Sense & Accountability

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• April-May 2007 Issue
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Accountants are often the first to poke fun at their own profession, citing the long hours often spent researching tax code or determining proper depreciation treatments. The client interaction side is often much like any other business, but still, the spreadsheet jokes can be enough to put an actuary to sleep. Accounting can be exciting, though (even to outsiders), especially when you add a little sleuth work, crime solving and court time into the mix on occasion. Think of it as a CPA version of CSI (Crime Scene Investigation).

Nancy Koonce does just that. The Idaho CPA is a principal in the Twin Falls, Idaho, firm of Ataraxis Accounting & Advisory Services, Inc. (www.idahocpa.com), and also holds CVA and CFE credentials, for valuation and fraud examination specialties. And while she very much enjoys providing general accounting and tax services to her business clients, these two specialties are what make her job the most challenging.

“Fraud investigation is like a puzzle, and going into a client’s office to find where the problem may be is very much a mystery,” Nancy said. All too often, it’s a mystery that can severely hurt a company.

While the Enrons and WorldComs steal the spotlight as examples of corporate stock fraud, most business fraud involves theft or misappropriated funds and property, according to Nancy. “Small businesses are especially susceptible to theft, embezzlement and other financial crimes. Nearly 30 percent of the small businesses that close do so because of employee theft,” she said, citing U.S. Chamber of Commerce statistics. “It’s my job to help a business or organization find out what happened to their property or money and to help set up safeguards to prevent similar occurrences in the future. Of course, we also need to know who acted inappropriately, and we want to try to get the money or property back, but that often just isn’t possible.”

While her accounting B.S. and MBA from McNeese State University are essential, Nancy says that the key to discovering the problem is often found not from dissecting the financial records, but through questioning of the client’s staff. “As fraud examiners, we don’t have the powers of law enforcement, but we do have specialized training in conducting interviews and gathering information, and as a CPA I also have the know-how it takes to discover questionable bookkeeping practices.”

First action, of course, is to ghost copy all computers involved to prevent losing evidence if data is changed or erased. But when the interviews start, you never know what you might find out. At one client’s business, for instance, she discovered that three people were individually stealing money from the company. “The clues get us started in the right direction; then it’s time to gather the evidence.”

She works solely for the client, but evidence chain rules and other legal concerns must be addressed in the event of court involvement. “If the client wants to pursue legal action, I will support them as a witness in court, but businesses often decline to request law enforcement involvement or to file a civil suit.”

Entities with more regulatory administration, however, are often required to conduct formal inquiries and present evidence, so she is no stranger to the courtroom. Business valuations are also often required in bankruptcy cases and other court dockets, as are court-ordered fraud investigations. And even in more traditional estate planning and taxation roles she has found herself as a witness for her clients in civil and probate actions, most notably in one of the largest estate cases of the past decade.