Ep. 87: Jason Pierce - Where'd the money go? Auditing, Forensic Accounting, and Business Valuation

Contact Jason Pierce:
https://www.linkedin.com/in/jasonrpierce/
About Jason Pierce:
https://edelsteincpa.com/our-team/jason-r-pierce/
Forensic Accounting Video, "Does my
balance sheet balance?":
https://edelsteincpa.com/does-my-balance-sheet-balance/


FULL EPISODE TRANSCRIPTAdam: (00:00)
 Welcome back to episode 87 of Count Me In, IMA's podcast
about all things affecting the accounting and finance world. This
is your host Adam Larson, and I'm excited to introduce you to our
featured guest, Jason Pierce. Jason is a partner with the firm
Edelstein and Company in Boston, Massachusetts, where he
specializes in financial forensics and business valuations. In
this episode, he talks with my co-host Mitch, about how a
background in audit lends itself nicely to forensic accounting
and business valuations. He also explains how the emergence of
data and data analytics has played a major role in his job today.
To hear more about fraud forensics and financial valuations, keep
listening for upcoming conversation.

Mitch: (00:45)
So, Jason, I know you have a very interesting background and I'd
like to start this conversation with you just kind of explaining
how you started off in your accounting career.

Jason: (01:01)
Yeah, thanks Mitchell. So I'm a military brat, which means we
bounced around the country, from place to place, which I also
think kind of helps with fill in with this, forensic accounting
stuff which we'll talk about in a little bit just from looking at
things as an outsider, but where we landed when I graduated from
high school and college was an in Tennessee. And so after I
graduated, I was looking at, at the time, going through another
year of school due to the 150 hours necessary to get my CPA. But
meanwhile, my dad had shipped off to Alaska and I would go visit
in the summers and see how awesome the summers were up there. And
it just kind of drew me up to that place. Those of you who have
been there, know exactly what I'm talking about. So after, after
graduation, then I moved up to Alaska, started working at a small
CPA firm up there, and I did specialize in auditing for about 10
years before I jumped into this forensic accounting and business
valuation area.

Mitch: (02:10)
So how exactly does auditing turn into forensic accounting and
your business valuation?

Jason: (02:16)
Yeah, for me, it was, it was overtime, you know, so if somebody
would have asked me in college, like what would I be doing today?
You know, forensic, accounting side of things. I wouldn't even
have known what that was. So, so just for the listeners, let's
defined forensic accounting. The easy definition of that is
really the art and science of investigating people and money. Or
I think a lot of the misconception is, is just kind of chasing
the money. But once you figure out the people's side, then the
money side becomes easier to figure out. So there is a
relationship between the two. But so how it happened for me was,
as I said, being a staff auditor in Alaska meant a lot of trips
out to the rural communities, which we call the Bush, right,
where there's no road system and, but I'd be out there and every
now and then there would be a situation where the records are
gone, the former managers are gone or that the city
administrator, what have you and so those audit then turned into
a forensic investigation. And, sometimes that meant just kind of
figuring out what the heck happened. And it also, sometimes it
meant like people made off with some money. And so we had to just
kind of figure out, what we call like pick and shovel sort of
methodology is understanding what happened and when, and how that
translates to the financial statements at the end of the
day.

Mitch: (03:48)
So, with that in mind, you know, can you kind of tell us what it
means to have a forensic mindset and how you were able to kind of
apply some of, you know, your auditing and accounting background
into what you were doing with forensics?

Jason: (04:00)
Yeah. You know, it's interesting with the, with the forensic
mindset compared to what one would traditionally think of as an
auditor, that in an audit you're looking for matching. So like
uniformity, consistency, you know, does, does the check or
purchase order or invoice agree from the date, the payee or the
vendor, the amount and the expense or whatever account code do
all those match with what's going through the general ledger. And
so on the surface, you have this forensic or the audit mindset
where you're digging through the general ledger, making sure that
the financial statements agree in all material respects and all
that good stuff, but what the difference is from a forensic side
of things is you're looking for differences. In other words,
whereas on one hand, we're looking for that uniformity where on a
forensic side, we're looking for, let's say there's a $2,000 dual
signing  check limit where in other words, if there's two
check issued for more than say $2,000, it requires dual check
signers, but lo and behold, there's a lot of checks for $1900. In
other words, if we're looking at things where we have the ability
to look to see if is there round numbers, is there what we call
like, there's a technique called Benford's law, where you could
look to see from the placement of the digits in whatever sort of
metric you're looking at, there should be some uniformity to it.
And without getting into that there's ways where you can test
from a risk based approach to identify like the nice round
numbers, or there's a lot of checks that start with say threes
and that's disproportionate to what would be expected. So there's
ways to look things from a forensic perspective, that are
different from say a traditional audit mindset where you're just
grabbing 40 to 60 cash disbursements and kind of checking those
against the general ledger.

Mitch: (06:16)
So now you have these two different mindsets and you've got
experience with both, but today I know you do a lot of work on
business valuation. So how do auditing and forensic accounting
mesh and ultimately allow you to come up with these business
valuations.

Jason: (06:34)
Yea well, surprisingly or not surprisingly, there's a lot of
accountants that are in this field. And I think primarily is
because we know how things flow through the general ledger. We're
also detail oriented folks, and I think that...