31 October 2005
Thrill-seeking and accountancy are not, whatever you may think, mutually exclusive. Forensic accountancy can be a high-profile and fascinating blend of legal and numerical problem-solving where you are key to beating the bad guys. There's nothing better than that thrill of getting the final bit of evidence that pieces the jigsaw together," says Adam Bates, global head of forensic at accountancy firm KPMG.
He is describing why he finds his job "exciting and exhilarating" and why after 19 years he has yet to see a better one. To momentarily trade in professional stereotypes, thrill-seeking is, perhaps, an unlikely reason to join the accountancy profession. But, as some readers might soon discover to their cost, life as a City lawyer can also be lacking in that department.
The forensic accountant is definitely the glamorous, sexy member of the accounting family and its practitioners all have their war stories to tell. Earlier in the year, Australian actor Jason Donovan ranked 31 in one UK accountancy magazine's 'power list' for his depiction of a forensic accountant in the drama Loot, which so far has aired only in Australia. "What Ally McBeal did for lawyers, Donovan may well do for accountants," the magazine wrote hopefully.
The recent case that gave Bates such professional satisfaction involved the KPMG team interviewing whistleblowers. "We met them in a hotel suite and pieced together the fraud," recalls Bates, a veteran of big fraud investigations such as Polly Peck, Maxwell and Guinness. "We then interviewed the suspects and got them to confirm what the whistleblowers said on tape. I just said, 'End of the game'." In this case the client did not want the police involved, but "the two suspects were dealt with and aren't with the company anymore. It was just enormously rewarding," Bates continues. "We felt we were doing exactly the right thing and acting for the right side."
What are forensic accountants?
While the expression may conjure up the frightening image of scalpel-wielding bean-counters, they are the people who are called in on fraud investigations or marital disputes to determine what is really going on. They often work in an investigative capacity, but are also hired to testify in court as expert witnesses to prove or disprove a claim that financial misconduct has taken place.
Why become a forensic accountant?
"I was getting bored to the depths of my skull doing audit work," admits Alex Brown, one of two partners at Amicus Forensics and a member of the Institute of Chartered Accountants in England and Wales's forensic committee. "So I seized on it as something new and different - and it is. When the phone rings you don't know who and what it's going to be. You don't know where your next case is coming from, unlike routine accountancy work where you have your audit and tax clients."
In the last 18 months, Brown's professional time has been taken up by three huge cases: one in the Cayman Islands; the other a huge money laundering case in the US; and the third "involving a Lithuanian cigarette smuggler. Three totally different cases, each one totally absorbing," he says.
The skills sets are very similar between audit and forensic work, reckons Clare Bloom, an executive with Grant Thornton's forensic and investigation services department, who qualified as an accountant in 2002. "The difference really is that, in forensic accountancy, you take it that bit further, investigate why things don't look right; whereas in audit you'd just report it and it would be resolved between partner and client," she says.
Bloom says it would be "frustrating" if, while doing an audit, she spotted a discrepancy, only for "the partner to come over, glance at it and say it was nothing important". She cites a recent high-profile case where the directors of a business involved in drug smuggling and carousel fraud (importing goods VAT-free and adding tax on before selling the items and pocketing the duty) were murdered. It is fascinating reading in the press about cases you are involved in, especially when "you know so much more information" about them, adds Bloom.
Of course, in our post-Enron world, it is boom time for fraud experts, who help their clients pick their way through the implications of a raft of new legislation, from the Sarbanes-Oxley Act in the US to the Proceeds of Crime Act on this side of the Atlantic. Bates has just got the green light from KPMG to treble the size of the practice, which already has some 160 professional staff throughout the UK, in the next three years.
Forensic accountancy wants you
Forensic accounting has been livening up of late, with the big four firms - Deloitte, Ernst & Young (E&Y), KPMG and PricewaterhouseCoopers (PwC) - relinquishing their stranglehold on the market. There has been pressure on the market leaders to hive off their forensic teams due to conflict of interest concerns after Andersen disintegrated in the wake of the Enron scandal, leaving the then big five one short.
So far that pressure has been resisted, with one notable exception. Andrew Mainz left PwC, where he was a partner, with four senior staff to set up Forensic Accounting in 2000. "We were fed up with all the conflict," he told The Lawyer at the time. "How can you possibly act against 'Mega Corp' when 'Mega Corp' might be your client tomorrow?"
His practice has grown from five fee-earners to 40 in the intervening years. "There's been a big problem for the big four," he says. "But it's been different to the one I thought it would be." Forensic accountancy is no longer "an important activity" for those firms, he reckons, as the growth has been with the niche practices. "There's definitely a shortage of good forensic accountants in London," he says. He points to Equitable Life's recent decision to drop its 700m claim for damages from E&Y without hearing expert accounting evidence. "That doesn't suggest the expert evidence reached a strong or persuasive result," he adds. He says one of his most interesting jobs was leading a global accountancy team in the mid-1990s, which identified money in Swiss bank accounts taken from the victims of Nazi persecution.
One practitioner points out, though, that conflicts or not, clients are beholden to the big four. "If an international bank has a really serious problem, where the shit is hitting the fan and you need 20 people in Hungary tomorrow, then you're going to one of the four," he says.
KPMG is not prepared to hive-off its practice. "Our firm believes that the skills we have as fraud investigators are useful for the other bits of the firm," says Bates. "Part of the new procedures for auditors is that they have to consider the possibility of high-level fraud in an organisation. We help the auditors with the more risky clients, brainstorming and identifying where those risks might be." So what is driving KPMG's recruitment drive? Bates admits that the big four practices "aren't really evolving quickly enough to meet what's happening in the market" and that there are competitor firms "who are doing what we should be doing. So we're gaining back the grounds that we believe are rightfully ours," he adds.
Most forensic practices look favourably upon lawyers jumping ship and joining forensic teams (see box). So how do lawyers find it working on the other side? Mark Tantam, lead partner in the fraud investigations team at Deloitte, defected from the commercial bar to forensic accountancy via the Serious Fraud Office, where he was a case controller. "What I love about what I do is that, whereas a lawyer has to be a lawyer in a certain location, I investigate anywhere," he says.
In the last 12 months, Tantam has worked in Croatia, Tokyo, Johannesburg,Germany, Hong Kong and various places in the US. He has not qualified as an accountant and does not give legal advice as a lawyer, although, he says, a client would expect him to understand the basic procedures. "My problem is that I'm always driven by intellectual fascination - otherwise I'd be at the chancery bar and probably better off," he says. But, he adds, he has no regrets.
DO LAWYERS MAKE GOOD FORENSIC ACCOUNTANTS
Most practitioners reckon that lawyers are good candidates for the job. And not because of any grounding in the law, says Andrew Mainz, chairman of Forensic Accounting. Lawyers are good at mastering the issues, both in terms of the substantive points and the detail, and then speaking persuasively and intelligently, he says. KPMG Forensic likes lawyers - its US and Moscow practices are run by them and it has just recruited Sanjay Bhandari, a senior litigator from Baker & McKenzie, to head its e-disclosure practice. For the investigative work you do not have to be a lawyer, says Adam Bates, global head of forensic at KPMG. Some of the skills are accounting-based but a lot of it's to do with good sleuthing skills, he says.
A lawyer becoming a forensic accountant is about crossing boundaries, because the lawyer's task is to win a case within the professional boundaries, says Alex Brown of Amicus Forensics. The forensic accountant's primary duty is to the court rather than the client, and he has to give a vanilla version of his opinion, while the lawyer will quite reasonably run the case to win. Brown sits on the forensic group of the Institute of Chartered Accountants in England and Wales, which wants a quality mark to avoid an accountant's evidence being discredited such as a paediatrician's could be. A lawyer jumping ship is probably more dramatic than a solicitor becoming a barrister, Brown says.
To requalify as an accountant you must undertake four arduous years of training, says Mainz. One musn't be afraid of figures and be prepared to acquire quickly those skills you don't already have. He adds that not every member of the forensic team needs to be a qualified accountant unless they are running audit negligence cases. Bates also points out that many KPMG partners are non-accountants. There's no glass ceiling, he adds. We aren't taking on lawyers to be litigators. We're looking for candidates that are intelligent with a lot of common sense. On the investigation side, you need a bit of front. You can't be the shy and retiring type when you do a raid because you have to `shock and awe' - so you get the computers and do the interviews before they kick you out.