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Forensic accounting incorporates the use of skills and knowledge in financial auditing and investigation in order to resolve legal matters. Apart from providing solutions to help resolve litigation issues, it is also used in investigating disputes and a wide variety of cases involving economic or financial operations.
Forensic accountants are investigative specialists who break down financial information into digestible portions which can easily be analyzed and understood by those who may not be familiar with the terminologies and complexities of the accounting field. Some of these specialists work in the public industry while others perform their duties in the private sector, for example in banking institutions, insurance companies or government bodies such as police departments, the FBI and the IRS.
An example where their services of forensic accountants can be used in litigation is in the case of a current or pending lawsuit, where there is a need for an analytical financial report to be presented in order to make a case for or against the lawsuit.
The forensic accountant can calculate and determine the financial or economic facts involved in the dispute even before the matter reaches the court. Moreover, a forensic accountant can take a stand in court and testify as a witness, for example when it comes to determining losses sustained by victims. They can also use their expertise in helping prepare evidence in the form of summaries that can be used in civil or criminal courts.
Likewise, lawyers may employ the services of a forensic accountant to investigate the financial audit of individuals who have been suspected of engaging in criminal activities. The resulting deposition or report of findings that the forensic accountant provides can help in help in eliminating persons of interest as suspects. It can also aid in getting suspected criminals either convicted or acquitted.
The skills and expertise of a forensic accountant can also be used by a criminal court in a bankruptcy case where there are inconsistencies in the financial information provided by business owners or employees. In addition, they can search for fixed or current assets which may have been concealed by parties involved in a dispute.
Since business executives must submit certified financial statements that genuinely represent the transactional operations of their companies, a forensic accountant can be hired in order to ensure that there are no inconsistencies or misstatements in these documents which can lead to legal problems for the business.
These accountants also assist in partnership and shareholder disputes, matters involving losses through negligence and employer or employee embezzlement. In addition, they are also hired by insurance companies to investigate claims made by individuals who are seeking insurance coverage for a variety of reasons including death, accident or injury. The accountant reviews the data to determines whether there is fraud or financial misrepresentation involved, or whether there is evidence of a scam.
Aside from the above, a forensic accountant can also serve as an advisor for the entities that have employed his or her services, by recommending courses of action to be taken in order to mitigate the risk of financial loss. Under corporate security and risk management, forensic accountants also analyze to what extent laws, taxes, exchange rates together with socio-cultural factors impact on business operations and the generation of revenue.
It has been estimated that 3.5 trillion dollars are lost each year to fraud globally or worldwide. Fraudsters tend to be very cunning in ensuring that they cannot be traced especially when they work in positions of authority be they government or corporate institutions.
This makes the services of a keen, professional investigative specialist necessary. Much scrutiny and diligence is required to counteract the efforts of fraudsters which is why the forensic accountant needs to be someone who is meticulous and methodical in their analytical and investigative procedures.
The most often committed occupational fraud for the last 30 years has been known to be the embezzlement of assets. This includes identity theft, corruption and the use of corporate assets for personal gain.
In such cases, the forensic accountant inspects the assets, examines the documents and performs invigilation and interviews of those suspected to be involved. He or she uses their knowledge and experience to offer suggestions to business owners as to how best they can avoid the occurrence of fraud and corruption in the organization.
Statistics have shown that forensic accounting will be among the top 20 jobs in the years to come. In order to be a forensic accountant, a degree in accounting is required as well as successful completion of the CPA examination.
Additionally, extra coursework in criminal justice and law enforcement is necessary. Due to the fact that the occupation has a lot to do with criminal justice, it is essential for candidates who aspire to excel to gain knowledge on such subjects as embezzlement, insurance claims, fraud and other white-collar crimes.
Apart from proper legal education, it is also helpful to have a Certified Fraud Examiner accreditation (or CFE) provided by the Association of Certified Fraud Examiners. Another important certification is the Certified in Financial Forensics (CFF) credential offered by the American Institute Certified Public Accountants (AICPA).
The mean mid-range salary of a forensic accountant is about $74,500, though experienced and senior forensic accountants can earn over $100,000 a year (though as we have seen so far, the benefits are much more than just income-related). It has been reported that certified forensic accountants have a mean salary which is 25% more than those who are uncertified.
According to the Bureau of Labor Statistics (or BLS), there will be a 13% growth in demand for accountants and auditors by 2022. Due to the current legal and corporate challenges, it is likely that the trend in demand for forensic accountants will match or exceed this. The demand for investigative auditors has been estimated at 20%.
Hence, by its very definition forensic accounting differs from other forms of public, cost or management accounting. Forensic accounting moves beyond the realm of figures and calculations by probing and exploring why financial and economic records are in the state they are at a given period.
It is an exciting career that fuses bookkeeping with detective work and it is also a financially rewarding path. Forensic accounting requires not just mathematical skills and attention to detail, but also deductive reasoning and the ability to process information in such a way that relevant conclusions that explain human behavior can be made.
Forensic Accountant Career Checker
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.