Forensic accounting is a specialized field of accounting. Forensic accounting requires specialized auditing, accounting, and investigative skills in order to conduct an indepth examination of a corporation’s financial statements in order to return finding that can be used in a court of law. Forensic accounting must be very thorough and complete so that an accountant can deliver his or her finding in an adversarial legal proceeding, or within an administrative or judicial review. The word “Forensic” literally means “suitable for use in a court of law”, and it is to that higher standard and verky likely end that forensic accountants are typically require to work. Forensic accountants are oftened referred to as investigative or forensic auditors. Forensic accountants are frequently required to provide expert evidence, and in some instances expert testimony, in judicial proceedings and criminal or civil trials.
Forensic accounting assignments relating to civil disputes typically fall into one of several categories: quantifying and calculating economic damages and financial losses, whether suffered through tort or breach of contract; disagreements involving company acquisitions-including breaches of warranties or earn outs; and valuation of businesses. It is not unusual for forensic accountants to be tasked with resolving professional negligence claims where they are required to analyze and evaluate the work of other professionals. Surprisingly, forensic accountants are may also be involved in marital and family law cases in order to analyze lifestyle for spousal and child support purposes, specifically to evaluate income available for equitable distribution between spouses as well as childsupport.
Forensic Accountants are also involved in public practice or employed by banks, insurance companies, government agencies, police forces, law enforcement agencies and other organizations. Forensic accounts also provide litigation support and other legal matters. Assignments relating to criminal matters are typically a result of a fraud that’s been committed. Forensic accountants conduct criminal investigations and work in many different types of police and federal law enforcement and state/local government agencies. Since financial fraud is now everywhere, accountants play a vital role with many federal government agencies and the number of forensic accountants employed by government is on the rise. For example, professionals with a bachelor’s degrees in accounting or those certified as CPAs are eligible to begin a career with the Federal Bureau of Investigations in a special entry program.
Forensic accountants are typically responsible for the following:
- Investigating, reviewing and analyzing financial evidence;
- Developing computerized applications and processes to help analyze and presents financial evidence;
- Communicating financial findings in the form of exhibits, reports and collections of documents; and
- Assisting in legal proceedings and trials, including testifying in court as an expert witness and preparing visual aids to support the legal case.
Today most large accounting firms, as well as many medium-sized and boutique accounting firms, have forensic accounting departments. Within forensic accounting departments, there are often additional divisions that provide sub-specializations. For example, some forensic accountants may specialize in personal injury claims, insurance claims, fraud, construction, or royalty audits.
More and more, forensic accountants are playing a very proactive role in risk reduction by designing and performing specialzed forensic procedures as part of the regular corporate audit, fraud deterrence engagements, acting as advisers to audit committees, and participating in investment analyst research.
The Forensic Accountants Society of North America (FASNA) lists the most common types of cases taken on by their members. These include the following:
- Inventory/property loss
- Employee dishonesty
- Business income loss
- Personal injury or wrongful death claims
- Truth in lending/ truth in leasing
- Divorce and fidelity claims
- Loss of income/earnings
- Expert testimony
- Post judgment matters/calculations
- Business valuation
FASNA members have worked on cases in the following industries:
- Construction, contracting & engineering
- Financial/money management
- Education institutions
- Real estate
- Indian tribal government
- Consumer dealerships / retail and wholesale
- State government
- Trust and estate
- Travel and transportation
Many forensic accounting professionals choose to work full-time with an accounting firm while others opt to work as a freelance consultant. Compensation for forensic accountants is typically higher and that for accounts performing more traditional roles because firms charge their client’s more for accounting services that require forensic accounting expertise. The forensic accounting industry is expected to grow for the next decade and career opportunities should be plentiful.
Before launching a career in accounting, a person must earn an accounting degree from an accredited institution. Many colleges and universities offer 2 year associate’s degrees and 4 year bachelor’s degrees in accounting. Accountants interested in working as a forensic account for the federal government in such departments as the Treasury Department, Internal Revenue Service, or the Federal Bureau of Investigation must earn a 4 year bachelor’s degree at minimum and most forensic accountants are now required to have a master’s degree. Most forensic accountants working with top accounting firms or that provide consulting services have obtained the CPA (Certified Public Accountant) designation and possess a master’s degree.