Forensic Accounting and Fraud Investigation for Non-Experts, Second Edition

By Howard Silverstone and Michael Sheetz
Published by Wiley; 2006; ISBN:
0-471-78487, 294 pages (hardcover); $50

Reviewed by Joseph T. Wells

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I hold the strong opinion that non-experts should not be engaged in forensic accounting and fraud investigation, because these are highly specialized occupations. It would be similar to this author penning Brain Surgery for Amateurs; some skills can be acquired only through education and extensive practical experience. Unlike the worst outcome of performing a lobotomy after reading about the procedure, flubbing a fraud investigation is usually not fatal. But it can be extremely expensive and painful if conducted by a rookie; just ask a defendant from a botched case of the past.

For a book to teach a novice this craft is too much to ask, however. Antifraud education for accountants should begin in college, where qualified teachers in a formal setting can provide proper guidance through myriad case studies and practical exercises. If a little knowledge is a dangerous thing, this well-intended work could be hazardous in the wrong hands. For example, a scant 25 pages is devoted to conducting interviews, the stock-in-trade of investigators. Omitted entirely are such basics as Miranda warnings. (Law-enforcement officers must advise subjects under arrest or in custody of their constitutional rights.)

Equally disturbing is a glaring error or two. The book quotes the 1996 and 2004 Association of Certified Fraud Examiners’ Report to the Nation on Occupational Fraud and Abuse. I have detailed knowledge of these studies because I was the principal researcher for both of them. According to the authors, the ACFE estimated the cost of occupational fraud in 1996 as $400 million, a figure off by orders of magnitude. The actual estimates were $400 billion for 1996 and $660 billion in 2004. Another issue involves the suggested readings. Because this is the second edition, far too many references are from the late 1990s, when the first edition was published. I would challenge readers to even locate much of this material today.

Still, Forensic Accounting and Fraud Investigation for Non-Experts has a lot going for it. The book is written in an easy-to-read style and is divided logically into 13 chapters. Some of them start with a humorous quote. For example, from chapter 2: “The company accountant is shy and retiring. He’s shy a quarter of a million dollars. That’s why he’s retiring.”

Silverstone and Sheetz wisely begin their book with the legal definition of fraud, which can be new territory for CPAs who have taken only a course in commercial law and contracts. The second edition has updates both the Sarbanes-Oxley Act for and the PCAOB rulings. While an accountant will learn little from the treatise on the basics of accounting, chapter 10, on proving cases through documentary evidence, and chapter 11, on analysis tools for investigators, are particularly strong. The experienced forensic accountant or fraud examiner will also find chapter 13, “Documenting and Presenting the Case,” a very useful review of this important area.

Only an idiot or a know-it-all can’t learn something from nearly any book; there are very few I have read that could be described as a waste of time. Forensic Accounting and Fraud Investigation for Non-Experts certainly is not one of them. Indeed, it has become a part of my library and would be a good addition to that of any experienced investigator. Perhaps the “non-expert” tag was added to the title in an effort to broaden sales. If so, that is unfortunate but understandable. Regardless, my advice to a novice is simple: Don’t believe for a moment that you are competent to conduct a fraud investigation by merely reading how it is done. Either get the proper education and experience, or hire those who already know what they are doing.