An Overview of Forensic Accounting
In a 2012 report, the Association of Certified Fraud Examiners estimated that approximately 5% of annual revenue around the world is lost to fraud. Globally, this translates to $3.5 trillion in potential losses. Fraud is notoriously difficult to detect and counteract; the typical perpetrator is intelligent, well educated and in a position that allows them to easily cover their tracks. It is the job of a forensic accountant to uncover evidence of illicit activity and help bring the fraudster to justice.
Also known as forensic auditors or investigative auditors, these professionals are generally employed in the occurrence of a dispute or impending litigation. Potential cases range from insurance claims, personal injury suits and royalty audits to insolvency, divorce or breach of contract issues. A modern investigative auditor must be methodical, detail-oriented and analytical, while possessing advanced computing skills and the ability to translate their findings into easily understood language. The 2012 Report to the Nations on Occupational Fraud & Abuse found that the median amount of damage caused by organization owners or executives was $573,000 and that 20% of cases dealt with losses in excess of $1 million. The majority of these incidents go undiscovered until the authorities are tipped off, so a forensic accountant must always be suspicious and scrutinizing in their efforts.
While forensic accountants themselves rarely make headlines, the cases they work do, as was made evident with the fall of Enron in the early 2000s. The job can be exciting, but it requires a level of attention that few people can master. To further explore the roles and responsibilities of this unique position, we have detailed the different offices held by those in the forensic accounting field.
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Forensic Accounting Careers
Forensic accountants are fortunate in having a diverse range of entry-level options available to them. Unlike other career paths in the accounting world, forensic auditors tend to perform the same functions throughout their career and move up from analyst, to manager, to supervisor/senior consultant over the course of their employment. Compensation generally begins around $50,000 and increases with professional certification, education and years of experience, with senior level auditors earning a salary upwards of $150,000.
There are many certification options open to forensic accountants, but the two most widely recognized are the Association of Certified Fraud Examiner (ACFE) Certified Fraud Examiner (CFE) and the American Institute of Certified Public Accountant (AICPA) Certified in Financial Forensics Credential (CFF). Many fraud examiner positions will require one of these credentials, and even if they do not, certified forensic accountants earn on average 25% more than their uncertified colleagues.
The Bureau of Labor Statistics (BLS) predicts 13% job growth for accountants and auditors by 2022. The growth of all forensic accounting jobs should correspond with this rate, if not exceed it due increasing financial regulations, with some estimates predicting a 20% growth in demand for investigative auditors. Below, we have broken down some of the most common career paths and included potential salary data sourced from the Association of Certified Fraud Examiners. It is not uncommon to jump between these types of employment as someone progresses in their career and hones in on an area of interest.
Governmental Departments (FBI, CIA, IRS)
Corporate Security & Risk Management
Financial Consulting Firms
Frequently Asked Questions
What do forensic accountants do?
Often working for insurance companies, financial institutions, and law enforcement agencies, forensic accountants analyze financial data to search for evidence of financial crimes. They may also testify in court cases as expert witnesses.
What is the difference between a CPA and a forensic accountant?
A CPA, or certified public accountant, provides general accounting services like tax advising to individuals and corporations. While they may boast similar skill sets, forensic accountants dig through accounting data to seek out evidence of financial fraud.
What qualifications do you need for forensic accounting?
Forensic accountants need a bachelor’s degree at minimum. Employers often look for professional credentials like certified fraud examiner (CFE), certified internal auditor (CIA), and certified public accountant (CPA).
What is the starting salary of a forensic accountant?
According to PayScale, entry-level forensic accountants earn an average annual salary of $59,352. Salary potential for forensic accountants increases with years of experience, education, and professional credentials.
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