The industry experienced rapid growth as new financial regulations boosted demand
Los Angeles, CA (PRWEB) September 07, 2012
Early in the last decade, the collapse of Enron and WorldCom, among others, highlighted the need for forensic accountants in the battle against accounting scandals. Following these scandals, the federal government passed the Sarbanes-Oxley Act, which placed accounting regulations on corporations in regards to their internal auditing techniques. “These regulations fueled Forensic Accounting Services industry growth through the recession, when the importance of industry services was again made apparent,” says IBISWorld industry analyst Eben Jose. In the five years to 2012, IBISWorld estimates industry revenue will increase at an annualized rate of 7.9% to $4.3 billion.
Unlike typical accounting firms, firms in the Forensic Accounting Services industry benefit from an increase in the number of business bankruptcies and corporate restructures. When the financial markets collapsed in 2008 and the economy sunk into a recession a year later, the number of bankruptcies skyrocketed by over 50.0%. As a result, financial litigation also soared to new heights, prompting the industry to further expand. In 2008, the American Institute of Certified Public Accountants (AICPA) introduced its Certified in Financial Forensics (CFF) certification, which gave the industry a second tool for measuring the skill set of Certified Public Accountants in regards to their forensic accounting abilities. By 2009, AICPA had issued more than 3,500 CFF certifications. As a result, IBISWorld estimates the number of forensic accounting firms to increase sharply at an annualized rate of 16.5% to 3,922 in the five years to 2012. “Such rapid expansion would normally mean lower profit margins for an industry,” adds Jose, “but that has not been the case, as demand has outpaced rising internal competition.” The vast majority of industry operators are small, local partnerships with only a few employees. However, the Big Four accounting firms (Ernst & Young, Deloitte Touche Tohmatsu, PricewaterhouseCoopers and KPMG International) and mid-tier firms account for a larger share of total industry revenue.
In 2010, the industry benefited from another surge of financial regulations. In response to the financial collapse, federal regulators passed the Dodd-Frank Wall Street Reform Act, which focuses on increasing the transparency of public company financials to government agencies. This regulation has spurred an uptick in growth; revenue is expected to rise 10.2% by the end of 2012. Strong growth is expected to continue in the five years to 2017. Continued demand for financial investigation services in the wake of the recession, combined with an increase in the number of specialized firms, will drive the industry forward. For more information, visit IBISWorld’s Forensic Accounting Services in the US industry report page.
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IBISWorld industry Report Key Topics
This industry provides services that apply accounting concepts and techniques to legal problems. Forensic accountants investigate and document financial fraud and white-collar crimes. They also provide litigation support to attorneys and law enforcement agencies that investigate financial wrongdoings.
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Globalization & Trade
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