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The 2014 AICPA Survey on International Trends in Forensic and Valuation Services

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Page 1: The 2014 AICPA Survey on International Trends › wp-content › uploads › 2015 › 08 › ... · Alan Zysman Additional contributions were made by the following member volunteers:

The 2014 AICPA Survey on International Trendsin Forensic and Valuation Services

Page 2: The 2014 AICPA Survey on International Trends › wp-content › uploads › 2015 › 08 › ... · Alan Zysman Additional contributions were made by the following member volunteers:

Copyright © 2014 American Institute of CPAs. All rights reserved.

DISCLAIMER:�7KH�FRQWHQWV�RI�WKLV�SXEOLFDWLRQ�GR�QRW�QHFHVVDULO\�UHƃHFW�WKH�SRVLWLRQ�RU�RSLQLRQ�RI�WKH�$PHULFDQ�,QVWLWXWH�RI�&3$V��LWV�GLYLVLRQV�DQG�its committees. This publication is designed to provide accurate and authoritative information on the subject covered. It is distributed with the XQGHUVWDQGLQJ�WKDW�WKH�DXWKRUV�DUH�QRW�HQJDJHG�LQ�UHQGHULQJ�OHJDO��DFFRXQWLQJ�RU�RWKHU�SURIHVVLRQDO�VHUYLFHV��,I�OHJDO�DGYLFH�RU�RWKHU�H[SHUW�DVVLVWDQFH�LV�UHTXLUHG��WKH�VHUYLFHV�RI�D�FRPSHWHQW�SURIHVVLRQDO�VKRXOG�EH�VRXJKW�

)RU�PRUH�LQIRUPDWLRQ�DERXW�WKH�SURFHGXUH�IRU�UHTXHVWLQJ�SHUPLVVLRQ�WR�PDNH�FRSLHV�RI�DQ\�SDUW�RI�WKLV�ZRUN��SOHDVH�HPDLO�FRS\ULJKW#DLFSD�RUJ�ZLWK�\RXU�UHTXHVW��2WKHUZLVH��UHTXHVWV�VKRXOG�EH�ZULWWHQ�DQG�PDLOHG�WR�WKH�3HUPLVVLRQV�'HSDUWPHQW��$,&3$������/HLJK�)DUP�5RDG��'XUKDP��1&������������

0HPEHUV�RI�WKH�����t���$,&3$�&HUWLƂHG�LQ�)LQDQFLDO�)RUHQVLFV��&))®) Committees provided information and guidance for this white paper and advised the authors and staff. The committee members are listed below.

2013 CFF Credential Committee 2014 CFF Credential Committee

%RE�+DUULV��&KDLU� %RE�+DUULV��&KDLU5REHUW�%RQDYLWR� &KULVWLQH�%DNHUAnna Maria Cicirello Anna Maria Cicirello-RVHSK�'RROH\� -ROHQH�)UDVHUJolene Fraser Gerald FujimotoGerald Fujimoto Jeff MooreJeff Moore Timothy PearsonBarry Sussman Barry Sussman5DQG\�:ROYHUWRQ� 5DQG\�:ROYHUWRQKoutayba Yamak Koutayba Yamak Alan Zysman

Additional contributions were made by the following member volunteers:

Ted BaskervilleCorey Anne BloomTim Bryan5RQ�'L0DWWLDJim Koerber5RQ�6HLJQHXU

AICPA Staff:

-HDQQHWWH�.RJHU��9LFH�3UHVLGHQW�u�0HPEHU�6SHFLDOL]DWLRQ�DQG�&UHGHQWLDOLQJ(GG\�3DUNHU��6HQLRU�7HFKQLFDO�0DQDJHU�u�)RUHQVLF�DQG�9DOXDWLRQ�6HUYLFHV3UHVWRQ�:LOOFR[��0DQDJHU�u�)RUHQVLF�DQG�9DOXDWLRQ�6HUYLFHV

CPA Canada Staff:

)UDQN�&RODQWRQLR��'LUHFWRU�u�3URIHVVLRQDO�/HDUQLQJ�DQG�'HYHORSPHQW9DOHULH�/HDFK��3ULQFLSDO�u�3URIHVVLRQDO�/HDUQLQJ�DQG�'HYHORSPHQW0DULVRO�$UUR\R��&RRUGLQDWRU�u�3URIHVVLRQDO�/HDUQLQJ�DQG�'HYHORSPHQW

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TABLE OF CONTENTS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Top lssues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

&DVH�6WXG\����6XFFHVVLRQ�3ODQQLQJ�LQ�D�1LFKH�3UDFWLFH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �

Insights Into Practice Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

(OHFWURQLF�'DWD�$QDO\VLV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �

� � &DVH�6WXG\����%LJ�'DWD�0RYHV�WR�&HQWHU�6WDJH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

� � &DVH�6WXG\����7KH�$GYDQWDJHV�:KHQ�%DQNUXSWF\�DQG�)UDXG�7HDPV�-RLQ�)RUFHV . . . . . . . . . . . 10

� 'DPDJH�&DOFXODWLRQV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

� )DPLO\�/DZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Financial Statement Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Business Industry Respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

:KHUH�'LG�7KH\�:RUN". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Fraud Prevention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

� (FRQRPLF�'DPDJHV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Financial Statement Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

� 6KDUHKROGHU�'LVSXWH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

� � &DVH�6WXG\����7ZR�&3$V�:HLJK�LQ�RQ�6KDUHKROGHU�RU�3DUWQHU�'LVSXWHV . . . . . . . . . . . . . . . . . . . 20

Page 4: The 2014 AICPA Survey on International Trends › wp-content › uploads › 2015 › 08 › ... · Alan Zysman Additional contributions were made by the following member volunteers:

EXECUTIVE SUMMARY

$V�SDUW�RI�LWV�FRPPLWPHQW�WR�VHUYLQJ�PHPEHU�QHHGV��WKH�$,&3$�)RUHQVLF�DQG�9DOXDWLRQ�6HUYLFHV��)96��6HFWLRQ�UHJXODUO\�VXUYH\V�)96�SURIHVVLRQDOV�WR�JHW�D�VHQVH�RI�WKH�VWDWH�RI�practice today and of the trends these professionals will be facing in the short term. The FVS Section undertook a landmark survey that gathered input from a range of sources. This is the ILUVW�VXUYH\�WKDW�KDV�EHHQ�GLVWULEXWHG�WR�ERWK�$,&3$�DQG�&3$�&DQDGD�PHPEHUV��PDUNLQJ�LWV�debut as an international study.

)RUHQVLF�DFFRXQWLQJ�VHUYLFHV�JHQHUDOO\�LQYROYH�WKH�DSSOLFDWLRQ�RI�VSHFLDOL]HG�NQRZOHGJH�DQG�LQYHVWLJDWLYH�VNLOOV�SRVVHVVHG�E\�&3$V�WR�FROOHFW��DQDO\]H�DQG�HYDOXDWH�HYLGHQWLDO�PDWWHU�DQG�WR�LQWHUSUHW�DQG�FRPPXQLFDWH�ILQGLQJV�LQ�WKH�FRXUWURRP��ERDUGURRP�RU�RWKHU�OHJDO�DGPLQLVWUDWLYH�YHQXH��9DOXDWLRQ�VHUYLFHV�DUH�WKH�DSSOLFDWLRQ�RI�VSHFLDOL]HG�NQRZOHGJH��DSSURDFKHV�DQG�PHWKRGV�WR�HVWDEOLVK�D�GHWHUPLQDWLRQ�RI�YDOXH��3URIHVVLRQDOV�VSHFLDOL]LQJ�LQ�IRUHQVLFV�DQG�YDOXDWLRQ�SURYLGH�VHUYLFHV�WR�WKHLU�FOLHQWV��ZKR�DUH�RIWHQ�DWWRUQH\V�DQG�EXVLQHVVHV�DFURVV� an array of industries.

One of the most notable findings in the 2014 survey was the appearance of electronic data DQDO\VLV�u�RU�ELJ�GDWD�u�DW�WKH�KHDG�RI�WKH�WRS�LVVXHV�OLVW��:KLOH�WHFKQRORJ\�FRQFHUQV�ZHLJKHG�LQ�DW�1R����RQ�WKH�OLVW�LQ�WKH������VXUYH\��LW�ZDV�VXUSULVLQJ�LQ������WR�VHH�D�WHFK�LVVXH�UHSODFH�KLULQJ�DQG�UHWDLQLQJ�TXDOLILHG�VWDII��D�SHUHQQLDO�FRQFHUQ�WKURXJKRXW�WKH�SURIHVVLRQ�DQG�LQ�WKH�VSHFLDOL]HG�)96�VHFWRU�LQ�SDUWLFXODU��LQ�WKH�1R����VSRW��6WDIILQJ��LQ�IDFW��GURSSHG�WR�1R����on the most recent survey list. Since by all accounts conditions in the CPA hiring market have RQO\�WLJKWHQHG�LQ�WKH�ODVW�WZR�\HDUV��LW�LV�SRVVLEOH�WKDW�ELJ�GDWD�PRYHG�WR�WKH�WRS�RI�WKH�OLVW�GXH�WR�JUHDWHU�SXEOLF�DZDUHQHVV�RI�WKH�VXEMHFW��ZKLFK�KDV�SURPSWHG�GHHSHU�DWWRUQH\�DQG�FOLHQW�awareness of its potential uses.

2YHUDOO��WKH�VXUYH\�LQGLFDWHG�KHDOWK\�GHPDQG�IRU�IRUHQVLF�DQG�YDOXDWLRQ�VHUYLFHV�DQG�VWURQJ�SURVSHFWV�IRU�WKHLU�IXWXUH��$�WRWDO�RI�����RI�IRUHQVLF�DQG�����RI�YDOXDWLRQ�UHVSRQGHQWV�H[SHFWHG�WKHLU�SUDFWLFHV�WR�JURZ�ZLWK�WKH�PDMRULW\�H[SHFWLQJ�JURZWK�RI�EHWZHHQ�����DQG� ����RYHU�WKH�QH[W�WZR�WR�ILYH�\HDUV���

7KH�YDVW�PDMRULW\�RI�UHVSRQGHQWV�WR�WKLV�VXUYH\�KDV�H[SHULHQFHG�RU�LV�H[SHFWLQJ�WR�H[SHULHQFH�LQFUHDVHG�GHPDQG�IRU�WKHLU�VHUYLFHV��)RU�H[DPSOH�

��7KLUW\�HLJKW�SHUFHQW�RI�VXUYH\�UHVSRQGHQWV�H[SHFW�D�MXPS�LQ�SUHSDFNDJHG�EDQNUXSWFLHV�LQ�WKH�QH[W�WZR�WR�ILYH�\HDUV�

��,Q�WKH�IDPLO\�ODZ�DUHD������UHSRUWHG�WDNLQJ�RQ�PRUH�GLYRUFH�FDVHV

��:LWKLQ�YDOXDWLRQ�VHUYLFHV������RI�UHVSRQGHQWV�H[SHULHQFHG�D�����WR�����LQFUHDVH�LQ�VHUYLFHV�during the last year

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 2

Rod Burkert
Rod Burkert
Page 5: The 2014 AICPA Survey on International Trends › wp-content › uploads › 2015 › 08 › ... · Alan Zysman Additional contributions were made by the following member volunteers:

,Q�VRPH�FDVHV��WKH�VXUYH\�DVNHG�UHVSRQGHQWV�WR�PDNH�SUHGLFWLRQV�DERXW�WUHQGV�LQ�VSHFLILF�SUDFWLFH�DUHDV��7R�WKDW�HQG������WKRXJKW�YDOXDWLRQ�RI�DVVHWV�FDUULHG�DW�IDLU�YDOXH�ZRXOG�EH�WKH�PRVW�SUHYDOHQW�ILQDQFLDO�VWDWHPHQW�PLVUHSUHVHQWDWLRQ�LVVXH�LQ�WKH�QH[W�WZR�WR�ILYH�\HDUV��ZKLOH�����FLWHG�LQDGHTXDWH�GLVFORVXUHV�RI�PDWHULDO�WUDQVDFWLRQV�DQG�IUDXG��DQG�����SRLQWHG�WR�UHYHQXH�UHFRJQLWLRQ��:LWKLQ�WKH�IUDXG�DUHQD������WKRXJKW�ILQDQFLDO�VWDWHPHQW�IUDXG�FRPPLWWHG�E\�FRPSDQ\�SHUVRQQHO�ZRXOG�LQFUHDVH�LQ�WKH�QH[W�WZR�WR�ILYH�\HDUV��DERXW�RQH�WKLUG�SUHGLFWHG�IUDXG�E\�FRPSDQ\�SHUVRQQHO�LQ�FROOXVLRQ�ZLWK�WKLUG�SDUWLHV��DQG�����H[SHFWHG�D�ULVH�LQ�IUDXG�by third parties.

5HJDUGLQJ�SURIHVVLRQDO�UHTXLUHPHQWV��ZKHQ�DVNHG�ZKDW�FUHGHQWLDOV�UHVSRQGHQWV�UHTXLUH�RI�WKRVH�SURYLGLQJ�IRUHQVLF�DFFRXQWLQJ�VHUYLFHV��D�&3$�ZDV�WKH�PRVW�IUHTXHQWO\�UHTXLUHG�FUHGHQWLDO��7KH�&3$��FRXSOHG�ZLWK�WKH�&HUWLILHG�LQ�)LQDQFLDO�)RUHQVLFV��&))®��FUHGHQWLDO��SURYLGHV�WKH�PRVW�GHVLUDEOH�FRPELQDWLRQ�RI�FUHGHQWLDOV�LQ�WKH�DUHDV�RI��IUDXG�SUHYHQWLRQ��detection and response; financial statement misrepresentation; damages calculations; EDQNUXSWF\��DQG�HOHFWURQLF�GDWD�DQDO\VLV��/LNHZLVH��WKH�&3$�FRXSOHG�ZLWK�WKH�$FFUHGLWHG�LQ�%XVLQHVV�9DOXDWLRQ��$%9TM) credential was the most widely desired combination of credentials for valuation engagements.

The AICPA FVS Section also commissioned a study of professionals in business and industry �%,��WR�JDWKHU�WKHLU�IHHGEDFN�RQ�ZRUNLQJ�ZLWK�IRUHQVLF�DQG�YDOXDWLRQ�SURIHVVLRQDOV��7KH�VXUYH\�UHVXOWV�SURYLGH�YDOXDEOH�LQIRUPDWLRQ�IRU�&3$V�RQ�WKH�WUHQGV�DIIHFWLQJ�WKHLU�FOLHQWV��KRZ�WKH\�DUH�UHVSRQGLQJ�WR�WKRVH�WUHQGV��DQG�ZKLFK�VHUYLFHV�WKH\�PD\�QHHG�IURP�RXWVLGH�H[SHUWV��

0RUH�WKDQ�KDOI�RI�WKH�VXUYH\�UHVSRQGHQWV�������KDG�H[SHULHQFHG�IUDXG�LQ�WKH�SDVW�\HDU���$PRQJ�RWKHU�LQVLJKWV�DERXW�)96�SURIHVVLRQDOV�LQ�%,��WKH�VXUYH\�RIIHUHG�D�XQLTXH�RSSRUWXQLW\�WR�JDXJH�ZKDW�NLQGV�RI�IUDXG�SUHYHQWLRQ�WHFKQLTXHV�DUH�EHLQJ�XVHG��*LYHQ�WKH�YDULHW\�RI�DSSURDFKHV��WKH�PRVW�SRSXODU�UHVSRQVH�ZDV�JHQHUDO�LQWHUQDO�FRQWUROV��������IROORZHG�E\�GLYLVLRQ�RI�UHVSRQVLELOLWLHV�������DQG�DSSURSULDWH�RYHUVLJKW�E\�PDQDJHPHQW�DQG�GLUHFWRUV��������

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 3

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THE RESPONDENTS

Who Participated

There were 443 professionals who responded to the VXUYH\������ZHUH�GHGLFDWHG�)96�SUDFWLWLRQHUV�DQG�����professionals in business and industry. Of the dedicated )96�SUDFWLWLRQHUV������ZRUNHG�LQ�SXEOLF�DFFRXQWLQJ�RU�FRQVXOWLQJ�ƂUPV��7KH�VHFRQG�ODUJHVW�JURXS�u�����u�ZRUNHG�LQ�EXVLQHVV�DQG�LQGXVWU\��([KLELW���SURYLGHV�D�complete overview.

7KH�UHVSRQGHQWV�ZHUH�DQ�H[SHULHQFHG�JURXS��ZLWK� WZR�WKLUGV�RU�PRUH�KDYLQJ����RU�PRUH�\HDUV�RI�H[SHULHQFH�LQ�WKHLU�QLFKH�DQG�����KDYLQJ����\HDUV�RU�PRUH�RQ�WKH�MRE���5HVSRQGHQWV�LQ�ƂUPV�RIIHUHG�D�UDQJH�RI�VHUYLFHV��EXW�WKH�WRS�FDWHJRULHV�ZHUH�

)UDXG�SUHYHQWLRQ��GHWHFWLRQ�DQG�UHVSRQVH������

9DOXDWLRQ������

(FRQRPLF�GDPDJHV������

Exhibit 1

55%

23%

3%

9%

1%9%

Q�3XEOLF�$FFRXQWLQJ�RU�&RQVXOWLQJ�)LUP����

Q�%XVLQHVV�DQG�,QGXVWU\����

Q�(GXFDWLRQ���

Q�*RYHUQPHQW��LQFOXGLQJ�UHJXODWRU\�ERGLHV���

Q�/DZ�(QIRUFHPHQW���

Q�2WKHU���

PARTICIPANTS

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 4

Rod Burkert
Page 7: The 2014 AICPA Survey on International Trends › wp-content › uploads › 2015 › 08 › ... · Alan Zysman Additional contributions were made by the following member volunteers:

7KH�ODUJHVW�JURXS�u�����u�FDPH�IURP�RUJDQL]DWLRQV�ZLWK�RQH�WR�ƂYH�DFFRXQWLQJ�SURIHVVLRQDOV�DQG�D�WRWDO�RI�����ZRUNHG�LQ�RUJDQL]DWLRQV�ZLWK����RU�IHZHU�DFFRXQWLQJ�SURIHVVLRQDOV��,Q�����RI�DOO�WKH�RUJDQL]DWLRQV�UHSUHVHQWHG��WKH�DFFRXQWLQJ�SURIHVVLRQDOV�VSHQW�QR�PRUH�WKDQ�����RI�WKHLU�WLPH�RQ�IRUHQVLF�DQG�YDOXDWLRQ�VHUYLFHV��2QO\�����RI�WKH�SURIHVVLRQDOV�ZRUNHG�IXOO�WLPH�RQ�IRUHQVLF�DQG�YDOXDWLRQ�VHUYLFHV���$�WRWDO�RI�����VDLG�WKDW�XS�WR�����RI�WKHLU�LQGLYLGXDO�WRWDO�KRXUV�ZHUH�generated from forensic and valuation services during WKH�SDVW�\HDU��ZKLOH�DW�WKH�RSSRVLWH�HQG������VDLG�WKDW�PRUH�WKDQ�����ZHUH��$ERXW�����XVHG�D�WKLUG�SDUW\�WR�support and supplement their resources in providing forensic and valuation services.

Optimism About the Future

The respondents were very enthusiastic about the opportunities for forensic and valuation services. A total RI�����RI�IRUHQVLF�DQG�����RI�YDOXDWLRQ�UHVSRQGHQWV�DUH�H[SHFWLQJ�JURZWK�ZLWK�PRVW�DQWLFLSDWLQJ�EHWZHHQ�����DQG�����JURZWK�LQ�WKHLU�SUDFWLFH�RYHU�WKH�QH[W�WZR�WR�ƂYH�\HDUV��2I�WKH������URXJKO\�����RYHUDOO�H[SHFWHG�XS�WR�D�����LQFUHDVH�LQ�GHPDQG�IRU�WKHLU�VHUYLFHV�LQ�WKH�FRPLQJ�WZR�WR�ƂYH�\HDUV��$QRWKHU�����DQWLFLSDWHG�XS�WR�D�����ULVH�LQ�GHPDQG��DQG�DERXW�����ZHUH�ORRNLQJ�WR�D�����RU�KLJKHU�VSLNH��7ZHQW\�SHUFHQW�IRUHVDZ�QR�FKDQJH��DQG�DERXW����H[SHFWHG�D�GHFOLQH�LQ�GHPDQG��

1R�GRXEW�RQH�FRQWULEXWLQJ�IDFWRU�ZDV�WKH�EHOLHI�u�KHOG�E\�WZR�WKLUGV�RI�UHVSRQGHQWV�u�WKDW�WKHUH�ZRXOG�EH�DQ�increase in litigation and regulatory enforcement during WKH�QH[W�WZR�WR�ƂYH�\HDUV��

Exhibit 2

What Services Were Offered?

0 10 20 30 40 50

Q�%DQNUXSWF\�DQG�,QVROYHQF\����

Q�(OHFWURQLF�'DWD�$QDO\VLV����

Q�(FRQRPLF�'DPDJHV����

Q�)DPLO\�/DZ����

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Q�1RQH�RI�WKHVH�����

AREAS OF PRACTICE

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 5

Rod Burkert
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TOP ISSUES

One of the hallmarks of every FVS Trend Survey is the UHVSRQGHQWVp�RSLQLRQ�RQ�WKH�WRS�ƂYH�LVVXHV�IDFLQJ�IRUHQVLF�DQG�YDOXDWLRQ�SURIHVVLRQDOV�RYHU�WKH�QH[W�WZR�WR�ƂYH�\HDUV��7KH�PDMRU�LVVXHV�WKLV�\HDU�ZHUH�D�GHSDUWXUH�IURP�WKRVH�LGHQWLƂHG�LQ�WKH������VXUYH\��DQG�they may be a surprise for many FVS professionals. The comparison between the two surveys can be found in ([KLELW����EXW�KHUH�DUH�VRPH�NH\�SRLQWV�

Electronic data analysis�u�DQRWKHU�WHUP�IRU�WKH�EX]]ZRUG�qELJ�GDWDr�u�GLG�QRW�DSSHDU�RQ�WKH�OLVW� LQ������EXW�MXPSHG�WR�QXPEHU�RQH�WKLV�\HDU���)RU� RQH�SUDFWLWLRQHUpV�WDNH�RQ�ELJ�GDWD��VHH�&DVH� 6WXG\���RQ�SDJH�����$V�VKRZQ�LQ�([KLELW����RQO\� ����RI�UHVSRQGHQWV�VDLG�WKH\�SUDFWLFHG�LQ�WKLV�DUHD�� but electronic data analysis may be called for in a variety of other engagements.

#VVTCEVKPI�CPF�TGVCKPKPI�SWCNKƂGF�UVCHH�UNKRRGF�VQ�PWODGT�ƂXG�HTQO�PWODGT�QPG�NCUV�VKOG� Although this VHHPV�OLNH�D�GUDPDWLF�FKDQJH��WKHUH�DUH�PDQ\�UHDVRQV�to believe that hiring and retention are still critical concerns for FVS practitioners. The CPA profession as a whole is seeing more demand for talent as the economy

rebounds and the baby boomers head into retirement. �)RU�D�ORRN�DW�VPDUW�VXFFHVVLRQ�VWHSV�LQ�DQ�)96�SUDFWLFH��VHH�&DVH�6WXG\���RQ�SDJH�����$W�WKH�VDPH�WLPH��WKH�QHHG�WR�ƂQG�WKH�ULJKW�SHRSOH�FDQ�EH�SDUWLFXODUO\�DFXWH�LQ�VSHFLDOL]HG�DUHDV�VXFK�DV�IRUHQVLF�DQG�YDOXDWLRQ�VHUYLFHV��:KLOH�VWDIƂQJ�PD\�KDYH�VOLSSHG�IURP�WKH�WRS�SODFH��LW�XQGRXEWHGO\�UHPDLQV�D�NH\�FRQFHUQ�IRU�WKRVH� in this practice area.

Increased complexity and scrutiny remain as challenges for CPAs as their approaches and methodologies come under greater scrutiny by judges and governing bodies. Taking second place in this \HDUpV�VXUYH\��WKLV�LVVXH�UHSODFHV�D�VRPHZKDW�UHODWHG�LVVXH�u�NHHSLQJ�DEUHDVW�RI�UHJXODWRU\�FKDQJHV�u� from 2011.

Although concerns about the economy dropped off the list this year, competition and fee pressure remain important issues for FVS practitioners.

Exhibit 3

Top Five Issues Facing Forensic and Valuation Professionals Over the Next Two to Five Years

25%

14%

13%

11%

9%

2014 ISSUES

25%

20%

14%

11%

7%

Electronic data analysis

,QFUHDVHG�FRPSOH[LW\�DQG�VFUXWLQ\�LQ�HQJDJHPHQWV

Competition and fee pressure

5HJXODWRU\�FKDQJHV

Attracting and retaining qualified staff

2011 ISSUES

Attracting and retaining qualified staff

Keeping abreast of regulatory changes

The economy

Competition and fee pressure

Technology

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 6

Rod Burkert
Rod Burkert
Rod Burkert
Page 9: The 2014 AICPA Survey on International Trends › wp-content › uploads › 2015 › 08 › ... · Alan Zysman Additional contributions were made by the following member volunteers:

Getting an early start is the key to succession SODQQLQJ�DW�7KH�.RHUEHU�&RPSDQ\�3$��D�ERXWLTXH�business valuation and forensic accounting practice in +DWWLHVEXUJ��06��$V�DQ�H[DPSOH��WKH�VL[�SHUVRQ�ILUP�has one young professional who was hired directly out RI�FROOHJH�DQG�ZKR�KDV�EHHQ�ZLWK�WKH�ILUP�IRU�VL[�\HDUV��q:HpYH�ZRUNHG�ZLWK�KLP�RYHU�WLPH�WR�HQVXUH�KH�JHWV�WKH�WUDLQLQJ�DQG�VNLOOV�KH�QHHGV�r�LQFOXGLQJ�DWWHQGDQFH�DW�WKH $,&3$�([SHUW�:LWQHVV�6NLOOV�:RUNVKRS��VD\V�-LP .RHUEHU��&3$�$%9�&))��&9$��&)(��7R�HQKDQFH�WKHLU�VNLOOV DQG�FRQILGHQFH��.RHUEHU�OLNHV�WR�VWDUW�\RXQJ�SURIHVVLRQDOV�ZLWK�VPDOO�EXW�LPSRUWDQW�SURMHFWV��VXFK DV�VWUDLJKWIRUZDUG�GLYRUFH�RU�FRXUW�DSSRLQWHG�ZRUN��

But the firm’s outreach begins before students graduate IURP�FROOHJH��q+LULQJ�LQWHUQV�ZKR�DUH�LQ�VFKRRO�DOORZV�you to evaluate their work ethic and their aptitude for WKLV�ZRUN�DQG�WR�LQWURGXFH�WKHP�WR�LW�r�KH�VD\V��q,W�KDV�ZRUNHG�YHU\�ZHOO�IRU�XV�r�7KH�ILUP�LV�DERXW�WR�KLUH�D�woman who has just completed her master’s degree and who has worked for the firm as an intern for two years. .RHUEHU�LV�DOVR�FRQVLGHULQJ�H[SDQGLQJ�KLV�RXWUHDFK�EH\RQG�VWXGHQWV�LQ�DFFRXQWLQJ�SURJUDPV��WR�LQFOXGH�WKRVH�JHWWLQJ�PDVWHUpV��GHJUHHV��LQ�VXEMHFWV�VXFK�DV�economics or finance.

5HSXWDWLRQ�LV�DQ�LPSRUWDQW�HOHPHQW�LQ�WKH�VXFFHVV�RI�DQ�)96�SUDFWLFH��ZKLFK�LV�ZK\�.RHUEHU�KDV�HQFRXUDJHG�young professionals to speak before Beta Alpha 3VL�FKDSWHUV��WR�SUHVHQW�FRQWLQXLQJ�OHJDO�HGXFDWLRQ�seminars and to write articles that have been published LQ�WKH�0LVVLVVLSSL�6RFLHW\�RI�&3$V�QHZVOHWWHUV��)LQDOO\��ZKHQ�.RHUEHU�JRHV�RQ�VLWH�YLVLWV��KH�EULQJV�D�\RXQJ�professional along so that clients get to know them and VR�WKDW�WKH\�KDYH�ILUVW�KDQG�H[SHULHQFH�ZRUNLQJ�ZLWK�WKHP��q'RQpW�ORRN�DW�WKH�VKRUW�WHUP�r�KH�DGYLVHV�RWKHU�SUDFWLWLRQHUV��q,W�FDQ�WDNH�XS�WR�ILYH�\HDUV�EHIRUH�SHRSOH�UHDOO\�PDVWHU�WKLV�DUHD�r�

Koerber also works to educate students and prospective FDQGLGDWHV�DERXW�IRUHQVLF�DQG�YDOXDWLRQ�VHUYLFHV��ZLWK�which many are unfamiliar. His firm accomplishes this through the presentations for accounting students and WKURXJK�FODVVHV�.RHUEHU�KDV�WDXJKW�DW�/68�LQ�%DWRQ�5RXJH��,Q�KLV�FODVV��.RHUEHU�WULHV�WR�EXLOG�D�VHQVH�RI�H[FLWHPHQW�E\��IRU�H[DPSOH��GLYLGLQJ�WKH�JURXS�LQWR�plaintiffs and defendants and having them work through D�FDVH��q$IWHU�HDFK�FODVV��,�ZRXOG�JHW�HPDLOV�LQTXLULQJ�DERXW�RSHQLQJV�DW�WKH�ILUP�r�KH�VD\V�

Case Study 1: Succession Planning in a Niche Practice

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 7

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Electronic Data Analysis

The research company Gartner Inc. defines big data as qKLJK�YROXPH��KLJK�YHORFLW\�DQG�KLJK�YDULHW\�LQIRUPDWLRQ�DVVHWV�WKDW�GHPDQG�FRVW�HIIHFWLYH��LQQRYDWLYH�IRUPV�of information processing for enhanced insight and GHFLVLRQ�PDNLQJ�r�,Q�VLPSOH�ODQJXDJH��LWpV�DERXW�DFFHVVLQJ�DQG�DQDO\]LQJ�YROXPLQRXV�DPRXQWV�RI�LQIRUPDWLRQ��$W�WKH�HQG�RI�������,QWHUQDWLRQDO�'DWD�Corporation forecasted that the big data technology DQG�VHUYLFHV�PDUNHW�ZRXOG�JURZ�DW�D�����FRPSRXQG�DQQXDO�JURZWK�UDWH�WR�������ELOOLRQ�WKURXJK�������ZKLFK�ZRXOG�EH�URXJKO\�VL[�WLPHV�WKH�JURZWK�UDWH�RI�WKH�RYHUDOO�information and communication technology market.

This year’s results clearly indicate that this surge is KDYLQJ�DQ�LPSDFW�RQ�)96�SURIHVVLRQDOV��HYHQ�LI�WKH\�don’t work directly in this practice area. Much of the LQWHUHVW�PD\�EH�GULYHQ�E\�FOLHQWV��$�IXOO�����UHSRUWHG�WKDW�WKHLU�FOLHQWV�ZHUH�GHYHORSLQJ�LQ�KRXVH�FDSDELOLWLHV�WR�DGGUHVV�HOHFWURQLF�GDWD�DQDO\VLV�QHHGV��1RW�RQO\�GLG�HOHFWURQLF�GDWD�DQDO\VLV�OHDG�WKH�WRS�LVVXHV�OLVW�WKLV�\HDU��EXW�DOVR�����RI�UHVSRQGHQWV�H[SHFW�WR�VHH�DQ�LQFUHDVH�in time spent on electronic data analysis.

Information security is another critical concern for FVS professionals. The survey asked respondents about ORRPLQJ�WKUHDWV�LQ�WKLV�DUHD��DQG�WKHLU�DQVZHUV�DUH� VKRZQ�LQ�([KLELW����

Exhibit 4

Over the Next 2 to 5 Years, What Will Be the Biggest Information Security Threat for Organizations?

14%

14%

4%

11%

6%2%

1%

40%

8%Q�&\EHUVHFXULW\����

Q�0DOLFLRXV�LQVLGHUV����

Q�3HUVRQDO�GHYLFHV�LQ�WKH�ZRUNSODFH����

Q�&ORXG�FRPSXWLQJ����

Q�6RFLDO�QHWZRUNLQJ���

Q�%LJ�GDWD�UHSRVLWRULHV���

Q�5HPRWH�DFFHVV���

Q�2WKHU����

Q�6XSSO\�FKDLQ�VHFXULW\����

SECURITY THREAT

INSIGHTS INTO PRACTICE AREAS

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 8

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$OWKRXJK�WKH�EX]]�DERXW�ELJ�GDWD�KDV�FHUWDLQO\�EHHQ�JURZLQJ��HOHFWURQLF�GDWD�DQDO\VLV��ZKLFK�WRSSHG�WKLV�\HDUpV�OLVW�RI�WRS�LVVXHV�IRU�)96�SUDFWLWLRQHUV��LV�QRW�QHZ�WR�&3$V�LQ�WKLV�DUHD��q,WpV�VRPHWKLQJ�ZHpYH�EHHQ�GHDOLQJ�ZLWK�IRU�VRPH�WLPH�r�QRWHV�7LP�%U\DQ��&3$�&))�&,73��&,6$��(Q&(��D�IRUHQVLF�DFFRXQWLQJ�DQG�WHFKQRORJ\�VHUYLFHV�VHQLRU�PDQDJHU�DW�&URZH�+RUZDWK�LQ�6DFUDPHQWR��&$��The important changes that have moved it to center stage include new technologies that support greater data mining and the fact that clients have developed a more VRSKLVWLFDWHG�XQGHUVWDQGLQJ�RI�LWV�SRWHQWLDO��q7KH\�DUH�GHPDQGLQJ�D�KLJKHU�OHYHO�RI�GDWD�DQDO\VLV�FDSDELOLWLHV�r�Bryan says.

He describes one recent engagement that involved a governmental agency whose investigation of a company required an analysis of all sales data for that entity RYHU�D�WKUHH�\HDU�SHULRG��q:LWK�HYHU\�WUDQVDFWLRQ��WKH�FRPSDQ\�LV�JRLQJ�WR�JHQHUDWH�D�ORW�RI�GDWD��VR�ZH�ZHUH�ZRUNLQJ�ZLWK�DERXW����PLOOLRQ�OLQHV�RI�GDWD�WKDW�KDG�WR�EH�V\QWKHVL]HG�LQWR�VRPHWKLQJ�WKH�DWWRUQH\�FRXOG�XVH�WR�GHIHQG�WKH�FOLHQW�r�KH�H[SODLQV��.H\�FRQVLGHUDWLRQV�LQFOXGH�GDWD�YDOLGDWLRQ��q7\LQJ�WKH�GDWD�WR�D�VRXUFH�that you know is complete and accurate is the biggest FKDOOHQJH��IROORZHG�E\�JHWWLQJ�LW�LQWR�D�XVHDEOH�IRUPDW�r�7KLV�FDVH�UHTXLUHG�WDNLQJ�WKH�GDWD�RXW�RI�D�64/�VHUYHU��D�GDWDEDVH�WKDW�LPSOHPHQWV�WKH�VWUXFWXUHG�TXHU\�ODQJXDJH��DQG�PRYLQJ�LW�WR�WKH�ILUPpV�RZQ�64/�VHUYHU�

New Skills Required

7KLV�ZRUN�UHTXLUHV�D�EURDGHU�VHW�RI�VNLOOV��q6SUHDGVKHHW�WRROV�DUH�QR�ORQJHU�JRRG�HQRXJK�r�%U\DQ�VD\V��q'DWDEDVH H[SHULHQFH�LV�YLWDO�IRU�&3$V�LQ�WKHVH�FDVHV��$W�RXU�ILUP��ZH�KDYH�LQYHVWHG�LQ�SHRSOH�ZLWK�WKLV�H[SHULHQFH�and given them database training opportunities and encouraged obtaining certifications. Spreadsheet tool FDSDELOLWLHV�VWRS�DW�DURXQG���PLOOLRQ�URZV�RI�GDWD��ZKLFK�LV�SRZHUIXO�EXW�QRW�HQRXJK�IRU�D�FDVH�OLNH�WKLV�RQH�r

CPAs also must be able to slice and dice all that data to PDNH�VHQVH�RI�LW��q:H�DUH�UXQQLQJ�TXHULHV�DQG�VDPSOLQJ�data by query to understand it and make sure we have a

JRRG�XQGHUVWDQGLQJ�RI�WKH�GDWD�r�KH�VD\V��q7KH�DQDO\VLV�is driven by the need to answer a query or test a theory UDLVHG�E\�\RXU�VLGH�RU�D�FODLP�IURP�WKH�RWKHU�VLGH��:H DUH�DQDO\]LQJ�PDVVLYH�DPRXQWV�RI�GDWD��WU\LQJ�WR�V\QWKHVL]H�LW�WR�YDOLGDWH�RU�LQYDOLGDWH�D�WKHRU\�r��

The availability of big data is behind several new cases that Bryan has seen in wage and hour litigation. State and federal labor laws require employers to offer workers a certain amount of break time and an uninterrupted lunch break. Employees must clock in or out before and after HDFK�EUHDN�RU�OXQFK��EXW�LI�WKH\�DUH�UHTXLUHG�WR�GR�VR�ILYH�PLQXWHV�HDUO\��VD\��WKDW�FRXOG�DGG�XS�WR�VLJQLILFDQW�RYHUWLPH�GXULQJ�D�\HDU��,Q�RQH�FDVH��qZHpUH�GRZQORDGLQJ�\HDUV�DQG�\HDUV�RI�WLPHVOLS�OHYHO�GDWD�RQ�HYHU\�VLQJOH�HPSOR\HH�r�%U\DQ�VD\V��q,W�ZLOO�DOO�EH�XVHG�WR�GHWHUPLQH�trends and whether the employees are getting their EUHDNV�DQG�PHDO�WLPHV�r�:DJH�DQG�KRXU�OLWLJDWLRQ�LV�QRW�QHZ��EXW�WKHUH�LV�D�QHZ�GHPDQG�IRU�DQ�DQDO\VLV�RI�UDZ�GDWD��q$W�WKH�HQG�RI�WKH�GD\��GDWD�LV�JRLQJ�WR�WHOO�WKH�WUXWK�r�KH�QRWHV�

Gearing Up

,Q�KLV�KLULQJ��%U\DQ�LV�VHHNLQJ�SHRSOH�ZKR�FDQ�DGG�,7�DELOLWLHV�WR�WKHLU�&3$�VNLOO�VHW���q,Q�DGGLWLRQ�WR�D�&3$��,�ORRN�IRU�FRXUVH�ZRUN�RU�PLQRUV�LQ�LQIRUPDWLRQ�V\VWHPV�r�KH�VD\V��q:H�DOVR�RIIHU�LQWHUQDO�WUDLQLQJ��:H�KDYH�RQH�SHUVRQ�GRLQJ�FRQWLQXLQJ�HGXFDWLRQ�LQ�XQLYHUVLW\�OHYHO�classes in 5��D�SURJUDPPLQJ�ODQJXDJH�r

2QH�SRWHQWLDO�VWXPEOLQJ�EORFN�IRU�RUJDQL]DWLRQV�LV�WKH�failure to have the requisite systems to efficiently and HIIHFWLYHO\�PDQDJH�GDWD�DQDO\WLFV��q<RX�KDYH�WR�EHHI�XS�\RXU�V\VWHPV�DQG�KDUGZDUH�DQG�NQRZ�KRZ�WR�XVH�WKHP�r�KH�VD\V��1HZ�DSSURDFKHV�UHTXLUH�WDNLQJ�D�PRUH�KROLVWLF�approach that goes beyond sampling to consider every transaction. Bryan recommends taking some data analysis courses related to big data which can easily be found RQOLQH�DQG�DUH�RIWHQ�IUHH��q,WpV�D�JUHDW�ZD\�WR�LQWURGXFH�\RXUVHOI�WR�WKH�VXEMHFW��DQG�WKH�SULFH�LV�ULJKW�r�KH�VD\V��q:KHQ�FOLHQWV�QHHG�GDWD�DQDO\VLV��WKH\�WKLQN�RI�&3$V�� DQG�WKH\�H[SHFW�XV�WR�KDYH�WKH�VNLOO�VHW�WR�JHW�LW�GRQH�r

Case Study 2: Big Data Moves to Center Stage

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 9

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Bankruptcy

:KHQ�LW�FDPH�WR�SUHSDFNDJHG�EDQNUXSWFLHV��D�KHDOWK\�����H[SHFWHG�DQ�LQFUHDVH�RYHU�WKH�QH[W�WZR�WR�ILYH�\HDUV��:KDW�DUH�UHVSRQGHQWV�ZRUNLQJ�RQ�QRZ"�$�WRWDO�RI����VDLG�WKDW�FRUSRUDWH�EDQNUXSWF\�PDGH�XS�����WR������RI�WKHLU�SUDFWLFHV��ZKLOH�DQRWKHU����VDLG�LW�PDGH�XS�����WR������3HUVRQDO�EDQNUXSWFLHV�PDGH�XS�D�PXFK�smaller portion of their work.

The top five roles being performed in bankruptcy practices demonstrate the range of roles that FVS professionals can play in this area. They were:

([SHUW�IRU�UHFHLYHU�WUXVWHH

([SHUW�IRU�FUHGLWRUVp�FRPPLWWHH

([SHUW�IRU�GHEWRU

5HVWUXFWXULQJ�FRQVXOWDQW

)UHVK�VWDUW�DFFRXQWLQJ

FVS practitioners are used to working with attorneys and other professionals. One CPA has seen the value of FRPELQLQJ�WKH�NQRZOHGJH�IURP�WZR�DUHDV��EDQNUXSWF\�DQG�IRUHQVLFV��XQGHU�WKH�)96�XPEUHOOD��&RUH\�$QQH�%ORRP��&3$�&))��&$��&$ũ,)$��&)(��D�SDUWQHU�RI�WKH�ILUP�RI�013�//&�LQ�0RQWUHDO��&DQDGD��EHOLHYHV�WKDW�there often is an assumption that bankruptcy is due to PLVPDQDJHPHQW��%XW�LW�FDQ�DOVR�EH�D�UHVXOW�RI�IUDXG� or even a combination of both.

6KH�EHOLHYHV�WKDW�WKH�FRPSOH[LW\�DQG�RU�PDJQLWXGH�of the fraud or suspected fraud can be a factor in determining when bankruptcy professionals should turn WR�IRUHQVLF�H[DPLQHUV�WR�DVVLVW�ZLWK�WKH�PDQGDWH��,Q�WKHVH�VLWXDWLRQV��WKH�UROH�RI�WKH�&))�RU�,)$�PD\�YDU\��,W�PD\�LQFOXGH��WKH�JDWKHULQJ�DQG�VHFXULQJ�RI�WKH�HYLGHQFH��including electronic evidence; performing forensic analysis; identifying improper or irregular transactions; DQG�DVVLVWLQJ�LQ�WKH�UHFRYHU\�RI�WKH�IXQGV��q7KH�IRUHQVLF�team may also assist with technology and call upon its forensic technology services to secure evidence and SURWHFW�GDWD�r�%ORRP�VD\V��

,Q�D�FDVH�LQYROYLQJ�WKH�EDQNUXSWF\�RI�D�ODUJH�FRPSOH[�UHDO�HVWDWH�LQYHVWPHQW�FRPSDQ\��WKH�WUXVWHHV�VXVSHFWHG�that fraud may have been present and invited the forensic team to review detailed information. The forensic team assisted in the determination of whether fraud indicators were in fact present and whether fraud had played a key role in the company’s bankruptcy.

Bloom’s advice is simple. She advises professionals to JHW�WKH�ULJKW�WHDP�DQG�H[SHUWLVH�LQ�SODFH�LQ�D�EDQNUXSWF\�case where fraud is suspected. That may include the WHDP�KDYLQJ�NQRZOHGJH�RI�D�YDULHW\�RI�DUHDV�LQFOXGLQJ��DPRQJVW�RWKHUV��IRUHQVLF�,7��DFFRXQWV�UHFHLYDEOH�DQG�SD\UROO��6KH�FRQFOXGHV��q,I�\RXpUH�QRW�VXUH�LI�\RXpUH�GHDOLQJ�ZLWK�IUDXG�LQ�D�EDQNUXSWF\�VLWXDWLRQ��EULQJ�LQ�WKH�IRUHQVLF�H[SHUWV��7KHUH�DUH�D�ORW�RI�EHQHILWV�ZKHQ�RIILFHV�encourage bankruptcy and forensics professionals to ZRUN�WRJHWKHU�r

Case Study 3: The Advantages When Bankruptcy and Fraud Teams Join Forces

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 10

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Damages Calculations

To offer FVS professionals an overview of what their SHHUV�DUH�GRLQJ�LQ�SUDFWLFH��WKH�VXUYH\�TXHVWLRQV�LQ�this area generally focused on practical approaches. )RU�H[DPSOH��WKH�VXUYH\�IRXQG�WKDW�ZKHQ�LW�FRPHV�WR�GDPDJHV�FDOFXODWLRQV������DUH�XVLQJ�D�K\EULG�DSSURDFK������H[�DQWH�DQG�����H[�SRVW�

The survey also asked whether respondents calculated damages for:

:KHQ�GLVFRXQWLQJ�IXWXUH�GDPDJHV�EDFN�WR�SUHVHQW�YDOXH������XVHG�ERWK�DVVXPSWLRQV�DQG�D�GLVFRXQW�UDWH��6L[WHHQ�SHUFHQW�XVHG�RQO\�WKH�GLVFRXQW�UDWH�DQG����XVHG�DVVXPSWLRQV��)RUW\�RQH�SHUFHQW�ZHUH�LQYROYHG�LQ�GDPDJHV�FDVHV�LQYROYLQJ�EUHDFK�RI�FRQWUDFW������EXVLQHVV�WRUWV������PHUJHUV�DQG�DFTXLVLWLRQV������LQWHOOHFWXDO�SURSHUW\������HDFK�IRU�SHUVRQDO�LQMXU\�DQG�HPSOR\PHQW������ZURQJIXO�GHDWK�DQG�����XQIDLU�FRPSHWLWLRQ�� 7KLUW\�QLQH�SHUFHQW�VDLG�WKDW�HFRQRPLF�IDFWRUV�KDG�changed their approach to the damages assessment.

,Q�SUHGLFWLQJ�IXWXUH�GHPDQG������IRUHVDZ�PRUH�LQWHUHVW�LQ�EUHDFK�RI�FRQWUDFWV������LQ�LQWHOOHFWXDO�SURSHUW\������LQFUHDVH�LQ�EXVLQHVV�WRUWV�FDVHV������LQ�PHUJHUV�DQG�DFTXLVLWLRQV������LQ�HPSOR\PHQW������LQ�XQIDLU�FRPSHWLWLRQ������LQ�SHUVRQDO�LQMXU\�DQG����LQ�ZURQJIXO�GHDWK��)RUW\�VL[�SHUFHQW�RI�UHVSRQGHQWV�VDLG�WKH�FDVHV� in which they were involved never went to trial.

Family Law

7KLV�UHPDLQV�D�VROLG�SUDFWLFH�DUHD��ZLWK�PDQ\�SURIHVVLRQDOV�VHHLQJ�JURZWK��,Q�IDFW��ZLWKLQ�WKH�ODVW�\HDU������VDZ�D�MXPS�LQ�GLYRUFH�FDVHV�DQG�DQRWKHU�����PDLQWDLQHG�WKH�VDPH�QXPEHU�RI�HQJDJHPHQWV��:KHQ�DVNHG�WKH�UHDVRQ�IRU�WKDW�LQFUHDVH��WKH�PRVW�SRSXODU�FKRLFH�ZDV�WKH�HFRQRP\��ZKLFK�ZDV�FLWHG�E\�����RI�respondents. This may be because a stronger economy has enabled couples to afford two households and made them more willing to split or sell assets now that asset values have risen again.

Daubert Doings

$PRQJ�WKRVH�WR�ZKRP�LW�DSSOLHG������KDG�IRXQG�����RU�IHZHU�RI�WKHLU�FDVHV�VXEMHFW�WR�D�'DXEHUW�FKDOOHQJH��ZKLOH����KDG�IDFHG�WKHVH�FKDOOHQJHV�LQ�����WR�����RI�WKHLU�FDVHV�DQG����LQ�����WR�������,Q�FDVHV�ZKHUH�DQ�RSLQLRQ�RU�WHVWLPRQ\�KDG�EHHQ�FKDOOHQJHG��WKH�PRVW�OLNHO\�FDXVHV�ZHUH�PHWKRGRORJ\������RI�SDUWLFLSDQWV���ODFN�RI�HYLGHQFH� �����RU�TXDOLILFDWLRQV������

������

�����

������

������

�����

������

0 year

1 year

3 years

5 years

10 years

In perpetuity

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 11

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Among other key findings:

����KDYH�VHHQ�DQ�LQFUHDVH�LQ�DOWHUQDWLYH�GLVSXWH�UHVROXWLRQ��ZLWK�WKH�ODUJHVW�MXPS�LQ�WKH�XVH�RI�PHGLDWLRQ��IROORZHG�E\�DUELWUDWLRQ��FROODERUDWLYH�resolution and binding arbitration

7KLUW\�IRXU�SHUFHQW�KDG�VHHQ�JUHDWHU�XVH�RI�PXWXDOO\�DJUHHG�XSRQ�H[SHUWV�DQG�����KDG�VHHQ�D�ULVH�LQ� FRXUW�DSSRLQWHG�H[SHUWV��$�WRWDO�RI�����KDG�VSHQW� XS�WR�����RI�WKHLU�WLPH�VHUYLQJ�DV�D�MRLQW�H[SHUW�

)RUW\�IRXU�SHUFHQW�VSHQW�XS�WR�����RI�WKHLU�WLPH�WUDFLQJ�separate property as a key component of their tasks. The majority of cases in which respondents were LQYROYHG�������QHYHU�ZHQW�WR�WULDO�

Exhibit 5

In Family Law Cases, What Types of Analyses Do You Perform?

40%

19%

16%

13%

11%

Valuation

Equitable distribution

0DULWDO�YV�QRQ�PDULWDO

Separate vs community property

Standard of living

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 12

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Valuation

This was another area in which strong growth was H[SHFWHG��7HQ�SHUFHQW�KDG�D�����LQFUHDVH�LQ�VHUYLFHV�GXULQJ�WKH�ODVW�\HDU��DQG�����HQMR\HG�D�����ULVH��$� WRWDO�RI�����RI�UHVSRQGHQWV�H[SHFWHG�PRUH�GHPDQG� IRU�YDOXDWLRQ�VHUYLFHV�RYHU�WKH�QH[W�WZR�WR�ILYH�\HDUV��

:KHQ�DVNHG�DQ�RSHQ�HQGHG�TXHVWLRQ�DERXW�DUHDV�LQ�ZKLFK�WKH\�KDG�VHHQ�LVVXHV�HPHUJH�GXULQJ�WKH�ODVW�\HDU��areas they cited included:

&KDQJHV�LQ�HVWDWH�WD[�SURYLVLRQV

Closely held systematic risk premium determinations

Competitive bidding for work

Contributory asset charges

Cost competition

)DLU�YDOXH��LQFOXGLQJ�WKH�LPSDFW�RI�QHZ�SULYDWH�company reporting standards)

Incorporating the recession into both current data and future assumptions

Intangible assets

Municipal property assessment fluctuations

Purchase price allocations

5LVN�VFRSLQJ

Shareholder disputes

9DOXDWLRQ�RI�FRPSOH[�ILQDQFLDO�LQVWUXPHQWV

Technical requirements for contingent analysis �HVSHFLDOO\�IRU�FRQWLQJHQW�FRQVLGHUDWLRQ�LQ�SXUFKDVH�price allocations and use of simulations)

Emerging use of quantitative models for discounts IRU�ODFN�RI�PDUNHWDELOLW\�RQ�WD[�HQJDJHPHQWV�

5HVSRQGHQWV�KDG�VHHQ�D�ULVH�LQ�GHPDQG�IRU�

6KDUHKROGHU�RU�SDUWQHU�GLVSXWH�FDVHV������VHH�&DVH�Study 4 on page 20 for more on these disputes)

&RQWUDFWXDO�GLVSXWHV����

/LWLJDWHG�YDOXDWLRQV����

*LIW�DQG�HVWDWH����

)DPLO\�ODZ�PDULWDO�GLVVROXWLRQ�FDVHV����

,QGXVWU\�VSHFLDOL]DWLRQ����

)DLU�YDOXH�IRU�ILQDQFLDO�UHSRUWLQJ����

%DQNUXSWF\��LQVROYHQF\�DQG�UHRUJDQL]DWLRQ����

1RQ�FDVK�FRPSHQVDWLRQ�YDOXDWLRQ����

(PSOR\HH�VWRFN�RZQHUVKLS�SODQV����

$UHDV�WKH\�EHOLHYHG�ZHUH�PRVW�OLNHO\�WR�H[SHULHQFH�LQFUHDVHG�GHPDQG�LQ�WKH�QH[W�WZR�WR�ILYH�\HDUV�ZHUH��

6KDUHKROGHU�SDUWQHU�GLVSXWHV�����

/LWLJDWLRQ�VHUYLFHV����

&RQWUDFWXDO�GLVSXWHV����

)DPLO\�ODZ�PDWULPRQLDO�GLVSXWHV����

*LIW�DQG�HVWDWH�WD[HV����

%DQNUXSWF\��LQVROYHQF\��UHRUJDQL]DWLRQ����

7KLUW\�ILYH�SHUFHQW�RI�YDOXDWLRQ�UHVSRQGHQWV�KDG� ���RU�PRUH�\HDUV�RI�H[SHULHQFH�LQ�YDOXDWLRQ�� 7KLUW\�VHYHQ�SHUFHQW��WKH�ODUJHVW�JURXS��ZRUNHG�LQ�ILUPV�ZLWK�XS�WR�ILYH�SURIHVVLRQDOV��DQG�D�WRWDO�RI�����ZRUNHG�LQ�ILUPV�ZLWK����RU�IHZHU��7KH�ODUJHVW�VHJPHQW�������KDG�GHYRWHG�XS�WR�����RI�WKHLU�LQGLYLGXDO�KRXUV�WR�YDOXDWLRQ�LQ�WKH�SDVW�\HDU��7KLUW\�IRXU�SHUFHQW�XVHG�KHOS�IURP�DQ�RXWVLGH�WKLUG�SDUW\�WR�SURYLGH�VHUYLFHV��

In considering how their valuation practices had changed their uses of resources:

����KDG�LQFUHDVHG�WKHLU�XVH�RI�WKLUG�SDUW\�UHVRXUFHV

����KDG�DGGHG�YDOXDWLRQ�SURIHVVLRQDOV

2QO\�����KDG�QRWLFHG�PRUH�ODZ�ILUPV�EULQJLQJ�YDOXDWLRQ�SURIHVVLRQDOV�LQ�KRXVH��DQG�DPRQJ�WKDW�JURXS������had seen a resulting impact on the engagements they received from those firms.

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Most did not believe their practices would be affected by standards being proposed by the Private Company &RXQFLO��������EXW�����WKRXJKW�WKH\�ZRXOG�EH�VRPHZKDW�DIIHFWHG�DQG����KLJKO\�DIIHFWHG��

Financial Statement Misrepresentation

:KDW�NLQGV�RI�PLVUHSUHVHQWDWLRQ�GLG�UHVSRQGHQWV�H[SHFW�WR�VHH�LQ�WKH�QHDU�IXWXUH"�7ZHQW\�QLQH�SHUFHQW�EHOLHYHG�valuation of assets carried at fair value would be the most prevalent financial statement misrepresentation LVVXH�LQ�WKH�QH[W�WZR�WR�ILYH�\HDUV��$QRWKHU�����FLWHG�inadequate disclosures of material transactions and IUDXG������WDSSHG�UHYHQXH�UHFRJQLWLRQ�DQG�����WKH�WUHDWPHQW�RI�RII�EDODQFH�VKHHW�DVVHWV�DQG�OLDELOLWLHV��6HYHQW\�IRXU�SHUFHQW�H[SHFWHG�WKDW�DOOHJDWLRQV�RI�inadequate control over financial reporting would be a prevalent issue in conjunction with other issues in the QH[W�WZR�WR�ILYH�\HDUV��ZKLOH�����VDZ�LW�DV�D�SUHYDOHQW�standalone issue. The rest did not believe it would be significant. Investing and wealth management entities ZHUH�PRVW�OLNHO\�WR�H[SHULHQFH�WKH�PRVW�DOOHJDWLRQV�RI�financial statement representations in the respondents’ RSLQLRQ��������IROORZHG�E\�OHQGLQJ�LQVWLWXWLRQV��������VHUYLFH�RUJDQL]DWLRQV��VXFK�DV�KHDOWK�FDUH�������DQG�KLJK�WHFK�FRPSDQLHV��������6HYHQW\�SHUFHQW�RI�UHVSRQGHQWV�said their financial statement misrepresentation cases never went to trial.

Fraud

)LIW\�HLJKW�SHUFHQW�H[SHFWHG�WKDW�ILQDQFLDO�VWDWHPHQW�fraud committed by company personnel would increase LQ�WKH�QH[W�WZR�WR�ILYH�\HDUV������DQWLFLSDWHG�IUDXG�E\�FRPSDQ\�SHUVRQQHO�LQ�FROOXVLRQ�ZLWK�WKLUG�SDUWLHV��DQG�����H[SHFWHG�D�ULVH�LQ�IUDXG�E\�WKLUG�SDUWLHV��'XULQJ�WKH�VDPH�SHULRG��DQRWKHU�����WKRXJKW�WKDW�HPEH]]OHPHQW�FRPPLWWHG�E\�FRPSDQ\�SHUVRQQHO�ZRXOG�ULVH������H[SHFWHG�PRUH�HPEH]]OHPHQW�E\�FRPSDQ\�SHUVRQQHO�LQ�FROOXVLRQ�ZLWK�DQ�RXWVLGHU�DQG����IRUHVDZ�PRUH�IURP�third parties.

,Q�WKH�FDVHV�LQ�ZKLFK�UHVSRQGHQWV�ZHUH�LQYROYHG��IUDXG�was detected using:

,QWHUQDO�LQTXLU\�RU�WLSRII����

:KLVWOHEORZHUV����

%\�DFFLGHQW����

,QWHUQDO�DXGLW����

([WHUQDO�LQTXLU\�RU�WLSRII����

([WHUQDO�DXGLW����

/DZ�HQIRUFHPHQW�LQYHVWLJDWLRQ����

5HJXODWRU\�LQYHVWLJDWLRQ���

/RRNLQJ�DKHDG�RYHU�WKH�QH[W�WZR�WR�ILYH�\HDUV��respondents thought there could be significant improvements in preventing fraud by using internal FRPSXWHU�EDVHG�WRROV��������LQWHUQDO�QHZ�HPSOR\HH�VFUHHQLQJ��������DQ�LQWHUQDO�IUDXG�ULVN�PDQDJHPHQW�SURJUDP��������LQWHUQDO�SK\VLFDO�FRQWUROV��������DQG�LQWHUQDO�ZKLVWOHEORZHU�KRWOLQHV��������$PRQJ�H[WHUQDO�FRQWUROV��UHVSRQGHQWV�WKRXJKW�LPSURYHPHQWV�ZRXOG�EH�VHHQ�GXH�WR�H[WHUQDO�ZKLVWOHEORZHU�KRWOLQHV��������H[WHUQDO��6(&�RU�,56��FRPSXWHU�EDVHG�FRQWUROV��������H[WHUQDO��6(&�RU�,56��LQFUHDVHG�DQG�EHWWHU�WUDLQHG�LQWHUQDO�DXGLW��������DQ�H[WHUQDO�IUDXG�ULVN�PDQDJHPHQW�SURJUDP��������H[WHUQDO�HQIRUFHPHQW�RI�FRPSUHKHQVLYH�YHQGRU�DQG�HPSOR\HH�FRGHV�RI�FRQGXFW��������H[WHUQDO�QHZ�HPSOR\HH�VFUHHQLQJ��������H[WHUQDO�SK\VLFDO�FRQWUROV�������DQG�H[WHUQDO�FXUUHQW�HPSOR\HH� VFUHHQLQJ��������

In the wake of the new SEC whistleblower rules and UHFHQW�IUDXG�FDVHV������GLG�QRW�XVH�DQ�LQYHVWLJDWLYH�UHVSRQVH�SODQ������GLG�QRW�SODQ�FKDQJHV�DQG�����GLG��)RUW\�RQH�SHUFHQW�RI�WKH�RUJDQL]DWLRQV�GLG�QRW�SURYLGH�IUDXG�ULVN�WUDLQLQJ��EXW�����KDG�LQFUHDVHG�WKLV�training because of recent developments. The training they believed was most useful was forensic accounting DQG�LQYHVWLJDWLYH�SURFHGXUHV��������WKH�QDWXUH�DQG�YXOQHUDELOLW\�RI�WHFKQRORJ\��LQFOXGLQJ�FRPSXWHUV��������knowledge about internal control in general and fraud ULVN�LQ�SDUWLFXODU��������NQRZOHGJH�DERXW�FRPSXWHU�GULYHQ�LQWHUQDO�FRQWUROV������DQG�DXGLWLQJ�VWDQGDUGV�������)LIW\�HLJKW�SHUFHQW�RI�WKH�IUDXG�FDVHV�LQ�ZKLFK�respondents were involved did not go to trial.

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BUSINESS AND INDUSTRY RESPONDENTS

Where Did They Work?

$�WRWDO�RI�����RI�EXVLQHVV�DQG�LQGXVWU\�UHVSRQGHQWV�ZRUNHG�LQ�SULYDWHO\�KHOG�8�6��FRPSDQLHV������ZRUNHG� LQ�SXEOLF�FRPSDQLHV������LQ�JRYHUQPHQW��HGXFDWLRQ�RU�QRW�IRU�SURILWV�����ZRUNHG�IRU�IRUHLJQ�HPSOR\HUV�DQG� ���IRU�RWKHUV��

7ZHQW\�ILYH�SHUFHQW�ZHUH�HPSOR\HG�E\�RUJDQL]DWLRQV�ZLWK�UHYHQXHV�RI����ELOOLRQ�RU�PRUH��ZKLOH������WKH�QH[W�ODUJHVW�VHJPHQW��ZRUNHG�IRU�FRPSDQLHV�ZLWK�����PLOOLRQ�WR�����PLOOLRQ�LQ�UHYHQXHV��7ZHQW\�RQH�SHUFHQW�ZHUH�LQ�FRPSDQLHV�ZRUWK�����PLOOLRQ�DQG�XQGHU��ZKLOH�����worked for those worth $50 million to $100 million. The ODUJHVW�SHUFHQWDJH�u����u�ZRUNHG�LQ�PDQXIDFWXULQJ��IROORZHG�E\�����LQ�ILQDQFH�RU�LQVXUDQFH�����LQ�EDQNLQJ�DQG����IRU�D�KHDOWK�FDUH�SURYLGHU��7KH�RUJDQL]DWLRQV�involved employed CPAs with valuation skills in the DFFRXQWLQJ�FRQWUROOHU�IXQFWLRQ��������FRUSRUDWH�ILQDQFH��������WD[��������WUHDVXUHU�������DQG�DFTXLVLWLRQV�������$�WRWDO�RI�����RI�WKH�RUJDQL]DWLRQV�XVHG�WKLUG�SDUW\�YHQGRUV�WR�SURYLGH�YDOXDWLRQ�VHUYLFHV��7KLUW\�HLJKW�SHUFHQW�RI�WKRVH�ZHUH�FKRVHQ�EDVHG�RQ�D�UHIHUUDO�IURP�WKH�H[WHUQDO�

DXGLWRU������EDVHG�RQ�D�UHIHUUDO�IURP�DQ�LQWHUQDO�DXGLWRU�DQG�����IURP�D�UHIHUUDO�IURP�H[WHUQDO�FRXQVHO��7ZHQW\�VL[�SHUFHQW�XVHG�RWKHU�PHWKRGV��LQFOXGLQJ�DXGLW�FRPPLWWHH�VHOHFWLRQ��ZRUNLQJ�UHODWLRQVKLSV�DQG�UHIHUUDOV�IURP�bankers or board members. The largest number of the H[WHUQDO�YDOXDWLRQ�VSHFLDOLVWV�u�����u�ZDV�HPSOR\HG�E\�D�EXVLQHVV�YDOXDWLRQ�ILUP��$QRWKHU�����ZRUNHG�IRU�D�&3$�ILUP������IRU�D�FRQVXOWLQJ�ILUP�DQG����IRU�DQ�LQYHVWPHQW�banking firm.

Fraud Prevention

The survey offered a unique opportunity to gauge what kinds of fraud prevention and detection techniques DUH�EHLQJ�XVHG��VHH�([KLELWV���DQG�����5HVSRQGHQWVp�employers used a wide range of methods. The most popular prevention response was general internal FRQWUROV��������IROORZHG�E\�GLYLVLRQ�RI�UHVSRQVLELOLWLHV�������DQG�DSSURSULDWH�RYHUVLJKW�E\�PDQDJHPHQW�DQG�GLUHFWRUV��������)RU�GHWHFWLRQ��WKH�WRS�FKRLFHV�ZHUH�JHQHUDO�LQWHUQDO�FRQWUROV��������DSSURSULDWH�PDQDJHPHQW�RYHUVLJKW�������DQG�SK\VLFDO�FRQWUROV�������

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Exhibit 6

What Methods Does Your Organization Use to Prevent Fraud?

83%

77%

76%

69%

67%

67%

61%

49%

27%

25%

17%

12%

12%

General internal controls

'LYLVLRQ�RI�UHVSRQVLELOLWLHV

Appropriate oversight by management and directors

Background investigation of new employees

&RPSXWHU�EDVHG�FRQWUROV

Physical controls

Employee and vendor codes of conduct

Internal audit function including conduct of fraud risk assessments

$QWL�IUDXG�HGXFDWLRQ�SURJUDPV

Mandatory vacations

5RWDWLRQ�RI�GXWLHV

%DFNJURXQG�UH�LQYHVWLJDWLRQ�RI�FXUUHQW�HPSOR\HHV

Cybercrime prevention training

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 16

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Exhibit 7

How Did Respondents Detect Fraud?

85%

81%

69%

62%

47%

44%

25%

General internal controls

Appropriate oversight by management and directors

Physical controls

&RPSXWHU�EDVHG�FRQWUROV

Internal audit function including conduct of fraud risk assessments

:KLVWOHEORZHU�KRWOLQH

Cyber information security procedures

RESPONSE

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9LUWXDOO\�QRQH�RI�WKH�RUJDQL]DWLRQV�KDG�VHHQ�DQ�HPHUJHQFH�RI�WKH�XVH�RI�YLUWXDO�FXUUHQFLHV��VXFK�DV�ELWFRLQ���DQG�QRQH�had seen fraud associated with that use.

0RUH�WKDQ�KDOI�RI�WKH�VXUYH\�UHVSRQGHQWV�������KDG�H[SHULHQFHG�IUDXG�LQ�WKH�SDVW�\HDU��$PRQJ�WKH�PRVW�FRPPRQ�W\SHV�RI�IUDXG������KDG�EHHQ�YLFWLPV�RI�FKHFN�IUDXG������RI�HPSOR\HH�H[SHQVH�IUDXG������RI�WKH�PLVXVH�RU�GLYHUVLRQ�RI�DVVHWV�����RI�IDOVH�RU�ILFWLWLRXV�vendor invoices.

Exhibit 8

What Types of Fraud Did Your Organization Experience in the Past Year?

47%

15%

12%

10%

8%

6%

5%

4%

3%

2%

1%

0%

:H�GLG�QRW�H[SHULHQFH�DQ\�IUDXG

Check fraud

(PSOR\HH�H[SHQVH�IUDXG

Misuse or diversion of assets

False or fictitious vendor invoices

Fraudulent billing or credit scheme

Contract or vendor fraud

&\EHUWKHIW�u�H[WHUQDO

7KHIW�RI�LQWHOOHFWXDO�SURSHUW\��WUDGH�VHFUHWV

Fictitious employees and other forms of payroll fraud

Financial statement misrepresentation

&\EHUWKHIW�u�LQWHUQDO

RESPONSE

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Internal inquiry or tipoff was the top method of GHWHFWLQJ�IUDXG��������IROORZHG�E\�LQWHUQDO�DXGLW��������H[WHUQDO�LQTXLU\�RU�WLSRII�������DFFLGHQW�������ZKLVWOHEORZLQJ�������ODZ�HQIRUFHPHQW�LQYHVWLJDWLRQ������DQG�UHJXODWRU\�LQYHVWLJDWLRQ������

:KHQ�LW�RFFXUUHG������RI�WKH�WLPH�IUDXG�ZDV�FRPPLWWHG�E\�DQ�HPSOR\HH�EHORZ�WKH�VHQLRU�PDQDJHPHQW�OHYHO��ZLWK����DW�WKDW�OHYHO�DQG����DW�WKH�RIILFHU�RU�GLUHFWRU�OHYHO��7KH�DJJUHJDWH�ILQDQFLDO�DPRXQW�IHOO�EHORZ�������������RI�WKH�WLPH�DQG�EHWZHHQ���������DQG�������������of the time.

Frauds typically occurred in a wide variety of parts of the RUJDQL]DWLRQ��7KH�KLJKHVW�UHVSRQVHV�ZHUH�LQ�VDOHV�DQG�PDUNHWLQJ�������SXUFKDVLQJ�DQG�DFFRXQWV�SD\DEOH������DQG�FXVWRPHU�VHUYLFH�������

Economic Damages

$�WRWDO�RI�����RI�UHVSRQGHQWVp�RUJDQL]DWLRQV�KDG�QRW�been involved in an economic damages case during WKH�SDVW�\HDU��$PRQJ�WKRVH�WKDW�ZHUH��WKH�FDVHV�PRVW�IUHTXHQWO\�LQYROYHG�HPSOR\PHQW�������SHUVRQDO�LQMXU\������DQG�EUHDFK�RI�FRQWUDFW�������

,Q�WKH�ODUJHVW�SHUFHQWDJH�RI�FDVHV��RUJDQL]DWLRQV�UHOLHG�RQ�D�UHIHUUDO�IURP�H[WHUQDO�FRXQVHO�LQ�VHOHFWLQJ�WKH�H[SHUW�ZKR�WHVWLILHG�LQ�DQ�HFRQRPLF�GDPDJHV�FDVH�������Five percent used a referral from internal counsel and ���IURP�WKHLU�H[WHUQDO�DXGLWRU��

7KH�TXDOLILFDWLRQV�IRU�WKHVH�H[SHUW�ZLWQHVVHV�LQFOXGHG�WKH�&3$�������0%$�������&3$�$%9�������$6$������DQG�&3$�&))�������

Financial Statement Misrepresentation

2QO\����RI�WKH�RUJDQL]DWLRQV�LQYROYHG�H[SHULHQFHG�financial statement misrepresentation during the SDVW�\HDU��)RU�WKRVH�DIIHFWHG��WKH�FDVHV�LQYROYHG�DQ�RYHUVWDWHPHQW�RI�DFFRXQWV�UHFHLYDEOH��LQYHQWRU\��VHFXULWLHV�RU�RWKHU�DVVHWV��������ILFWLWLRXV�RU�RYHUVWDWHPHQW�RI�UHYHQXHV��������RU�LQWHQWLRQDO�RPLVVLRQV�RU�LPSURSHU�GLVFORVXUHV�������7KH�FDVHV�ZHUH�PRVW�RIWHQ�GHWHFWHG�WKURXJK�DQ�LQWHUQDO�DXGLW��������LQ�DQ�H[WHUQDO�DXGLW�RU�E\�DFFLGHQW������HDFK��RU�WKURXJK�ZKLVWOHEORZLQJ������

The 2014 AICPA Survey on International Trends in Forensic and Valuation Services | 19

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:LOO�WKH�RQJRLQJ�UHWLUHPHQW�RI�WKH�EDE\�ERRP�generation and an improving economy spur more VKDUHKROGHU�RU�SDUWQHU�GLVSXWHV"�q7KHUH�LV�QRW�D�EULJKW�OLQH�FRQQHFWLRQ��EXW�LWpV�FHUWDLQO\�WUXH�WKDW�DV�WKH�HFRQRP\�DQG�DQG�HQWHUSULVH�YDOXHV�LPSURYH��WKLQJV�DUH�RIWHQ�PRUH�ZRUWK�ILJKWLQJ�RYHU�r�VD\V�5RQ�6HLJQHXU��&3$�$%9�&))��&*0$��$6$��&9$��PDQDJLQJ�SDUWQHU�RI�6HLJQHXU�*XVWDIVRQ��//3��LQ�/DNHZRRG��&2��+H�reports seeing a spike in interest from attorneys or from partners or shareholders who aren’t getting along.

5RQ�'L0DWWLD��&3$�$%9��&0$��SUHVLGHQW�RI�&RUSRUDWH�9DOXH�3DUWQHUV�LQ�5RFN\�5LYHU��2+��EHOLHYHV�WKDW�&3$V�and attorneys are doing a better job of talking about YDOXDWLRQ�LVVXHV�ZLWK�FOLHQWV��ZKLFK�PDNHV�WKHP�PRUH�aware of the need to hire a professional to help them navigate the process.

Get It in Writing

,Q�WKHVH�GLVSXWHV��6HLJQHXU�RIWHQ�VHHV�FRUSRUDWH�OHJDO�documents that don’t adequately set forth what will happen if the owners differ on critical issues or decide WR�VSOLW��q7KH�RSHUDWLYH�OHJDO�GRFXPHQWV�RIWHQ�GRQpW�adequately define the standard of value that should be used or how qualified business appraisers will be FKRVHQ�r�KH�VD\V��+H�UHFRPPHQGV�D�ERRN�E\�YDOXDWLRQ�H[SHUW Chris Mercer��Buy-Sell Agreements: A Ticking Time Bomb or Reasonable Resolution?��EHFDXVH�LW�RIIHUV�H[DPSOHV�RI�ZRUNDEOH�DQG�IODZHG�DJUHHPHQWV���

7KH�ODFN�RI�VDWLVIDFWRU\�EX\�VHOO�DJUHHPHQWV�LV�DQ�RSSRUWXQLW\�IRU�&3$V��6HLJQHXU�REVHUYHV��q<RX�FDQ�review the legal documents with your clients before they DUH�JRLQJ�WKURXJK�D�WULJJHULQJ�HYHQW��VXFK�DV�D�EXVLQHVV�GLYRUFH��ZKHQ�WKH�SDUWQHUV�DUH�JHWWLQJ�DORQJ�RU�HYHQ�DW�WKH�SRLQW�RI�EXVLQHVV�IRUPDWLRQ�r�KH�DGYLVHV��q/RRN�IRU�details on how a dispute or split will be handled and for ODQJXDJH�RQ�WULJJHULQJ�HYHQWV��VR�WKDW�D�GLVSXWH�ZLOO�QRW�KDYH�WR�RFFXU�GRZQ�WKH�URDG�r�6HLJQHXUpV�ILUP�GRHV�D�JUHDW�GHDO�RI�H[LW�SODQQLQJ�ZRUN��DQG�KH�RIWHQ�ILQGV�WKDW�an owner who has not saved enough for retirement who QRZ�KDV�XQUHDOLVWLF�H[SHFWDWLRQV�DERXW�ZKDW�WKH\�VKRXOG�EH�DEOH�WR�WDNH�RXW�RI�D�EXVLQHVV��ZLOO�W\SLFDOO\�OHDG�WR�D�GLVSXWH��$�ZHOO�VWUXFWXUHG�EX\�VHOO�DJUHHPHQW�FDQ�KHOS�prevent the problem.

'L0DWWLD�DGYLVHV�&3$V�WR�KDYH�UHJXODU�FRQWDFW�ZLWK�WKHLU�clients and to talk about valuation issues as part of those FRQYHUVDWLRQV��q7KH�EXVLQHVV�LV�UHODWLRQVKLS�EDVHG�DQG�WUXVW�EDVHG�r�KH�VD\V��q7KH�FOLHQW�RU�NH\�SHRSOH�ZKR�LQIOXHQFH�WKH�FOLHQW�KDYH�WR�NQRZ�\RX�r�,Q�GLVFXVVLQJ�WKH�VHUYLFH�ZLWK�FOLHQWV��KH�HPSKDVL]HV�WKH�JRDO�RI�PDNLQJ�WKH�EHVW�RI�D�WUDQVDFWLRQ��UDWKHU�WKDQ�WKH�SRWHQWLDO�IRU�disputes and he spends time with clients discussing KRZ�YDOXDWLRQ�FRQFHSWV�UHODWH�WR�WKHLU�RSHUDWLRQV��q$Q�understanding of valuation is a gift that clients can use LQ�WKHLU�EXVLQHVVHV�HYHU\�GD\�r�KH�VD\V�

Case Study 4: Two CPAs Weigh in on Shareholder or Partner Disputes

Shareholder Dispute

7ZR�SHUFHQW�RI�WKH�RUJDQL]DWLRQV�KDG�H[SHULHQFHG�D�shareholder dispute. The cases cited involved dissenting VKDUHKROGHUV��RSSUHVVHG�VKDUHKROGHUV�DQG��LQ�RQH�VLWXDWLRQ�LQ�WKH�qRWKHUr�FDWHJRU\��D�ODUJH�VKDUHKROGHU�purchase. Fair market value was the standard of value XVHG�����RI�WKH�WLPH�DQG�LQYHVWPHQW�YDOXH�LQ�WKH� other cases.

7KLV�DSSHDUV�WR�EH�D�ORZ�QXPEHU�EXW��DV�SUHYLRXVO\�VWDWHG������RI�YDOXDWLRQ�SURIHVVLRQDOV�KDYH�VHHQ�DQ�LQFUHDVH�LQ�WKLV�EXVLQHVV�RYHU�WKH�SDVW�\HDU�DQG�����H[SHFW�WR�VHH�LQFUHDVHG�GHPDQG�RYHU�WKH�QH[W� ����\HDUV�

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The Standard of Value

One sticking point in disputes is often the standard of value to be used. The possibilities might be fair market YDOXH��LQYHVWPHQW�YDOXH�RU�IDLU�YDOXH��DQG�WKH�FKRLFH�LV�D�legal issue that is not determined by a CPA. In a merger RU�DFTXLVLWLRQ��WKH�VWDQGDUG�RI�YDOXH�XVHG�LV�LQYHVWPHQW�YDOXH��6HLJQHXU�VD\V��q0RVW�&3$V�OLYH�LQ�D�IDLU�PDUNHW�YDOXH�ZRUOG��EHFDXVH�WKDWpV�ZKDWpV�XVHG�LQ�HVWDWH�SODQQLQJ�DQG�RWKHU�WD[�UHODWHG�HQJDJHPHQWV�r�+H�QRWHV�WKDW�ZKHQ�ZRUNLQJ�ZLWK�LQYHVWPHQW�YDOXH��WKHUHpV�QRW�DV�much reliable empirical data available. He recommends GF�'DWD�DV�RQH�OHVV�FRVWO\�VRXUFH�RI�HPSLULFDO�YDOXHV�

The Client Viewpoint

2XWVLGH�RI�EXVLQHVV�FRQVLGHUDWLRQV��'L0DWWLD�DGYLVHV�maintaining some perspective on what the issues PHDQ�WR�WKH�FOLHQW��q$Q\�WUDQVLWLRQ�LV�HPRWLRQDO�r�KH�VD\V��q)RU�WKH�VHOOHU��LW�PD\�EH�WKH�RQO\�WUDQVDFWLRQ�of this magnitude in his or her life. The asset they are selling may be as important to them as their family. 2Q�WKH�RWKHU�KDQG��WKH�EX\HU�PD\�KDYH�D�JUHDW�GHDO�RI�XQFHUWDLQW\�DERXW�WKH�GHDO��HVSHFLDOO\�LI�LW�ZLOO�EH�KLJKO\�OHYHUDJHG�r��8QOLNH�LQ�HQJDJHPHQWV�WKDW�DUH�ODUJHO\�FRPSOLDQFH�GULYHQ��LW�PD\�EH�GLIILFXOW�IRU�HDFK�VLGH�WR�remain economically impartial in a buyout or sale.

One complication is the lack of any real market test for WKH�RZQHUVKLS�LQWHUHVWV��,Q�WKH�DEVHQFH�RI�WKLV�WHVW��WKH�valuation can offer comfort and reassurance about the SURSHU�YDOXHV��'L0DWWLD�QRWHV�WKDW�YDOXDWLRQV�DUH�QRW�QHFHVVDULO\�WKH�ILQDO�GHWHUPLQDWLRQ��q,Q�PDQ\�FDVHV��WKH�WZR�VLGHV�ZLOO�XVH�WKH�YDOXDWLRQ�WR�QHJRWLDWH�r�KH�VD\V��q7KDWpV�ZK\�D�ZHOO�GRFXPHQWHG�YDOXDWLRQ�LV�VR�important. You’re educating the buyer and seller about WKH�LVVXHV�LQYROYHG�r�

'HDO�VWUXFWXUH�LV�DQRWKHU�FULWLFDO�FRQFHUQ�DQG�RQH�that can offer chances for negotiation. He cites a hypothetical case in which the ownership interest is ZRUWK����PLOOLRQ��7KH�EX\HU�FDQ�RQO\�ERUURZ�����������VR�WKH�VHOOHU�FDUULHV�D�QRWH�IRU�����������q7KDW�QRWH�ZLOO�GLIIHU�IURP�RQH�JLYHQ�E\�D�EDQN�r�'L0DWWLD�VD\V��q7KH�VHOOHU�PD\�DJUHH�WR�WHUPV�WKDW�D�EDQN�ZRXOG�QRW��VXFK�DV�DQ�LQWHUHVW�IUHH�ORDQ�IRU�WKH�ILUVW�IHZ�\HDUV�r�Other options might allow a moderate interest rate in H[FKDQJH�IRU�D�VHDW�RQ�WKH�FRPSDQ\�ERDUG�RI�GLUHFWRUV��q7KH�VHOOHU�RIWHQ�ZDQWV�WR�PDLQWDLQ�VRPH�NLQG�RI�LQYROYHPHQW�LQ�WKH�EXVLQHVV��VR�WKH\�PD\�EH�ZLOOLQJ�WR�QHJRWLDWH�WHUPV�LQ�H[FKDQJH�IRU�VRPH�VHQVH�RI�FRQQHFWLRQ�DQG�FRQWURO�r�

Pumping Up the Practice Area

Seigneur offers this advice for those who are interested in this practice area:

*HW�WUDLQLQJ�LQ�H[SHUW�ZLWQHVV�VHUYLFHV��7KHVH�GLVSXWHV�are often litigation engagements that will involve UHQGHULQJ�DQ�RSLQLRQ�LQ�FRXUW��q,�RIWHQ�JHW�KLUHG�EDVHG�RQ�P\�UHSXWDWLRQ�DV�D�WHVWLI\LQJ�H[SHUW�DV�PXFK�DV�P\�UHSXWDWLRQ�LQ�EXVLQHVV�YDOXDWLRQ�r�6HLJQHXU�VD\V��q7KH�attorneys know we have the credentials. They also want to be sure we can defend our opinion in court DQG�DUWLFXODWH�RXU�SRVLWLRQV�r�2QH�WUDLQLQJ�UHVRXUFH� is the $,&3$�([SHUW�:LWQHVV�6NLOOV�:RUNVKRS.

3XPS�XS�\RXU�LQWHOOHFWXDO�SURSHUW\�H[SHUWLVH��q$�ORW�RI�YDOXH�UHODWHV�WR�LQWHOOHFWXDO�SURSHUW\�r�6HLJQHXU�QRWHV��%H\RQG�SDWHQWV�DQG�WUDGHPDUNV��WKHVH�HQJDJHPHQWV�PD\�DOVR�LQFOXGH�ZRUNIRUFH�LQ�SODFH��SURSULHWDU\�SURFHVVHV��DUWLVWLF�HQGHDYRUV�DQG�ORJRV�

0DUNHW�\RXUVHOI�WR�DWWRUQH\V��q7KDWpV�ZKHUH�ZRUN�FRPHV�IURP�r�KH�QRWHV��+H�UHFRPPHQGV�PDNLQJ�WKH�most of chances to write for legal publications or speak to attorney groups.

Case Study 4: Two CPAs Weigh in on Shareholder or Partner Disputes �&RQWLQXHG�

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