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What is a Forensic Accountant?

23 February 2022

Forensic accounting can seem a complicated deal. Especially if you're unfamiliar with what forensic accountants do for a living - how else are you supposed to know how they can help you? But don't worry, today we'll clear all that up so you can be confident in using forensic accounting services in the future should you need to.

Forensic Accounting Explained

To understand a forensic accountant's role, we first have to understand the key principles of forensic accounting - and it's about more than just finance.

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Photo by Kindel Media from Pexels

In short, forensic accounting deals with financial crimes. It's concerned with investigating financial documents and financial records to get a better picture of how a financial crime has been committed, by whom, and why. It focuses on fraud, financial statement misrepresentation, and other financial crimes that impact individuals, companies, and businesses.

But How Does That Work?

It might seem odd to us, but financial accountants can use their investigative skills to learn a lot about cyber criminals and how they're committing crimes and taking part in fraudulent activity online. With that information, they can then work to protect people from fraud in the future, and support in the prosecution of these criminals.

Where do Forensic Accountants Work?

The beauty about forensic accounting professionals is that they work in multiple places, making them accessible to everyone.

For example, some forensic accountants work independently, so work mostly in the private sector and are available for hire by clients. Others work for government agencies to protect our national security and large scale financial companies from becoming victims of suspected fraud. Others, still, work in consulting firms, insurance companies, public accounting firms, internally for large companies and businesses, larger accounting firms, and for specialist forensic accounting departments.

So What Ties Forensic Accountants Together?

Well, ALL forensic accountants work closely with police forces and often take part in legal proceedings to act as an expert witness and support trial evidence in cases of fraud where their forensic accountancy skills can be used as further evidence in court proceedings. It's here where we, the public, will see a forensic accountant in operation the most.

To regulate this, there is a global body that can support a professional forensic accountant in their expert testimonies and train them to explain their investigation effectively to the court. They aren't just thrown in at the deep end.

What Sort of Jobs Does a Forensic Accountant Take On?

One reason you might be here today is to learn if a forensic accountant can help you with a particular financial problem you're having.

So, to give you an idea of a forensic accountant's role, here are some common jobs where their forensic accountancy and investigative skills may be useful:

  • Supporting in the analysis of a spouse's financial records to determine if assets have been hidden in a divorce case
  • Investigating and collecting financial evidence of theft for businesses, especially if an employee is suspected
  • Helping settle financial disputes between two parties (between one company and another, one business and another, etc.)
  • Supporting large businesses with an internal audit
  • Evaluating and analysing money laundering accusations
  • They may gather evidence in personal injury and insurance claims
  • Understanding and investigating the proceeds of crime for law enforcement
  • They often also support accusations of professional negligence by accountants, financial advisors, and auditors

As you can see, a forensic accountant can be used for many jobs.

What Sets a Forensic Accountant Apart From Accountants?

We thought it'd be a good idea to clarify a few things about forensic accountants and how they differ from regular accountants, and it isn't just in the finance they look at, but rather how they look at it.

Courtroom Drama

The first major difference is their knowledge of the courtroom. Most forensic accountants will, at some point in their career, be called into a courtroom as an expert witness in a financial crime investigation, or as part of litigation support between two businesses. Regular accountants will not.

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Photo Credit - Adobe Stock

Additional Skills

Another key difference is that although a forensic accountant has accounting and finance skills more generally, it's their financial forensics and financial accountancy skills that set them apart. Most accountants can look through financial documents and prepare internal audits, etc., but it's a forensic accountant who can investigate financial crimes as a certified fraud examiner.

Their investigation might lead to looking for financial misrepresentation too, since they're trained to spot this. Calling upon their knowledge of business administration is also more important here, to determine whether a company is running as it should. It's about more than just finance, so they must develop these additional skills.

A Deeper Investigation

They also have an ability to pick out the best accounting analysis suitable to the specific job to find evidence and then further use their investigative techniques to support as expert witnesses in trial. Beyond this, though, they're also trained to look at the business reality of the situation, past the numbers, and think analytically about what makes sense and what doesn't. This then furthers their investigation and allows them to gather more data. Often their trial evidence is very helpful in securing convictions. Regular accountants rarely support in this collection process for the court.

Hopefully that clears up the differences between a forensic accountant and the sort of accountant you might hire to support you with your taxes.

Are Forensic Accountants Investigators?

The reason we ask this question is that many of you will sit there now wondering if a forensic accountant is just an investigator or police officer in a different hat - and surprisingly, in many ways, they are.

By that we mean a forensic accountant doesn't just sit at a desk all day analysing spreadsheets and looking at financial statements. Forensic accountancy is about more than that.

How Are the Fields Connected?

Well, a forensic accountant does, in fact, take part in interrogations like police officers do, and develop suspect lists like investigators. Sure, they don't get the same credit and glamour as the police TV shows we see a lot of nowadays, but they're just as important in bringing these criminals to justice.

In court, they're often asked to prepare visual aids and explain their problem solving skills to the jury to determine why someone is guilty or not based on their expertise and deductive reasoning throughout the case. Depending on the size of the business being investigated and the nature of the case, they may work with other professionals (usually from law enforcement agencies or other related fields) to better explain their position and investigation to the court.

Whether it's tax fraud, securities fraud, or other illegal activities online pertaining to finances, a forensic accountant is trained to investigate and catch these criminals. And they do so regularly.

What Areas Does Forensic Accounting Cover?

We've talked a lot today about what a forensic accountant does and where we might see them in action. But what areas do they cover?

It's important to know this, to show just how wide ranging forensic accountants' skill sets need to be. Here's a quick overview of the areas they deal with from one job to the next:

  • Bankruptcy
  • Divorce proceedings
  • Defaulting on debts
  • Personal injury claims
  • Insurance claims
  • Financial theft
  • Securities fraud
  • Tax evasion and fraud
  • Money laundering
  • Economic damages
  • Recover losses

And the list probably goes on. They need a deep understanding of forensic accounting and financial forensics and a wide-ranging expertise, all whilst making time for professional development to stay on top of the advancement in investigative technology and skills that are constantly evolving.

As you can probably tell, being a forensic accountant probably isn't easy...

Forensic Accounting Careers

Despite being complicated work, forensic accounting is also rewarding and exciting. It's no wonder, then, that many people are interested in becoming a forensic accountant. Heck, maybe you'd like to be one too!

But how do you become a forensic accountant? Well, it's actually not too complicated, so long as you have the right accounting knowledge and skills and are interested in the field.

However, a word of warning. You don't just walk into forensic accounting. Instead, you'll need to study accountancy like everybody else, gain experience in the field, and then eventually progress to forensic accounting.

So if the idea of working for a few years in a public accounting firm, or large company, gaining traditional auditing experience and developing your accounting skills doesn't sound like fun to you, then forensic accounting may not be for you either.

Yes, they do work that's similar to investigators and police officers in some respects, but they also rely heavily on their traditional accounting and auditing skills. If you don't like to use these and only care for the exciting interrogations, well, you might want to consider a different career path. At the end of the day, you need to be just as comfortable with a balance sheet as you do with an interrogation.

I'm Interested. Now What?

But if you are interested in accounting more generally and want to explore forensic accounting in the future, then there are certain accreditations and qualifications you can work towards on the way to make your transition into forensic accounting that much smoother:

  • Financial modelling & valuation analyst (FMVA)
  • Financial risk manager (FRM)
  • Chartered financial analyst (CFA)
  • Chartered alternative investment analyst (CAIA)
  • Certified financial planner (CFP)
  • Certified public accountant (CPA)

By doing some further research into these qualifications, accreditations, and certifications, you'll be able to decide on a route into accounting that's best for you, before specialising in forensic accounting later where you'll be able to put your financial forensic skills to the test.

Forensic Accountancy in the Future

Before we leave you today, we thought it'd be a good idea to focus on forensic accounting in the future. Why? Because this field is evolving constantly. And that can mean two things for any would-be budding forensic accountants out there.

First, it might make you nervous. After all, change isn't something people are generally comfortable with, and the prospect of entering a field that is changing every second might be a little daunting. But there's a second way of looking at it.

What if the ever-changing nature of forensic accounting is exactly what makes it such an exciting field to work in? Yes, the criminals are adapting and changing and working harder than ever to hide their fraudulent activity. Not to mention the tech they use to do so is evolving faster than ever in the 'information age'. But so are forensic accounting resources for catching them.

So if the idea of working with new and exciting technology and adapting your way of thinking to every job sounds exciting, then becoming a forensic accountant might just be for you. There's no guarantee how the field will look 10 years from now, 1 year from now, or even a month. There's also no guarantee how the job will look from business to business or company to company - meaning everyday is different - but that, for many forensic accountants, is part of the joy of the job!

What Is A Forensic Accountant? - Round-Up

Hopefully, today's post has taught you everything you need to know about the field of forensic accounting and the role of forensic accountants. What may, at first glance, have sounded like a pretty boring run-of-the-mill job has hopefully been revealed as anything but. After all, how many other jobs do you know that combine investigations, interrogations, courtroom appearances, digital forensics, and accounting into one job?

And whether you're planning on entering the field, hiring and working with a forensic accountant yourself, or you simply came here today to get an idea about what forensic accountants do, hopefully you've found the article useful and now understand the world of forensic accountancy a little more.

If your looking for more information about the world of accountancy we have plenty of articles over at our growing blog section. We cover multiple topics such as the Difference Between Event and Transaction and Questions to ask Accountants as A Student.

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