As Jeff Harper poured over government airplane records in Alabama, he saw that things didn’t quite match up.
Discrepancies existed between the plane logbooks and service records, said Harper, who reviewed the records as part of his job at the time as a state public accounts examiner. After talking with pilots, he discovered that then-Alabama Gov. Guy Hunt used the government aircraft to travel to preach at Primitive Baptist churches in other states. Though Harper didn’t have the time to investigate the matter further, he noted the discrepancy in his report he later filed with the state.
The Los Angeles Times reported in 1992 that a grand jury investigation into Hunt moved beyond the preaching trips and into other areas of Hunt’s finances. Forced out of office by a 1993 felony ethics conviction, he later received a pardon after paying restitution. Harper’s review of the airplane records initiated the investigation.
It’s all part of a forensic accountant’s job.
“The day-to-day work is very, very detailed,” said Harper, who left his job with the State of Alabama when he pursued his doctorate. “You comb through mounds and mounds of data. It’s not exciting in any way. It’s mundane, almost trivial … until you stumble upon that one thing that makes the difference, and then the excitement of the chase takes over, and the adrenaline starts flowing, and you know you’re on the verge of perhaps something significant.”
Field of opportunity
While some college students on summer vacation visit amusement parks, ISU alumnus Andrew Schroeder spent the summer after his freshman year working at one.
The Networks Scholar from Fort Wayne, who graduated in December 2010, and another student rewrote cash handling procedures and policies for Cedar Point Amusement Park in Sandusky, Ohio.
It was an ironic twist of fate for the graduate born into a family line of accountants. He initially swore he wanted nothing to do with the occupation.
But then he found forensic accounting.
“It offers a random variety of case-based activities that would keep my somewhat short attention span engaged,” Schroeder said. “But all of those cases would require a very strong working knowledge of accounting and provide ample opportunities for analytical work.”
He currently works as an accountant in Fort Wayne, though he hopes to ultimately dedicate himself to forensic assignments.
He already has garnered some experience. At another accounting internship, Schroeder worked in a team analyzing an embezzlement case in which the person under investigation “had taken money in a variety of ways,” he said.
“It was our job to try to determine what those were,” Schroeder added. “I relied heavily on information I had learned while at ISU to try to investigate strange items we found and prove fraud.”
Schroeder took advantage of the forensic accounting minor at ISU, which is less than 10 years old. Its origins can be traced to a 2003 meeting of the accounting department’s advisory board, which includes alumni. Professors attending the meeting asked if ISU should consider adding a forensic accounting course to the curriculum.
“We were just amazed,” said Tom Harris, assistant professor of accounting. “It was unanimous that we really needed that.”
Harris quickly realized that the topic could be expanded into more than just one class. He contacted DeVere Woods, now chair of ISU’s criminology and criminal justice department, and they designed the six-course minor, which has been popular with ISU students majoring in accounting. The minor is a good way for accounting majors to fulfill the course requirements needed to become a certified public accountant, Harris said.
“What we have seen, in the hiring process, is that the forensic accounting minor is giving our accounting majors an advantage over those who do not have the forensic minor,” he added.
Defense Finance and Accounting Services in Indianapolis was particularly interested in hiring ISU graduates who had learned about forensic accounting and fraud examination techniques, said William Svihla, a former ISU accounting professor.
The minor is open to students from all academic areas, as classes teach them the accounting basics they need. ISU professors emphasize that people from a variety of backgrounds can become forensic accountants.
“You’re talking about tracking and crunching numbers, but behind those numbers are people, and people have behavioral patterns,” Harper said. “Criminals have their ways of trying to cover up what they do. You have to sometimes think like a criminal to follow them.”
“Over the years, I had a number of instances where we found that taxpayer money had been diverted for personal use,” Harper said of his work in Alabama. “I testified as an expert witness in trials against tax collectors, license commissioners, probate judges, school board superintendents, people like that who had perpetrated some kind of fraud.”
While in Alabama, he was contacted by accountants in Texas interested in creating a new professional certification, and they organized the Association of Certified Fraud Examiners.
Harper was a charter member of the organization whose ranks quickly mushroomed. The first certifications took place in 1991; by 1995, the group had more than 1,000 certified members. More than 55,000 forensic accountants around the world now boast the organization’s certification.
“The reason the society has grown as it has is because there is a clear need in the business world for specialists who have the scientific tools and intellectual mindset to investigate fraudulent acts, and also to help in determining appropriate systems to prevent fraud,” Harper said.
The organization in 2010 estimated that about 5 percent of a firm’s revenues is lost to fraud, said Harris,. The loss rate is true for companies of different sizes, he explained.
“It’s a problem, and it really hits small businesses, because small businesses don’t have the personnel to separate duties within the company,” Harris added. “So that makes it much easier for a fraud to be perpetrated.”
As more people become educated about forensic accounting, the more difficult it will be to commit fraud, Harris said. He added that forensic accountants also analyze fraud prevention.
“Usually, when the fraud examiner gets a case, the company has already been taken …,” Harris said, “and so all they’re doing is tallying up who’s responsible for this and how many dollars the company lost.”
Back to work
Svihla, a 1980 ISU graduate, knows the demand for forensic accounting first-hand. He majored in criminology and accounting at ISU with hopes of getting into law enforcement, though he ultimately became a professor while earning his Ph.D. and certification as a forensic accountant.
He taught accounting courses while working for Svihla and Associates, a CPA firm started by his wife, Terri Svihla. Yet the private firm’s demands kept increasing, leaving him at a crossroads.
“The reason why I left academia is increasingly the services we were getting related to forensic accounting. It was getting difficult to accept them because of the time commitments they might have in terms of what I would feel ethically inclined to take,” Svihla said. “If I were to take the cases, then it would mean something at ISU would suffer, and I was not willing to do that.”
Svihla, who had implemented elements of forensic accounting into his ISU classes in the 1990s, now focuses much of his work at the firm on fraud examination and internal control risk assessment services. He gets called in when there is concern about potential fraud.
Attorneys typically hire certified fraud examiners to analyze a case, Svihla said. While he has seen an increase in requests, it doesn’t necessarily mean that there is an increase in people committing fraud.
“As the economy has gone south and businesses have started suffering, they start looking at their bottom line a little more closely and looking at their expenses,” Svihla said, “and because of that, oftentimes they discover something that’s amiss.”
Harper, Harris and Svihla agree that the field provides tremendous opportunities for students, who need an analytical mind, patience and sometimes even a willingness to testify in court about their work. Sometimes, attorneys will challenge not only a forensic accountant’s findings, but also the person’s credentials and background, said Svihla, who once went through a three-day deposition for a case.
“You have to understand that it’s difficult, and you have to understand what the purpose of this is,” Svihla said. “It is not really about you as a person as it is about the attorneys trying to build the strongest case for themselves.”
Even more opportunities have emerged for forensic accountants during the past decade. The U.S. Department of Homeland Security has hired more fraud examiners, Harper said, to track money laundering and funding of terrorist organizations.
“You have to have somebody that can go in and dig through and follow the money trail, and find out where that money originated from, find out who uses it, what they spend it on, and there are records for virtually everything we do nowadays with the electronic financial systems that we have,” Harper said. “It’s a question of being savvy enough to understand those systems, and diligent enough to follow sometimes five, six, seven dozen transactions intended to throw an auditor off.”
Austin Arceo is the interim assistant director of media relations.