Knowledge and Insights

Traditional roles of Certified Public Accountants (CPAs) in the public sector, whether at the federal, state or local level, revolve around the areas of auditing, financial reporting and management accounting. These roles, however, have undoubtedly expanded to include both detective and reactive forensic accounting services.

Mercadien’s Forensic Accounting and Government Services practices work together, occasionally with attorneys, to serve diverse clients, including state and local agencies and authorities, counties, municipalities and school districts. We are committed to providing meaningful accounting and consulting services, including forensic audits and investigations.

Forensic accountants look for red flags that may uncover suspicious financial activity, which often leads to an in-depth focus on specific transactions, accusations or allegations. Forensic accountants possess a mixture of traditional accounting skills along with professional skepticism and an investigative mindset that can be used to uncover the truth behind various claims made.

According to the Association of Certified Fraud Examiners (ACFE) 2018 Report to the Nations, the government and public administration sector was the third most-represented sector in fraud cases that were examined, right behind the banking and financial services and manufacturing industries. Fraud schemes involving corruption had the highest frequency of occurrence within the public sector, according to the ACFE’s study. Corruption is defined as the wrongful use of influence in a business dealing to procure a benefit for the actor or another person, contrary to the duty and/or the rights of others.  Essentially, it is the use of influence to obtain a personal or private gain. Fraudulent acts, which are intentional and deceptive like corruption, can certainly tarnish one’s reputation. Furthermore, such acts can cause discouragement and loss of trust amongst employees, managers, investors, customers, citizens and other regulatory bodies.

Allegations of wrongdoing are sometimes reported through a hotline established by the client to report fraud, waste and abuse. They may also ensue after internal or external auditors become aware of potentially inappropriate or suspicious activity identified during testing procedures. Attorneys and forensic accountants may work closely during an engagement in an effort to ensure that relevant accounting data is requested and produced. Forensic accounting and other investigative techniques utilized include, but are not limited to:

• discovery and analysis of documents and financial information;
• public record research; and
• reviews of electronic communications and forensic interviews.

Large volumes of data are analyzed to look for patterns and indicators of corruption or any other type of fraudulent activity.

The use of a forensic accountant provides many benefits such as enhancing operational efficiencies, protecting an organization’s reputation and best interests, and managing finances with a professionally skeptic mindset. Forensic accountants can also prove essential in the examination of financial processes geared toward identifying solutions or detecting problems that otherwise may go and remain unnoticed. Forensic audits can be used as a deterrent against potential corruption and/or employee misconduct where the results of such engagements can assist management in developing future action plans to help prevent, detect and deter fraud throughout the organization.

Mercadien’s team of professionals have extensive experience working closely with individuals within various areas of the public sector to provide efficient and effective forensic accounting and/or investigation services. If you have any questions or would like further information, please do not hesitate to contact me at [email protected] or 609-689-9700.