because it’s not all black and white.”
Recruiting: These days, Kosowsky said, forensic accounting as a practice segment is getting more attention from firms. However, firms don’t quite know yet how to position a forensic accounting segment. It’s not recurring work, like tax work, so firms aren’t sure how to manage and forecast for that type of business, let alone hire for it.
“That turned into a problem area for some firms,” Kosowsky said. “They don’t want to bring a person in full-time if you don’t have the same clientele coming back all the time. In forensic, the work comes when the work comes. Also, making sure you get paid on engagements can be tough. With litigation, for instance, sometimes the money gets tied up, and takes time.”
Kosowsky’s own practice has always been robust, solely based on the referral business and exposure from the cases he was taking on through attorneys asking for help. He didn’t have to do any meaningful marketing, he said. And his merger into Connecticut firm CironeFriedberg shows one way a firm can add forensic accounting to its portfolio — by acquiring a practice that already has it figured out.
Delivery of services: “One thing expected through our merger with CironeFriedberg is we’ll be offering forensic accounting as a service to their existing clientele,” Kosowsky said. “For instance, if they’re terminating an individual and they don’t want a problem with wrongful termination, we may need to look at the past behavior of the terminated individual to use as part of a settlement process. With a bigger staff, we may be able to take on bigger cases.”
When it comes to technology, again, the solutions used will depend on the case, and vary greatly. Data analysis, however, is a mainstay, and software created for audit, for instance, can be useful to forensic accountants who need to sift through large amounts of data to detect anomalies or suspicious entries.
“Typically, though, I use a traditional program like Microsoft Excel to take a lot of data and go through it,” Kosowsky said.
Another key aid in the success of Kosowsky’s cases are his relationships in the industry, including with criminal investigators within the Internal Revenue Service and the U.S. attorneys in his state, Connecticut. “Them knowing my work gives them confidence that the tasks from the accounting perspective will be done correctly, and those relationships are to a client’s benefit,” he said.
