"It's not a practice area I heard much about as an undergraduate accounting student 20 years ago, but forensic accounting tops the list of services requested by many of our clients today," says Kevin Crumbo, member-in-charge of KraftCPAs' Turnaround and Restructuring Group. Forensic accounting combines traditional accounting, auditing, and investigative skills to provide analysis suitable for courts and other venues.
Kevin believes highly publicized cases of wrong-doing at distressed enterprises like Enron and Worldcom have raised awareness of the practice area in the last few years. He explains, "Stakeholders in much smaller enterprises have become aware that forensic services are available from firms like ours, and we frequently hear from those stakeholders or their attorneys and advisors when they believe that wrong-doing has caused distress at an enterprise. Our investigations and reports often form the basis of litigation, bankruptcies, and other legal actions by those stakeholders."
Forensic skills are not always used for legal actions. KraftCPAs' Turnaround & Restructuring Group uses many of its skills to find underlying operational problems leading to fi nancial distress. Accounting and other records at many companies are not adequate for management to identify problems easily and take corrective actions. Management often doesn't know problems exist until cash or other resources become constrained. In such situations, forensic investigation may identify underlying problems like unprofi table customer contracts or ineffective compensation structures. "The facts are our friends," says Myles MacDonald who works with Kevin in Kraft's Turnaround & Restructuring Group. "The sooner we can find the facts, the sooner corrective action can be taken."
Kevin recently addressed the June meeting of Tennessee Turnaround Management Association on the topic of forensic accounting. He told the audience the selection of forensic accountants should include a review of credentials and experience relevant to the concerns giving rise to a project. "There are now several specific credentials in addition to CPA that may be desirable for a project," Kevin said, "and previous experience is obviously important in any situation." He added that forensic accountants should be able to analyze and present complex financial and business issues in a manner that can be easily understood by business owners and other stakeholders.
KraftCPAs recognizes the sensitive nature of inquiries about forensic accounting services like those mentioned above. All inquiries are handled in a confidential manner. You may reach Kevin or Myles for consultation at (615) 748-4274.
