The digital age represents both forensic challenge and opportunity

Forensic financial analysts can increase their effectiveness and value by expanding their training and knowledge in IT forensics.

computer crime

[pullquote]“With each passing day, businesses and workers rely more on computer software, technology, and digital processes. It should then come as no surprise that financial crimes and wrongdoings are increasingly intertwined and hidden in the same technology.”[/pullquote]

As the demand for services from forensic financial analysts rises, so do the challenges and opportunities. To our credit, financial forensics has ramped up training and introduced an increasing number of methods and tests to identify financial and accounting schemes and shenanigans intended to bilk business and government out of substantial funds without detection. As of 2013, the cost of fraud alone represents 0.51 percent of every dollar of revenue. It’s no wonder forensic financial analysts are busy. In my own Texas backyard, a corporate controller was indicted for stealing $16.65 million from the private bakery that employed him. At $1.1 million dollars per year, that’s a lot of fruit cakes. Stories like this one are common across the country, and there is no doubt that many forensic examinations end after a financial forensic analyst has examined the books and records and performed a number of tests that indicate a cash-related anomaly, cover up, or scheme that doesn’t add up. Confronted with the facts, findings, and conclusion of the analyst, the perpetrator either confesses or lawyers up. At the end, the financial analyst has completed the task or might receive additional work related to system vulnerabilities and future protection. This scenario suggests that the forensic financial analyst is limited to forensic accounting. So, what opportunities exist for the forensic financial analyst willing to further train and delve deeper into existing service areas of valuation?

With each passing day, businesses and workers rely more on computer software, technology, and digital processes. It should then come as no surprise that financial crimes and wrongdoings are increasingly intertwined and hidden in the same technology. This presents a challenge to the financial forensic analyst as the search for evidence becomes more difficult and intensive. Surely, today’s analyst must consider the need to add some level of computer forensic skills to the toolkit of tests and methods. Let’s look at some of the forensic practice areas and implications.

Fraud: Forensic financial analysts will attest that fraud almost always includes a digital trail of evidence on computers, laptops, servers, and mobile devices. The ability to recognize or gather this information and evidence certainly goes a long way in building a strong financial fraud case against those committing the crime. Why not the financial forensic analyst?

Bankruptcy and Insolvency: Analysts practicing in this area know there are cases where it is necessary to learn what happened at a company that led to bankruptcy or liquidation. In order to gain insight and evidence, the analyst must be able to effectively access, search, and review thousands of spreadsheets, e-mails, and documents. Why not include financial forensic analyst with insolvency, turnaround, and bankruptcy specialty training?

Economic Damages: Analysts involved in either commercial or economic damages should know that digital evidence can be a determining factor on case outcome. Consider intellectual property theft and the information and trail left on various storage media and devices. Employment-related cases require careful investigation and handling of digital information from computers, mobile devices, and other media in order to determine what was done, who was involved, and any attempt to cover up.

Anyone reading this article might argue that the tasks and functions described above are in the private domain of forensic IT specialists. If so, we relegate the forensic financial analyst to forensic accountant, close the door on professional and practice growth, and fail to recognize that many within our profession have the education, background, training, and interest to meet the challenge without going too far afield. I am not inclined to do so and suggest that we must look to the future and develop the skills and network to perform our task alongside the IT specialist.

Meeting the Challenge
For the forensic financial analyst interested in expanding his or her technology skills and professional value, there is good news. The forensic IT community is a relatively open, sharing, and supportive one. Within it, you will find online instruction, blogs, open source and free software, and forums. Want proof?

Online Learning Example:
Education Portal: List of free online computer forensics courses and classes

120 Free Software Tools and Resources from Forensic Control:

Digital Forensic Association Blog

It’s a brave new world for forensic financial analysts. For those willing to increase their knowledge and broaden their horizon, an opportunity exists to expand practices and client service and perhaps help prevent the ever increasing number of financial crimes being committed each day.

Jeffrey Harwell, CVA, MAFF, CMEA, is principal of Harwell & Company, a Dallas/Fort Worth, Texas, business valuation, litigation support, and machinery and equipment professional advisory firm. As a valuation analyst, his time is exclusively devoted to providing answers and solutions to client problems in the complex area of valuation. The firm’s focus includes economic damage and litigation support. In addition, Mr. Harwell serves as chair of the Ambassadors’ Editorial board and he is a member of the Education Quality Assurance Board as well as the Standards and State Chapter Committees of the National Association of Certified Valuators and Analysts (NACVA). Mr. Harwell serves as NACVA’s State Chapter President of Texas. Mr. Harwell can be reached at (817) 385-1866.

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