September 29, 2020

Study: Competing Forensic Accounting Bodies Pretty Much Hate Each Other; Regulation Needed

The continued prevalence of fraudulent activity in business will undoubtedly lead many of you to a career in forensic accounting and/or fraud examination.

Because of the nature of their work, you might be under the impression that the organizations in this little corner of the sandbox would be above reproach and bickering over petty differences would never be an issue, so they may best serve the capital markets by busting the baddies.

NOT SO, says Wm. Dennis Huber of Capella University! Huber says that several studies have "uncovered significant problems within the forensic accounting profession and the forensic accounting certification industry" and that results in the need for regulation of the industry. 

What, exactly, is going on? From the sounds of it, the lack of disclosure of basically anything, the lack of a hollow, cliché-filled code of ethics, and some practical standards:

The failure of forensic accounting corporations to disclose either their legal status or the qualifications of their officers and directors, their failure to publish financial statements, and their failure to adopt or enforce a Code of Ethics or Standards of Practice, were among the most significant problems uncovered,” said Huber. “The failures of the corporations were exacerbated by forensic accountants’ failure to investigate diligently the corporations that issued their certifications prior to obtaining their certifications. This resulted in a significant number of forensic accountants holding certifications from corporations that were inconsistent with their beliefs that a forensic accounting corporation should be not-for-profit, and their officers and directors should be qualified.”

So some forensic accountants were under the impression that forensic accounting firms should be NFPs and certification issuers don't necessarily share that point of view and that is bad so it warrants regulation…I think? UDPATE: NOPE! I had it wrong. The actual problem, as one person in the know explained to us, is that the associations were not NFPs and forsenic accountants had believed otherwise.

But not only that, parties in the "forensic accounting certification industry" don't seem to like each other very much and that isn't good for anybody. 

Huber argues that the forensic accounting certification industry “is characterized not just by strong, competitive forces but also by outright legal conflict between the corporations that issue forensic accounting certifications. The competition can easily be seen in the various self-promotional materials. The conflict, if not outright animosity, is manifested in the legal actions taken by one corporation against another which, while claiming it is to protect the corporation, does little to advance the forensic accounting profession.”

This is quite interesting. We're in touch with a friend of GC that promises to explain further, but for now you can speculate as to what this all means.

Should the forensic accounting profession be regulated? [SciVerse]
Researcher Foresees Regulation of Forensic Accountants [AT]

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