This paper presents data generally indicating that, over the seven-year period 1998 through 2004, Certified Public Accountant (CPA) firms' offering of forensic accounting services didn't change very much at all. While a few fluctuations (up and down) of the percentages of firms offering forensic services between years were noted, overall it appears that (1) about the same percentage of CPA firms offered such services in 2004 compared with 1998 and (2) no meaningful changes have occurred during the seven-year period in the types of firms offering such services, for example, in 2004, as in 1998, only around 10 percent of the smallest CPA firms offered forensic services compared with around 42 percent of the largest CPA firms. The apparent lack of growth in forensic services provided by CPA firms is quite surprising considering that demand for such services has likely increased in recent years. Possible implications: If there really is more forensic business out there now than a few years ago, then it appears, based on the survey data, that professionals other that CPAs are capturing much or most of the new business. If this is the case, perhaps it is because many CPA's don't find such work profitable; or, perhaps many CPAs do not seek such work because of inadequate training/education in forensic techniques; or, perhaps, "forensic specialists" are sought after by the market to a greater extent than 'traditional' CPA's that offer forensic accounting as one of many public accounting services. This paper presents the results of national surveys of CPA firms over a seven year period indicating the extent to which such firms offer forensic services and also discusses several possible implications of the data.
INTRODUCTION AND BACKGROUND
Forensic accounting may involve the application of special research and investigative skills in accounting, auditing, finance, quantitative methods, and law in order to collect, analyze, and evaluate evidential matter, and to interpret and communicate results that may be used in legal proceedings or in dispute resolution. (AICPA, 2004). One would think that demand for such services would be increasing in light of recent events such as Enron, Worldcom, Arthur Andersen, and the many other high-profile business-fraud failures, bankruptcies, litigation, the media attention devoted to business fraud, recent legislation (Sarbanes-Oxley), the accounting profession's explosion of attention to all issues fraud related, and the dollar magnitude of operational fraud in the United States.
Consider the following examples that support an expectation of increased demand for forensic services. According to the Association of Certified Fraud Examiners (ACFE), in 2003 an estimated $660 billion was lost by corporations to fraud (ACFE, 2004). And in 2005, ACFE membership increased by almost 15 percent to over 35,000 members (ACFE, 2006). In a recent national survey of U.S. corporations, 39 percent of organizations responding indicated they have considered the need for a forensic accountant while 28 percent said they already sought help from a forensic accountant (Kessler). A 2004 survey of 100 of the largest CPA firms in the United States reported that 60 percent of the firms indicated an increase in their forensics/fraud business (Accounting Today, 2004).
Also, because Statement on Auditing Standards (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit (AICPA, 2002) requires independent auditors to expand procedures directed at fraud detection and the identification of fraud risk factors it would seem reasonable to expect increased demand for forensic accounting services. For example, SAS No. 99 includes the suggestion that an "auditor may respond to an identified risk of material misstatement due to fraud by assigning forensic specialists." (AICPA, 2002). In addition, many of the suggested procedures in SAS No. 99 are forensic in nature. Certain procedures presume the possibility of dishonesty at various levels of management, including override of internal controls, falsification of documents, and collusion. …