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Career Center: Making a Career Change
Scott A. Cohen, CFE, CIA, CISA
Director of Internal Audit
NATO Airlift Management Agency
In 2004, Scott Cohen, CFE, CIA, CISA, Director of Internal Audit for NATO Airlift Management Agency, was three years away from retiring from the U.S. Navy when a friend suggested he begin to think about his post-retirement career. Like many professionals making a career transition, Cohen ruminated over his experience, his credentials and, more importantly, what it was going to take to for him to enter the job market as a competitive candidate. It didn't take him long to discover that ACFE resources and the CFE credential were the vital tools he needed to make a smooth transition. "It's a case of not really knowing what you're missing until you learn about it and then wondering how you ever did your job effectively without it," Cohen said.
What made you decide to become a Certified Fraud Examiner (CFE)?
I was having lunch with an IRS agent in Saddam Hussein''s former palace in Baghdad. The idea of being an accountant in law enforcement was intriguing. He explained that part of his job was to seize records and computers, and sometimes, people were not willing to part with them. I asked how I could get involved doing that sort of work, only to learn that at the age of 40, I was too old to apply for a federal law enforcement position. But he said that I could be trained as a forensic accountant or fraud investigator, and I would be the person to whom he would turn over the records for analysis.
I looked into several options and decided that while no one qualification would provide all the training I would need, the CFE credential would provide a solid basis for any further study. The approach is interdisciplinary, drawing on ideas from criminal justice and the law, sociology, accounting and economics. Fraud issues are never one dimensional, and understanding the fundamentals in different disciplines is important to understanding how a problem occurred or can occur and what can be done to detect or prevent fraud.
How did you prepare for the CFE Exam? Where were you in your career when you studied and passed the Exam?
I attended the ACFE Fraud Conference and sat through several lectures, not really knowing from the outset what being a CFE meant. Although I am sure that I missed a lot of details, I was excited by what I saw. The speakers and the people attending were enthusiastic about what they did and were willing to share their stories. One of the lectures I attended discussed the best way to prepare for the CFE exam, and I confirmed what I was told with several of the CFEs at the conference.
I ordered the CFE Exam Prep Course offered by the ACFE. It took about two and a half months to feel that I was ready to take the exam. At the time, I was stationed in Baghdad as the Chief of Logistics for the NATO Training Mission – Iraq. The program allowed me to study when I was able and I used the Fraud Examiners Manual as a reference when I needed something explained in more depth. (As the Director of Internal Audit, I still use the manual and recently wrote the organization's Fraud Management Policy using the template provided on the CD).
When I was ready to take the exam, I planned to take each part on successive Saturdays. While this seemed a bit drawn out, I figured this would give me the best chance at success. And it was a strategy recommended in the lecture at the ACFE Fraud Conference. I did the first part and felt good about how I'd done. Then the bombing started and mortars were falling close enough to the headquarters that it was not safe to go anywhere. So I did the second part. And the bombs were still falling. Before long, I'd completed all parts. Exhausted from the tests and the stress from hearing the rounds fall near us, I went to dinner at the dining facility located behind the palace. Not knowing who the people were that I sat with at dinner, we introduced ourselves, and as it turned out, they worked for the Special Inspector General for Iraqi Reconstruction and three of the five people were CFEs. I was exhausted but happy that I found a little fraternity of like-minded individuals.
How has having your CFE credential helped you in your career?
By attaining the CFE credential, and more importantly, continuing one's professional education, there is a depth of understanding that is achieved and over time, one develops a certain expertise in the field. While I have never strictly worked as a fraud examiner, I have been able to apply what I have learned through the ACFE to positions I have held with the Navy and with NATO, first in Iraq and now as the Director of Internal Audit with the NATO Airlift Management Agency. For example, the policies and procedures developed by NATO provide guidance on how financial management or procurement should function. The guidance, however, does not require an evaluation of fraud when reviewing the financial statements. Additionally, auditors are not trained in how to conduct fraud risk assessments. Through the training and educational resources available through the ACFE, I have been able to incorporate fraud assessment into each audit and to train others in the organization how to detect when fraud may be occurring and what to do about it.
How have you seen the role of the auditor change over the past five years?
There is, of course, a difference between external audit and internal audit. External audit is still primarily focused on determining whether the financial statements are stated fairly in all material respects in accordance with some accounting standard (e.g., GAAP, GAGAS and IFRS). Internal audit used to also focus on the financials and, in many ways, mirrored or supplemented what the external auditors did.
Over the last five years, internal audit has focused more on improving the effectiveness of processes and in helping organizations become more efficient. By shifting the focus away from financial audits, although they are still an important contribution we can make, internal auditors can complement the work of external auditors and provide more "value for money."
This shift in focus also requires that auditors become more business savvy. It is not enough to understand the rules of accounting and point out mistakes that were made. Auditors need to understand the businesses or organizations they work for and to be able to make recommendations that improve how the organization is managed. I believe that understanding the environment within which decisions are made will also make our recommendations more acceptable to line or operational managers and improve the standing of the internal audit function within the organization.
What do you consider your greatest career achievement?
That's a hard question. There are some achievements which provide a lot of satisfaction when they occur and there are some in which we don't realize the benefits from it until years later. When I became the financial manager for a Navy shipbuilding program, we had just awarded the contract for the construction of 12 ships. After the contract was issued, we were required to update the program cost estimate. The last bottom-up estimate was done three years before but now the design of the ship was finalized, we knew where the ships would be built, labor rates, etc. The revised bottom-up estimate reflected an 8 percent increase in the cost of the program. This was considered reasonable as the revised estimate took into account three years' worth of design changes, inflation and actual labor rates for the shipyards where the ships would be built. Small percentages of large numbers can be large and an 8 percent increase in the cost of the program equated to an additional $800 million needed.
The Navy conducted their own bottom-up estimate and determined that not only were we not $800 million short but rather we were $230 million overfunded and they cut our budget. I spent the next several months reviewing their estimate. While estimates are simply educated calculations based on assumptions – and reasonable people can differ on what assumptions are valid – some assumptions are wrong. The Navy's cost analyst had assumed learning curve savings would occur with each production unit instead of each doubling of production; he had applied learning curve savings to non-recurring costs such as tooling and materials, and he assumed that when a system is removed from or added to a ship, the only incremental cost was the cost of the system. In addition to the system itself, configuration changes need to be made to the ship. Adding a system to a ship will therefore cost more than the system itself and deleting a system from the ship will save less.
In the end, the Navy agreed with my analysis, and the $230 million budget cut was restored and the $800 million that we needed following the contract award was added to the program. I am no longer in the Navy and won't ever deploy on them, but I get an immense sense of satisfaction knowing the ships will be in the fleet for many years to come.
What advice would you give to someone just starting their career as a CFE?
The CFE is just a beginning; it is a foundation on which to build. In my opinion, a career as a CFE means that you will have many jobs or positions that require the skills and knowledge of a CFE, but you will need to continue learning about the organization, the industry and the environment you are in. You may be the world's best accountant and you may understand all intricacies of fraud, but unless you understand the organization, the industry and the environment you are working in, you will not be able to function effectively and the people you work with will not appreciate what you do if you haven't taken into account what they do and why they do it. Never stop learning!
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