What is Forensic Accounting?

Forensic accounting blends auditing, accounting, and investigatory skills to assess financial documents. Forensic accountants often review accounting systems and practices related to criminal and legal investigations. While the field is a branch of general accounting, it takes a holistic view of financial statements and traces the movement of money in order to assess a particular situation.

Forensic accounting involves meticulous record-keeping and, quite often, testimony in court. Forensic accountants adjust their methods and goals depending upon the needs of each case, and may incorporate both paper- and computer-based investigation techniques.

Forensic accounting professionals must consistently demonstrate integrity, credibility, and objectivity.

To enter the field of forensic accounting, individuals often need an educational background in accounting with additional expertise in criminal justice, computer science, forensic analysis, and statistics. Forensic accounting requires communication and analytical skills, the ability to work independently, and strong attention to detail. Forensic accounting professionals must also consistently demonstrate integrity, credibility, and objectivity.

What is a Forensic Accountant?

A forensic accountant is a specialist within the larger field of accounting. Forensic accountants assess financial documents for use in disputes, litigation, and criminal procedures. To this aim, they investigate the nature, path, and outcome of monetary and asset exchange. They generally look for evidence of events such as theft, fraud, or embezzlement.

Forensic accountants perform a variety of tasks during their investigations; for example, they collect data as they research funds, assets, and similar financial information. Forensic accountants also have an extensive knowledge of accounting practices, and may offer testimony in court and other disputes through written and verbal reports.

What Does a Forensic Accountant Do?

Forensic accountants must possess strong attention to detail, objectivity, and communication skills, as well as an extensive background in statistics, computer applications, business, and general accounting procedures. They must have strong investigative skills and know how to access sensitive data from accounting, tax preparation, and financial analysis software.

Through active listening, critical thinking, and deductive reasoning, forensic accountants identify and document financial violations and problems. Forensic accountants are curious but skeptical, suspicious yet willing to keep an open mind until all information has been received. Dependable, tenacious, and thorough, forensic accountants carry out their duties with due diligence and integrity.

In the event of a trial or hearing, forensic accountants also offer court testimony.

Forensic accountants primarily focus on litigation support and investigative accounting, and may work in one or both areas. As litigation support, forensic accountants provide testimony, consultation, or guidance in civil and criminal matters. Cases and disputes involving asset location, bankruptcy and reorganization, contract disputes, and personal injury and medical malpractice can all involve forensic accountants. These professionals determine financial value, assess damages, and attempt to reconcile disputes before they reach the courtroom. In the event of a trial or hearing, forensic accountants also offer court testimony.

In litigation support, forensic accountants may work for any number of parties. Forensic accountants can be employed by plaintiffs and defendants alike, or by local, state, and federal authorities.

In investigative capacities, forensic accountants analyze financial statements, related documents, and accounts to find suspicious and criminal activity. In many companies and corporations, forensic accountants are tasked with rooting out suspected fraud, theft, and similar crimes. Forensic accountants may be employed by insurance companies to investigate suspicious claims, by individuals in divorce litigation, or by government agencies to assess securities and regulatory violations.

Forensic accountants identify vulnerabilities related to individuals, functions, and groups within an organization or institution, as well as make recommendations to remedy concerns before a problem occurs.

Another aspect of forensic accounting is fraud prevention and regulation compliance. Businesses and corporations can employ a forensic accountant proactively to make sure their financial transactions do not breach any laws, to avoid scandals, and to identify any potential violations of tax laws and investment regulations. Forensic accountants identify vulnerabilities related to individuals, functions, and groups within an organization or institution, as well as make recommendations to remedy concerns before a problem occurs.

Through financial audits, forensic accountants fully review an organization's compliance with all applicable guidelines by assessing organizational policies, document accuracy, access controls, and risk management protocols. They may help to revise guidelines to secure the financial stability of an institution.

Forensic accountants may also be called financial analysts, securities analysts, or financial investigators. They may specialize in specific aspects of finance such as employee crime, business valuation, or asset tracing.

Forensic accountants work with paper documents, but increasingly use computer technologies in their duties. They collect and keep records, and prepare reports for corporate executives, lawyers, government officials, or individual clients.

Forensic accountants honor confidentiality, adhere to professional ethical standards, and eliminate personal bias at all times.

Forensic accountants not only need to be well-informed about financial, legal, regulatory, and investigatory practices and processes; they also must maintain objectivity throughout an investigation and when offering litigation support. Forensic accountants honor confidentiality, adhere to professional ethical standards, and eliminate personal bias at all times.

Many forensic accountants work independently while consulting with legal, business, and financial colleagues. They can even work remotely and report to supervisors and employers by telephone or email. Forensic accountants may work in teams or with assistants, as appropriate, and be kept on retainer by law firms, insurance companies, and comparable institutions.

Forensic accountants often have a degree in accounting, finance, or a related field with additional training in forensics. A background in criminal justice and law enforcement can greatly benefit forensic accountants, and additional credentials in the discipline can further enhance their expertise and earning potential.

What Are the Responsibilities of a Forensic Accountant?

Fraudulent Bookkeeping Investigation

Forensic accountants collect accounting records and assess transactions to identify misreported and unethical actions. Forensic accountants review corporate, retail, and personal finances to trace infractions such as kickbacks, misappropriation, and embezzlement.

Anti-Fraud Risk Assessment

Financial accountants look at financial documents and practices to locate areas at risk for fraud. They factor in ethical and regulatory considerations to advise about internal financial controls, response plans, and fraud prevention techniques.

Due Diligence Contracts

Forensic accountants assess contracts and royalty agreements to identify fraud and abuse. They conduct financial investigations into all parties involved in contracts and related documents through background checks. They also perform due diligence responsibilities by taking ethical, legal, and regulatory factors into consideration.

Litigation Discovery

Forensic accountants collect financial information related to civil and criminal disputes. They gather electronic data, paper documents, and all relevant statements to provide legal professionals and authorities with materials at hearings, trials, and arbitrations. Litigation discovery may also involve a comprehensive report prepared by a forensic accountant.

Trial Testimony

Forensic accountants appear in court to testify in civil and criminal matters. Forensic accountants tasked with finding evidence of fraud, embezzlement, and tax evasion may provide verbal confirmation of their findings. Forensic accountants may also offer testimony for plaintiffs or defendants.

Insurance Claim Investigation

Forensic accountants obtain financial records related to insurance claims in order to identify whether or not payments made by insurance companies meet policy conditions. Insurance claim fraud detection involves the use of computer software, legal documents, and financial statements to assess false data and misuse of funds.

What Qualifications Do You Need to Become a Forensic Accountant?

Education

Undergraduate Degree Forensic accountants need a bachelor’s degree in accounting, forensics, finance, or a related discipline. During an undergraduate program, students explore topics such as business communications, accounting principles, and auditing.
Certified Public Accounting (CPA) Certification Forensic accountants are often CPAs with credentials from the American Institute of Certified Public Accountants. To become a CPA, learners complete a comprehensive exam divided into four sections: auditing and attestation; financial accounting and reporting; regulation; and business environment and concepts.
Graduate Degree Many forensic accountants hold a master's degree in forensic accounting, financial analysis, criminal justice, or law enforcement.
Field-Specific Certification Forensic accountants may earn specialized credentials in fraud examination and forensic accounting through professional associations and organizations. For example, the American Institute of Certified Public Accountants offers a certification in financial forensics.

Skills

Financial Data Analysis Forensic accountants must perform financial data analysis by reviewing an array of financial information to assess transactions.
Computer Application Use And Design Forensic accountants need to know how to use financial software in their investigations. Some qualified forensic accountants may also be tasked with creating or designing software to prevent fraud and related infractions.

Abilities

Verbal Communication Forensic accountants must articulate their findings at hearings, trails, and dispute resolution proceedings.
Written Communication Forensic accountants create summative reports based on their findings for superiors, legal professionals, regulatory bodies, and individual clients.
Analysis Forensic accountants take information from various sources and analyze it collectively to identify potential fraud, embezzlement, and similar offenses. They are insightful, intuitive, and detail-oriented.
Objectivity Forensic accountants remain objective and rely on data for their findings. They work independently and without bias; they are skeptical and curious, and maintain ethical standards.

Knowledge

Financial Practices Forensic accountants have knowledge of accounting, finance, and business principles, as well as familiarity with related processes.
Business Law And Regulation Forensic accountants understand and apply organizational, state, and federal laws, policies, and regulations related to business, finance, and accounting.
Fraudulent Practices Forensic accountants understand the techniques by which securities, bankruptcy, credit card, and financial statement fraud are carried out.
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How are Forensic Accountants Employed?

Forensic accountants work within local, state, and federal government agencies as auditors, investigators, and financial analysts. They apply financial laws and regulations in investigations of fraud, embezzlement, money laundering, and similar crimes. As independent contractors, forensic accountants conduct investigations for law firms. Their expertise contributes to resolving financial disputes, divorce proceedings, and legal matters, as appropriate. Forensic accountants often appear as witnesses in legal hearings and trials.

As insurance industry professionals, forensic accountants identify fraudulent claims. In small businesses, they may root out employee theft, falsification of financial statements, and matters related to identity theft. Forensic accountants often hold positions in large corporations and are tasked with preventing fraud and mismanagement of funds. They also assess economic damages; quantify losses; and perform due diligence on contracts, warranties, and acquisitions. They trace assets to locate missing or hidden funds and possessions using paper and digital financial information alike.

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Professional Organizations for Forensic Accountants

  • Institute of Certified Forensic Accountants ICFA facilitates communication, growth, and professionalism within the interdisciplinary field of forensic accounting. With members around the world, the IFCA offers certification programs, publications, and professional development opportunities for forensic accounting students and practitioners alike.
  • National Association of Forensic Accountants NAFA provides certification programs, trainings, marketing information, and industry updates to forensic accounting professionals and students. Members benefit from research, regulatory newsletters, discounts, and networking opportunities.
  • American Board of Forensic Accounting The ABFA, created in 1993, advances the field of forensic accounting through certification programs, trainings, and industry updates. The ABFA offers credentials in subsets of forensic accounting such as forensic bookkeeping, government forensic accounting, and cybersecurity accounting.
  • Association of Certified Fraud Examiners With more than 85,000 members, the ACFE reduces business fraud by building integrity, objectivity, and expertise among fraud examination professionals. The ACFE provides events, training, and certifications in line with their rules of conduct and standards of practice. The association also builds communities within the field.
  • American Institute of CPAs The AICPA provides comprehensive information for accounting professionals, with resources for individuals working in various subsets of the field. Forensic accountants benefit from tools and information about business valuation services and forensic accounting practices. The AICPA also offers two certifications in financial forensics.