Demand strong for forensic accountants in wake of financial crisis
Forensic accounting revenue in the United States is expected to grow 6.8% annually over the next five years.
September 24, 2012
The financial crisis devastated many industries but continued to create opportunities for firms and professionals in forensic accounting.
Demand for forensic accounting services will remain strong over the next five years in the United States as a result of increased financial regulations and continued demand for investigative services in the wake of the recession, according to a new market research report.
Revenue in forensic accounting in the United States is expected to grow 6.8% annually from $4.3 billion in 2012 to $6.0 billion in 2017, according to a report by IBISWorld. That’s a slightly lower rate than the 7.9% annual increase from 2007 to 2012 described in the report. A 7.0% increase in forensic accounting revenue is expected for 2013.
Mike Ueltzen, CPA/CFF, CFE, a former chair of the AICPA’s Certified in Financial Forensics Credential Committee, said the forecast is consistent with what he’s seeing in the market.
“We are seeing increased demand,” said Ueltzen, a founding member of Ueltzen & Co. LLP, a firm in Sacramento, Calif., whose specialties include forensic accounting. “We do special investigations, fraud investigations, valuation work, economic damages and electronic discovery, and across the board we’re seeing significant upticks.”
Profits in the profession total $669.8 million and wages total $1.6 billion, according to the IBISWorld report, whose predictions mirror those described in the AICPA’s 2011 Forensic and Valuation Services Trend Survey. Seventy-nine percent of Forensic and Valuation Services professionals participating in that survey predicted an increase in demand for their services in the next two to five years.
Four in five respondents in the AICPA survey predicted an increase in litigation and regulatory enforcement over the next two to five years. The IBISWorld report said the internal control provisions of the Sarbanes-Oxley Act of 2002 fueled the growth of forensic accounting during the recession. The Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, also led to increased demand for forensic services, according to the report. And the increase in recession-fueled bankruptcies fueled increased litigation that required the attention of forensic accountants.
The Big Four firms of Ernst & Young LLP, PwC, Deloitte LLP, and KPMG LLP command 35% of the market share in forensic accounting, but the profession mostly is served by small firms employing 10 or fewer people, according to the IBISWorld report.
Forensic accounting employees in the United States make an average annual salary of $80,435, according to the IBISWorld report, and wages are projected to increase because of high demand. In addition, Ueltzen said, the supply of forensic accountants is low because the job requires skills such as interviewing techniques and rigorous communication abilities that entry level accountants often don’t possess.
“In an indirect fashion, that kind of constricts the number of people who can participate in the market,” Ueltzen said. “ ... A six to seven percent annual increase in the demand side of it means we’ve got to fill that pipeline with six to seven percent new people. And the pipeline isn’t that robust.”
Ueltzen said computer forensics is an area of enormous potential growth in the sector. In the AICPA survey, 83% of respondents expected greater demand for computer forensic investigators in the next two to five years. More than half said they would hire additional employees in this area.
Businesses that discover anomalies often employ computer forensic accounting experts to image hard drives and interrogate data for additional problems, Ueltzen said.
“We’re talking about enormous amounts of data,” he said. “It’s what you’re going to find out there in the cloud. It’s what you’re going to find out on your cellphone. If you can think of any electronically stored information, it’s subject to discovery. When I started this career some 30-plus years ago, our discovery would consist of finding photocopies of documents. We only do that to a limited extent now. We get everything electronically, and massive amounts of it.”
Ken Tysiac is a Journal of Accountancy and CGMA Magazine senior editor.
FVS Section and CFF credential Membership in the AICPA's Forensic and Valuation Services (FVS) Section provides access to numerous specialized resources in the forensic and valuation services discipline areas, including practice guides, and exclusive member discounts for products and events. Visit the FVS Center at aicpa.org/FVS. Members with a specialization in financial forensics may be interested in applying for the Certified in Financial Forensics (CFF) credential. Information about the CFF credential is available at aicpa.org/CFF.