Increased Demand Predicted for Forensic and Valuation Services
As part of its commitment to serving member needs, the AICPA Forensic and Valuation Services Section regularly surveys FVS professionals to get a sense of the state of the practice today and the trends these professionals will face in the short term. According to the recent 2014 AICPA Survey on International Trends in Forensic and Valuation Services, done in conjunction with CPA Canada, there is currently a healthy demand for forensic and valuation services, and very strong growth potential for the future. This is good news.
The survey found that 76 percent of forensic and 54 percent of valuation respondents expected their practices to grow, with the majority expecting growth of between 10 percent and 50 percent over the next two to five years.
Here are a few predictions — by practice area — from the survey:
Electronic Data Analysis
With the explosion of media coverage and a business imperative to synthesize insight from information, “Big data” is, not surprisingly, the top overall issue among FVS practitioners who responded to the survey. The big data technology and services market is projected to grow at a 27 percent annual growth rate to $32.4 billion through 2017. That surge is having a measurable impact on FVS professionals. Fifty-three percent reported that their clients are developing in-house capabilities to address electronic data analysis needs. Additionally, 85 percent of respondents expect to see an increase in time spent on EDA.
When it comes to prepackaged bankruptcies, a restructuring plan where the terms and procedures have been prearranged and agreed to by the interested parties, 38 percent of respondents expect an increase over the next two to five years. As for what respondents are working on now, 7 percent noted that corporate bankruptcy made up 76 percent to 100 percent of their practices, while another 9 percent said it made up 11 percent to 40 percent.
Looking at growth potential in this practice area, 35 percent foresaw more interest in breach of contracts, 32 percent in intellectual property, 27 percent in business torts cases, 22 percent in mergers and acquisitions, 19 percent in employment, 13 percent in unfair competition, 12 percent in personal injury and 7 percent in wrongful death.
Last year, 35 percent of respondents saw a jump in divorce cases and another 60 percent maintained the same number of cases. The economy was cited as the top reason for the increase, with a stronger economy enabling couples to afford two households and making them more willing to split or sell assets now that asset values have risen again.
This is another area where strong growth is expected, with 10 percent reporting a 25 percent increase in services last year. A total of 54 percent of respondents expect more demand for valuation services over the next two to five years. A rise in demand was projected for: shareholder/partner disputes (34 percent), litigation services (29 percent), contractual disputes (25 percent) and family law/matrimonial disputes (25 percent).
Financial Statement Misrepresentation
Twenty-nine percent of respondents believe valuation of assets carried at fair value would be the most prevalent financial statement misrepresentation issue in the next few years. A whopping 74 percent expect that allegations of inadequate control over financial reporting would be a prevalent issue in conjunction with other issues in the next two to five years.
Fifty-eight percent expect that financial statement fraud committed by company personnel would increase over the next two to five years, 32 percent anticipated fraud by company personnel in collusion with third parties and another 55 percent think that embezzlement committed by company personnel would rise.
Download the complete 2014 AICPA Survey on International Trends in Forensic and Valuation Services. If you are a forensic or valuation professional, you may also be interested in the AICPA 2014 Forensics & Valuation Services Conference, Nov. 9 to 11 in New Orleans.
Preston Willcox, CPA, CGMA, Manager - Forensic and Valuation Services, American Institute of CPAs. Prior to joining the AICPA in 2013, Preston started his career in public accounting, working with a broad range of clients in tax, audit and consulting roles.