When they hear I’m a CPA, people often ask me questions about taxes. However, I tell them I’m a forensic accountant, so people think I live like a crime fighter. The truth is somewhere in the middle. People don’t realize the depth of experience forensic accountants have in observing organizational and human behavior in the most challenging situations companies or individuals can find themselves in. This perspective can have enormous implications for your business approach.
These are my top three business lessons from being a forensic accountant.
1. You are not immune from fraud.
Dr. Donald Cressey invented the fraud triangle as the most basic model for fraud. This model posits that fraud is more likely when there’s (1) pressure, (2) opportunity, and (3) rationalization.
People who claim they will never commit fraud are not trustworthy. I interpret this comment as an inability to recognize the pressures that can be applied to them to change their behavior. Like most people, I believe I am ethical. However, I have seen many situations in which people will act in a way that is not normal to protect their loved ones.
It is also clear that I could justify this as the best option to protect my family. I tell myself that when the imminent danger has passed, I will be able to help correct the wrongs I have committed.
This is why I try to eliminate such opportunities when I consult with businesses by creating processes and controls. Eliminating fraud opportunities helps people avoid being forced into impossible situations.
2. You can suspend judgment.
Because I can watch how a person could feel pressured into fraud, I try to be neutral with all parties and remove personal biases. To try to see a situation from the perspective of each party, I always put myself in their shoes.
It is easy to judge someone for their actions. I find it very easy to do this to myself. I then ask myself why they would act that way. I begin to think of logical reasons or stories to explain why this person would work the way they did. Once I have gathered a few reasons, I stop judging the actions and view them as responses to various circumstances. Now you can formulate a hypothesis.
Additionally, forensic accountants have been trained to recognize that they cannot determine whether an action is a fraud or not. This decision must be made by a trier (i.e., a judge or jury).
This mindset helps me quickly see the world from another’s perspective in business. It allows me to anticipate the outcome better because I have done it multiple times. My ability to gather more data quickly than others has allowed me to make better decisions.
3. Attention to every detail
People often confuse perfectionionism and someone meticulous. Although I pay great attention to details, I’m quick to let them go if they are not good enough. There is often not enough marginal value to produce a higher-quality product. This is called the law of diminishing marginal return or cost-benefit analysis.
Forensic accounting is a complex field requiring you to see many details simultaneously. It cannot be easy to combine all of the information. When working on a case, I pay attention to every detail.
Once, I could recognize the name on the notary stamp of a critical document. I saw it for only a fraction of a second. It was very relevant to the matter that I was working on. When I visit facilities, my first concern is how they are organized. I also look at the smell, dustiness, and whether it has spiderwebs. While all of these details seem meaningless while I collect them, once I find another record or fact, I might use all of those details to make sense.
My business is often accused of being too busy or lacking focus. Ironically, I am very focused on what I do. As I do many different things, I can get it all to be satisfactory before moving on to the next thing. Because of the breadth and depth of data I have through my work, my “good enough” ends up being better informed than those who may put more effort into a single task.
It is essential to know what the standard is for quality and attention to detail. Because I am a professor, most people are familiar with grading scales. I use a C+-A+ range to discuss the quality of the final product. My goal is to achieve a solid B+/A+ for most of my work. It is essential to recognize when work must be at an A+. This is part of paying attention.