Fascinated by forensic accounting and the FBI

What do actuaries do to liven up their office party? Invite an accountant. 

That’s intended as a joke, of course – one of dozens on the Internet devoted to the stereotype of accountants’ (and actuaries’) no-nonsense personalities.

No doubt there may be some boring accountants out there. But accountants also can be so intriguing. From tales of income tax-preparation nightmares to investment escapades to in-depth auditing scenarios, they have fascinating stories to tell.

Well, maybe not the auditing scenarios.

But, all in all, the accounting field has evolved to encompass a number of enticing occupations. In fact, the Web site education.yahoo.net   outlines five accounting careers that it calls “surprisingly exciting”:

•        International accountants travel the world navigating trade agreements or working on international mergers and acquisitions.

•        Forensic accountants investigate financial crimes and insurance fraud on behalf of companies and public law enforcement agencies.

•        IRS special agents investigate criminal violations of the Internal Revenue Code and related financial crimes, often working closely with the Department of Justice, FBI, Drug Enforcement Administration and Department of Homeland Security.

•        Comptrollers (or controllers) are in charge of an organization’s or government’s purse strings.

•        Chief Financial Officers (CFOs) are responsible for a company’s financial goals and budgets. In a publicly traded company, they are accountable for the organization’s financial reporting.

Personally, I’m captivated by the concept of forensic accounting, even though until recently, I had never met a forensic accountant. Then last week, I listened to a presentation by AIB College of Business alumnus James Rumph to the college’s current Accounting students. Tall, dark and appropriately uniformed in a conservative suit with starched white shirt and striped tie, he told about his personal experiences in unearthing financial fraud and corruption.

Rumph has a lot of letters behind his name. He’s a Certified Public Accountant (CPA), a Certified Fraud Examiner (CFE) and an Associate, Life Management Institute (ALMI). In the past, he’s also been licensed as a Certified Internal Auditor (CIA). He did stints in bookkeeping and auditing before building a career in forensic accounting – which means applying accounting methods in some way to litigation and/or the legal system.

For three years, Rumph worked in Des Moines for the FBI, investigating white-collar crime.

“I wasn’t an agent,” he said. “I didn’t carry a gun.”

But he did conduct interrogations and carry out search warrants. That’s pretty intriguing for an accountant.

Forensic accountants may root out evidence of sly spouses hiding assets in divorce cases. They may uncover money-laundering schemes, investment fraud (think: Bernie Madoff), underhanded insurance dealings or other sleight-of-hand financial-asset switcheroos.

And business is booming.

The 2012 annual report issued by the Association of Certified Fraud Examiners revealed that the typical business organization loses 5 percent of its revenues to fraud each year. Applied to the estimated 2011 Gross World Product, this figure translates to a potential projected global fraud loss of more than $3.5 trillion every year.

A key element to fraud investigations involves understanding personal situations, Rumph said – and he stressed that the violators aren’t necessarily bad people. Sometimes, miserable luck – job losses, family deaths or illnesses – create the pressure that drives an individual to resort to financial fraud.

“The ‘fraud triangle’ involves pressure, rationalization and opportunity,” he said. “If you don’t have all three in some fashion, fraud won’t occur.”

Rumph also cited the 80-10-10 rule of forensic accounting: 10 percent of the population will steal at any opportunity; 10 percent will never steal, no matter what; and 80 percent may wander down that path at some time, depending on how they rationalize a particular opportunity.

Rumph now investigates suspected fraud in the insurance industry.

“Most of it is related to agents and commissions,” he said.

Intrigued? Invite an accountant to your next party.