If you have been thinking about bringing in forensic accounting services to help with a problem that you are facing, the cost of such services might be one of your primary concerns. Forensic accountants are not used as frequently as traditional CPAs, so many people don’t have a good reference for how much this type of professional service costs or how long forensic accounting may be required.
We will use this article to clear up some confusion and give you a better idea of what it takes to retain forensic accounting for your business or personal matter. Of course, we aren’t going to be able to give you an exact quote in this article, as the costs incurred during forensic accounting projects like fraud investigations will vary from one case to the next.
For more specific insight into the costs that you would face, please feel free to reach out to Space Coast Forensics directly for assistance. We’ll work together with you to determine what needs you have, how much time the forensic accounting work will take, and what the costs will be. Take a moment today to get in touch and you can take a big step closer to resolving this matter once and for all.
Who Needs a Forensic Accountant?
There isn’t any point in thinking about the cost of a forensic accountant until you determine if these services are called for in your situation. So, to get started, let’s quickly review some of the occasions that might dictate the use of a forensic accounting team.
Fraud Investigations
One of the common reasons to call in a forensic accounting firm is when financial fraud is suspected in a business. Whether it’s embezzlement, financial statement fraud, or some other type of crime, a forensic accounting corp is the right partner for the job. Whether you know fraud is taking place or you just have a suspicion, it’s never too early to get help.
Divorce Process
In some divorce cases, a forensic accounting professional will be used to look for hidden assets or any other signs of financial impropriety as the two sides work toward a resolution. It could be that both partners want to get help via financial forensics to make sure things are done fairly, or it might be one party that wants an investigation to confirm that the other party isn’t getting away with something.
Insurance Claims
Insurance companies may use forensic accounting to confirm that the claims they are preparing to pay are accurate and legitimate. If a claim has been inflated beyond what the actual damages warrant, that fraud might be uncovered through the financial forensics work that is done along the way. Fraud detection can help save insurance companies significantly, and forensic accounting is a big part of that process.
Those three examples barely scratch the surface, of course, but they are a good indication of the types of work that forensic accountants can do and when they may be retained. Let’s move on to start to get a look at how much it will cost to use these professional services for your own needs.
A General Range
As mentioned above, there is just no way in an article like this to offer you a firm price on forensic accounting services. There are way too many variables involved to make a reasonable guess at how much it is going to cost to deploy forensic accounting within your organization.
For a rough guideline, you might be looking at paying somewhere between $150 – $300 per hour for a professional in this field. That’s far from set in stone, however, and you might find that rates are higher for certain types of work – including prices that exceed $500 per hour. Beyond the per-hour price, some firms will also require a minimal overall retainer that starts in the neighborhood of a few thousand dollars or more.
It’s important not to just assume that forensic accounting is outside of your budget. We’ll talk about this more later, but the cost of forensic accounting could wind up being relatively minor compared to what is saved in the long run through the use of these services. Certified fraud examiners have the potential to save businesses untold amounts of money if they can use fraud investigation to stop illegal activity in its tracks, or prevent it from getting started in the first place. Financial forensics is a powerful tool in the ongoing battle against illegal activity, so you certainly don’t want to rule out forensic accounting over cost concerns until you determine exactly how much it will cost and what the service could do for you.
Understanding the Fee Structures
How you pay for the services of forensic accountants will depend on the relationship you establish with a given firm and the structure they have in place for imposing their fees. There isn’t necessarily one type of fee structure that is better than another – it’s more about fitting the format of the relationship to suit the needs of each party. Let’s take a look at three possibilities for how you might wind up paying for the services of a forensic accountant.
Hourly Rate
This is likely the most common type of payment arrangement for forensic accountants. In this setup, the accountant simply bills the client by the hour, depending on how much work is done. As mentioned above, the per-hour price can vary wildly, but it will be agreed upon upfront before the work is started. This setup is desirable for the accountant because all of the time spent working is sure to be paid – the bill will be sent out based on the actual amount of time put into the job that the client needs to have completed.
It’s often an hourly rate that works best because of the uncertain nature of how long a job will take for the accountant to complete properly. For example, if the financial records that need to be reviewed take longer than expected, or the financial misconduct within a business is more widespread than first believed, there will be the flexibility needed to dive into the investigation and the billing can just be submitted periodically to cover the work that was done.
Of course, that means that the services of the forensic accountant have the potential to cost more than initially expected for the client, so open communication about how many hours will be billed is important. Also, it could come to be that the billable hours are less than what was anticipated, such as if the financial crimes that were suspected prove to not have been committed and a deeper investigation is not necessary.
Fixed Fee
As the name would suggest, a fixed fee billing arrangement means the client agrees to pay a flat rate for the accounting work that is performed, regardless of how long it takes. This isn’t used as frequently, but it can be a simple approach when a very well-defined task needs to be completed. For example, if the forensic accountant is going to serve as an expert witness, and will simply need to appear in court to speak on a given topic for a determined amount of time, agreeing on a fixed price might be the best approach.
Most of the time, the accountant will not want to settle on a fixed fee for more complicated, in-depth cases, as there is the potential for those to run far longer than expected – which would mean the accountant could wind up working essentially for free. So, a fixed fee system is only going to be offered when the scope of the job is clearly defined and easy to measure in terms of how much time it will require.
Retainer Fee
A retainer fee is essentially a deposit on the services of the accountant. For example, if forensic accountants are getting ready to take on a big job, they might require that the client deposits at least a certain amount of money into a trust account before they will start working. That money won’t be given to the accountant just yet, but it will be held as a guarantee that they are going to get paid.
This is an important tool if there is any question regarding the ability of the client to make payments later. In other words, the forensic accountants might not trust that the client is going to pay if billed after the fact, so a retainer fee can be used to alleviate those concerns. Then, as the work is performed, billing can be submitted based on an hourly rate and the money from that trust account can gradually be released.
What Influences the Cost of Forensic Accounting?
There are plenty of variables that impact the cost of forensic accounting services. First and foremost, the price of the services of forensic accountants will vary based on the office you choose to work with – some simply charge more than others. That might be based on past experience that they bring to the table, a particular capability that the firm offers, or other reasons entirely. So, as you look around for forensic accountants that will be able to serve your needs, you will certainly have to take cost into consideration and ask about their rates.
Specialized Tools
Any respected forensic accountant is going to already have a set of tools available to them that can be used to work on cases and get to the bottom of complicated situations. With that said, it might be the case that an additional piece of advanced software is needed for a given project, perhaps something that relates specifically to the industry in question. When that happens, the price of the accountant’s services will need to include whatever costs come along with that tool.
Travel Expenses
In some cases, it might be necessary for the accountant to travel to various locations to interview witnesses, collect evidence, and more. This could mean logging a lot of miles in a vehicle, or it could mean taking flights and staying in hotel rooms. So, if a given project is going to demand a lot of travel – which comes with expenses and takes up time – the price of the work is sure to rise.
Appearing in Court
If the client will not only be asking the forensic accountant to do the research and discovery work to get to the bottom of the case, but also to appear in court and present those findings, additional charges are likely. After all, appearing in court is a time commitment not only during the hearing but also in advance to prepare a statement and get ready for any cross-exam questions that may be presented.
Seeing the Big Picture
It would be easy to see the many costs that can come with retaining a professional to review financial statements and provide other services and think that the investment is just too much. However, that’s a short-sighted view that could leave the individual or business worse off in the long run. Forensic investigations have the potential to save a business untold amounts of money in the future if they uncover fraud or get to the bottom of accounting issues that have been going on for years.
Like anything else, it’s useful to do a cost-benefit analysis on the idea of hiring forensic accountants to see how the idea looks overall. First, it will be necessary to get a quote from an accountant who might be able to take on this project. Then, you can think carefully about what might be saved if the accountant is able to track down money laundering, employee theft, or other forms of white collar crime. Soon enough, it might start to look like the use of forensic accountants could be a steal as compared to allowing these crimes to continue.
Also, you can look at the cost of forensic accountants as valuable from a preventive perspective. If your business has managed to remain free from fraud and other issues over the years, you might be able to maintain that fortunate track record by investing money ahead of time to improve internal controls and enact careful fraud prevention strategies. This type of work will be more affordable than trying to chase down fraud later on, and you’ll gain the peace of mind that comes from knowing your operation is organized properly and is going to be difficult for anyone to defraud.
Get the Answers You Need
There is no reason to sit around and wonder whether or not you can afford to retain forensic accounting services to deal with the issue you are facing. Instead of just wondering, jump into action now by contacting Space Coast Forensics to get a clear picture of what our services would cost and how they could help you deal with whatever is going on in your personal or professional life. From insurance claims and business valuation disputes to litigation support and much more, our knowledge and experience are here to serve you. Thank you for taking a moment to consider our services and we hope to hear from you today.
