White collar detectives

Don’t call them number-crunchers. The next generation of accountants is being trained to root out fraud and serve as financial watchdogs in the international world of business.

Accountants huddle together to study document.
Accounting students Christina Harding, left, Benjamin Wu and Australia Cazares applied skills they learned in classes by entering as a team in the American Institute of Certified Public Accountants’ 2011 Competition. The “Super Stars” beat out approximately 200 teams from universities across the nation to make it to the semi-final round.

Enron. WorldCom. AIG. Bernie Madoff. Stories of major financial scandals have dominated headlines for the past decade.

ALUMNI AT WORK

Paul White
Headshot of Paul White.

Title: Founding Senior Partner
Firm: White, Zuckerman, Warsavsky, Luna & Hunt, LLP, an accounting and litigation services firm
Graduated: 1956
Degree: Bachelor of Arts in Business Administration/Accounting, College of Business and Economics 2005 Distinguished Alumnus

Q. Describe your work in basic terms:
A. I work closely with the attorney in charge of the case to analyze documents to fulfill an assignment for a client. For example, the work I do in family law is to determine adjusted cash available for support, marital standard of living, valuation of the business, a community property balance sheet, calculations of reimbursements, post-separation accounting and tracing of separate property. We do commercial litigation, fraud cases, work with government agencies, class actions, bankruptcy and personal injury. Since 1987, our company, which has 75 to 85 employees, has worked on approximately 15,000 litigation cases.
Q. What led you to a career in the field of litigation accounting?
A. I got into it by chance. In 1969, I was working as a general accountant when I was asked to do some litigation support work by a tennis buddy. I agreed to do it. Litigation accounting is working for an attorney and their client. It’s adversarial and significantly more challenging than regular accounting. As the controller for a company, you worry about its financial health, but we are working with many clients and different deadlines at the same time. We prepare document requests, write deposition questions, prepare reports, assist the attorney with strategy and many other tasks too enormous to mention all of them.
Q. How did Cal State L.A. prepare you for your chosen career?
A. Cal State L.A. gave me the background in accounting that I needed to start my career. I got into the program with a desire to learn about business. Accountants should know transactional accounting -- understanding all of the transactions in the preparation of reports, taxes, the books, etc. Without that, you don’t really know what you are looking at. I got my first job right after graduation and just worked hard. There’s no substitution for hard work.
Q. You’ve been generous in sharing your knowledge and experience by teaching courses in forensic accounting and litigation services. What are some of the challenges facing accountants today?
A. What’s happened with the advent of new technology is that people have gotten super technologically savvy fraud-wise and can shift money all over the world. There’s no end to their imagination, so there has to be no end to our imagination. Some of them are really bright, creating multiple accounts and aliases. The majority are found out by accountants using common sense. But someone who’s really clever could possibly beat the system.
Q. Why is ethics important for someone in the accounting field?
A. An accountant is only as good as his or her reputation. If an accountant has no integrity, and only works to satisfy the attorney he or she is working for, then it’s going to get around the courthouse or business community very quickly. You can’t win every case. Our job is to present information based upon facts to a judge, who then makes a decision. The judge doesn’t want to hear an opinion without facts.
Q. What other qualities make an accountant successful?
A. Successful forensic accountants must understand law, read documents and understand them. Forensic accountants must absorb information and match it to information or facts they receive days or even weeks later. They must be able to speak clearly, get along with attorneys and clients, have a personality, be truthful and sometimes be a psychologist. Organization is very important. We sometimes have to go through thousands of documents. A forensic accountant must excel at research, be inquisitive, resourceful and be a good listener.

Incidents of financial wrongdoing have led to the downfall of entire corporations, devastated the retirements and salaries of American workers and rattled the public trust.

So it’s more important than ever to ensure the next generation of accountants is properly educated to act as watchdogs in an increasingly complicated world of international business and finance.

“Ethics is becoming more and more important,” said Professor Rick Hayes, who teaches courses in auditing and forensic accounting. “Forensic accountants have seen how employees can have their whole lives turned upside down by financial wrongdoing.”

Accountants are more than just bean counters. They are fiscal detectives taught to produce, gather and analyze financial data to determine the viability of a business.

Demand for quality accountants is high and expected to continue because of society’s concern with financial accountability in both business and government. The state now requires students complete more credits before they can take the certified public accountant exam.

To address this need for versatile accountants, Cal State L.A.’s Department of Accounting has introduced two forensic accounting courses within the past six years, according to Accounting Chair Kathryn Hansen, and a special topics class in ethics made its debut in the spring quarter.

Hansen said, “Forensic accountants are hired by courts or someone who thinks something might be wrong, and once they review the documents for evidence, it can become a court case. When a business person goes into court, it can become a deterrent to others against fraud.”

Though the topic of ethics is not on the CPA exam, it is a subject that every student will face after graduation, Hansen said.

“The rules for the business world are changing,” she explained. “There are different rules and standards for auditors, tax accountants and preparers. This course introduces students to all the different standards of the profession.”

Accounting seniors tested their knowledge recently by entering a team in the American Institute of Certified Public Accountants’ 2011 Competition.

As part of the “Super Stars” team, Cal State L.A. students Benjamin Wu, Christina Harding and Australia Cazares demonstrated their skills in uncovering fraud with a hypothetical case.

For weeks, the team members pored over financial documents, researched Internal Revenue Service and U.S. Securities and Exchange Commission guidelines and memorized corruption laws to craft an analysis as consultants hired by a fictional Texas-based oil company to assess its planned expansion into Nigeria.

“There’s a misperception about what accounting is,” said team captain Wu. “People always think accountants are just number-crunchers. In reality, most of the work we’ll do is consulting. We’re more like problem-solvers.”

The Super Stars, advised by Rick Hayes, beat out approximately 200 teams from universities across the nation to make it to the semi-final round, in which they were required to make a six-minute video that was put up for a public vote online. Though they didn’t receive enough votes to make the final round, the students said it was a good experience and are eager to test their resolve with real clients after graduation.

“It’s about holding true to morals and principles,” explained Harding, who wants to be an accountant to “bust” the Madoffs and Ponzi schemers. “At some point, the pressure from outside sources may affect us. It may occur in our jobs or maybe managers will put us into a shady ethical position, but it comes down to what we believe to be right.”

Cazares added, “I am prepared now, but when the time comes, it will be a different situation. I know that I would try to use all my resources to take on the situation the best way possible.”

All the team members have received offers from major accounting firms after graduation.

Other Cal State L.A. accounting students are getting lessons on ethics through the department’s first course dedicated solely to the subject.

Professor Rafik Elias, who created the proposal for the class, points out that every public company gets audited every year, so the course curriculum addresses ethical issues the students may face as both preparers and auditors.

“If there is unethical behavior in a company, then the financial statements will have fraud,” Elias said. “We try to prevent that by teaching the students about fraud, how not to get involved in it, what kind of pressure is placed on accountants to commit fraud, and what happens when your boss asks you to commit fraud.”

The course explores human factors related to ethics, such as the motivation for fraud, the lure of rewards, the fear of losing a job if the accountant doesn’t agree with the fraud and the fear of retaliation for whistleblowers.

“There’s no shortage of cases of fraud from the preparers’ side … and auditors also have pressure because they want to get paid and keep the client. But we teach our students that there are people out there who rely on these financial statements; and you cannot let them down by agreeing to something that looks unethical,” said Elias.