What is a forensic accountant? 

The term “forensic accountant” might bring visions of a hit TV show or suspense filled crime story, but in reality it is less glamorous but still important. Forensic simply means the application of methods and techniques to the investigation of an event or crime. A forensic accountant applies these methods to the review of past business performance and uses that historical data to quantify the financial impact of a specific event on a business entity. The forensic accountant determines what the incurred costs and lost profits are from an event or breach.
 
With the amount of cyber fraud rising exponentially, the need for forensic accountants is greater today than ever before. Every week a new breach is reported in the news, but most breaches do not receive a front page listing, and as a result you do not hear about them. However, trends in Cyber Insurance Claims show  that events occur at a rate greater than five every two days. With the list of companies that have suffered a Cyber Breach growing each day it is unlikely that any adult in the US has not been impacted in one way or another.
 
Cyber breaches have affected retail outlets where the target was credit card information, and increasingly they are targeting health care information that can be used in identity theft. In the future, targets are expected to include utility companies or public infrastructure.

CYBER BREACH - A FORENSIC ACCOUNTANT'S ROLE

A forensic accountant will help ensure any insurance claims for economic damages are accurate and will assist by detailing how the fraud was perpetuated following the breach, including what information was compromised and what potential damages could still be suffered.  They can work with private individuals, small businesses, and large corporations; anyone who is affected by cybercrime can enlist the assistance of a forensic accountant.
 
Following a breach the job of a forensic accountant is to quantify the economic damages suffered due to the Cyber Breach.  This process may include the review of many documents, including:
 
  1. Historical company performance
  2. Financial statements
  3. Forecasts or projections
  4. Interviews with company management
  5. A review of the types of data lost or accessed
  6. A review of laws and obligations following a breach
 
This information will paint a picture of the financial position of the company or individual  prior to the event. This picture is then compared to the actual events following the breach. The differences are the potential economic damages. 

DIFFERENT FORMS OF DAMAGES

Damages can be in the form of lost reputation, lost sales, or even physical damage to infrastructure. Damage to any of these have a real world cost associated with them. Regarding insurance claims the compensable losses are contingent upon the insurance policy wording.
 
If a Point of Sale system is targeted, retail outlets may not be able to process payments for goods or services. Damage to control systems for CNC machines or processing steps that ensure quality can result in damage to work in process, materials, or expensive process equipment. Online reservation systems can be shut down by a cyber breach causing potential customers to move to competing providers. 
 
We have only begun to see the potential impact that results from cyber breaches. As more and more devices get connected to the Internet, the potential for economic damage from a breach will only increase.
 
Following a cyber fraud, a forensic accountant might also be called upon to determine data that is required as evidence in a court of law for litigation or criminal prosecution. The forensic accountants will work closely with the corporations,  legal counsel or a breach coach, and the  insurance company following an incident. 
 
Importantly, forensic accountants are highly educated and trained. At HSNO, the forensic accountants have professional credentials including Certified Public Accountants (CPA), Accredited in Business Valuations (ABV), Certified Fraud Examiners (CFE), Certified Financial Forensics (CFF), and Certified Information Technology Professionals (CITP). This extensive education and training enable our forensic accountants to act as Expert Witnesses in court if the event ends up in litigation or a criminal trial.

Forensic accountants are the piece of the puzzle following a breach that determines the quantum of the financial damages. That is how forensic accountants can help following a breach. 

Craig Streiff is a partner with HSNO in Southern California. He specializes in financial evaluation of damage claims, including the measurement of economic damages involving employee dishonesty, lost wages, business interruption and lost profits, contingent business interruption, extra expense, inventory, construction and surety claims, third-party damage claims, and personal injury. Mr. Streiff has performed forensic accounting analysis on individual claims exceeding $300M. Mr. Streiff is a Certified Public Accountant (CPA) and Certified in Financial Forensics (CFF). Mr. Streiff is also Accredited in Business Valuation (ABV). Craig Streiff has the AICPA Certified Information Technology Professional (CITP) designation indicative of his experience and dedication to advanced technologies. He has consulted and participated in cases involving computer forensics, network security analysis, disaster recovery assessment, and electronic discovery.