Uncovering a Career In Forensic Accounting

Forensic accountants are financial detectives who audit, investigate, and ascertain the accuracy of financial reports and documents, often in connection with anticipated or ongoing legal action.

Their job is to identify questionable financial data, usually for the purpose of investigating white-collar crimes such as securities fraud and embezzlement. White-collar crime is a nonviolent crime committed for financial gain, and it usually involves individuals or businesses of all sizes.

Forensic accountants may work for businesses, nonprofit organizations, government, and law-enforcement agencies, estates, or individuals.

Forensic Accounting: An Overview

It's not all about outright crime. Forensic accountants may help organizations establish or improve their risk management and risk reduction procedures through the customized design of accounting and auditing systems.

As a function of due diligence and investment analysis, they may advise on a wide variety of planned financial transactions including mergers and acquisitions, venture capital investments, purchases of corporate bonds, commercial paper and stocks, and bankruptcy proceedings.

From Dubious Practices to Outright Fraud

In many cases, they may find instances of dubious record-keeping meant to obscure financial problems. But they may also find evidence of outright criminal acts.

The criminal activity uncovered may include fraud, embezzlement, money laundering, concealment of debt, concealment of assets, tunneling, or other fraudulent activities. Forensic accountants may be called upon to testify in court as expert witnesses in criminal and civil litigation and appear in pretrial depositions.

Following the Money

Beyond their work in the business sector and in the investigation of individual assets for legal purposes, forensic accountants may also examine criminal enterprises to recover illegally obtained money or track money laundering activities.

In a government confiscation of assets in organized-crime cases, or in tax cases against individuals or companies, the work of a forensic accountant is crucial.

The Credentials

Forensic accountants are also often certified public accountants and certified fraud examiners (CFEs). A CFE has extensive training in the prevention and deterrence of fraud. CFEs who do not have at least two years of professional experience in a field either directly or indirectly related to the detection or deterrence of fraud may be required to pass the CFE Exam.

Candidates for the exam must also have at least have a minimum of 40 total qualifying points before taking the exam. The Association of Certified Fraud Examiners, which confers the CFE credential, has established a point system that awards credit for education, professional affiliations, and experience.

The CFE Exam covers topics such as investigation techniques, financial transactions, criminology and ethics, and legal elements of fraud.

Additional requirements for CFE certification include:

• Be an Associate Member of the ACFE in good standing 
• Be of high moral character 
• Agree to abide by the bylaws and Code of Professional Ethics of the Association of Certified Fraud Examiners

The CFE certification is recognized worldwide, and prospective employers look for it when recruiting a forensic accountant.

Requirements for a Forensic Accountant

Both the forensic accountant and the CFE must have a comprehensive understanding of business information and all aspects of financial reporting, including:

• The balance sheet showing a business's assets, liabilities, and net equity at the time of the report
• The income statement, which reports the profit or loss of a company over the reporting period
• The statement of retained earnings, which reports dividends paid and other items credited to or charged against earnings. This data may also be included in the balance sheet.
• The statement of cash flows showing the cash coming into the company (inflow) and going out of the company (outflow). Cash equivalents also appear in the statement of cash flows.

Reported information in these documents must comply with generally accepted accounting principles (GAAP), which spell out accounting rules and procedures.

Becoming a Forensic Accountant

Forensic accountants are typically required to have a bachelor's degree in accounting or a related field. Employment opportunities and career advancement may be enhanced with a master's degree in accounting or any of the business sciences.

Courses in forensic accounting are offered at many colleges and universities and through online educational programs.

Job Opportunities, Career Path, and Compensation

Careers in accounting can be lucrative. The average salary for an accountant was $73,560 in May 2020.

Salaries depend on experience, years in the profession, and the type and size of the entity. A small business can't pay as much as a major corporation, and a nonprofit organization may pay less than a for-profit organization.

Location is a big factor in the pay scale. Compensation in major cities will be higher than the national average, as will living costs.

Newer regulations, such as those introduced in 2002 with the Sarbanes-Oxley Act, have created many opportunities in the field. The act toughened accounting and reporting standards for corporations.

Potential places of employment include law enforcement, state and local governments, and federal agencies including the Internal Revenue Service (IRS), the U.S. Department of Defense, the Government Accountability Office, the Federal Bureau of Investigation (FBI), and the Central Intelligence Agency (CIA).

They also are in demand by businesses of all sizes, the financial services industry, and the nonprofit sector. The website Forensic Accounting lists information about potential job opportunities and can be a helpful resource for prospective forensic accountants.

The Bottom Line

The role of a forensic accountant is to identify questionable financial data, usually for the purpose of investigating white-collar crimes such as securities fraud and embezzlement.

If you are good with numbers and enjoy finance, and you are looking for a career in criminology, a career as a forensic accountant could be a good fit. It requires a unique skill set, and the prospect of exposing corruption, graft, and white-collar crime can be very appealing for some people.