What Is Forensic Accounting? Definition and Career Guide
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Forensic accountants are specialised financial professionals who provide expertise in investigating complex financial and business proceedings. People may use them in situations where they suspect some sort of fraudulent or criminal activity has taken place, and these professionals help solve important cases. Learning more about this career field could help you determine if it's right for you. In this article, we answer the question, what is forensic accounting? and provide information about this career.
What is forensic accounting?
Forensic accounting is a specialised field of accounting where financial professionals investigate, analyse, interpret and summarise complex financial information. Their work goes beyond that of traditional accountants. Forensic accountants employ their skills in situations where litigation may be necessary. They may look at complex financial and business activity information where some fraud may have occurred. Forensic accountants are therefore not only skilled auditors and accountants but skilled investigators too.
They work to complete their investigative tasks to a level that can uphold scrutiny in legal proceedings, but they also summarise the results of their complex, specialised investigations in a way that non-financial professionals involved in legal proceedings can understand.
Working as a forensic accountant
The general work of a financial accountant is to collect and present intricate financial information to be used in some sort of legal proceedings. The specifics of their duties can vary depending on what sort of litigation or investigation they're supporting, but here are some of their common duties:
Assessing accurate values for losses or potential damages in insurance claims
Auditing financial records
Conducting investigations and collecting financial evidence
Developing computer applications to manage data they collect
Preparing analytical data for litigation
Communicating findings of investigations in the form of reports or presentations
Preparing visual aids to support trial evidence
Testifying in court
Financial accounting work environment
Forensic accountants can work for banks, police forces, insurance companies, public accountancy firms, government agencies or other public bodies. They work in situations that may use specialised skills in financial data analysis, such as:
A forensic accountant may work on legal proceedings where they quantify losses or damages. Parties involved in legal disputes use the findings of the forensic accountant to assist in determining a fair settlement or court decision. Disagreement may arise during litigation involving payment of compensation or benefits, for example. The findings of the forensic accountant are used to help determine an accurate value for the losses suffered and compensation due. The forensic accountant may even testify as an expert witness if the dispute escalates to court proceedings.
Forensic accounting can be a component in criminal cases where there is suspicion of fraudulent financial activity or deliberate misrepresentation of assets and asset value. Their work can help determine if an incident is a crime or if criminal intent is likely. Typical crimes examined by a forensic accountant can include fraud, identity theft, insurance fraud or falsification of financial statement information. They're often involved in highly complex cases of financial misdealing, where they identify what has occurred and present this complex information in a way that other people can understand in court.
Forensic accountants may also search for hidden assets and determine the true value of assets in divorce cases or other civil proceedings, such as disputes in business valuation. They may also determine the financial impact of breaches of contracts and agreements, such as nondisclosure or non-compete agreements.
Forensic accountants regularly work in the insurance industry. In these cases, they may work to determine the economic damages suffered by a claimant as a result of a road traffic accident, medical malpractice or some other type of claimable incident. Similar to their work in litigation support, the findings of the forensic accountant help to determine the value of the settlement payment that may be due to the claimant.
How to become a forensic accountant
Forensic accounting is a highly specialised profession. To become a forensic accountant, you may consider following these steps:
1. Obtain a bachelor's degree
An undergraduate degree in accounting or a closely related finance subject is vital to becoming a financial accountant. This is typically a requirement for this career. Completing a bachelor's degree can give you a broad understanding of accountancy related subjects, such as statistics, economics and business administration.
2. Obtain CPA certification
Certified Public Accountant certification is one of the most well-regarded qualifications for finance and accounting professionals internationally. Obtaining CPA certification can give you additional expertise and a further competitive edge in the recruitment process than a bachelor's degree alone. Completing the CPA training also gives you the opportunity to gain invaluable real-world accounting experience. Although it may be optional for some roles in the field, many forensic accountants are also CPAs.
3. Obtain a postgraduate qualification
Specialised postgraduate qualifications, such as a master's degree or a postgraduate certificate, in forensic accounting, can help you further develop the skills and knowledge required to succeed as a specialised forensic accountant. Completing a master's in forensic accounting can also be a good option for someone who has obtained a bachelor's degree in a subject other than accounting who wishes to pursue a career as a forensic accountant. This may be optional for this career, but it can help you qualify for more positions and potentially earn a competitive role.
4. Gain experience
There may be competition for forensic accountant positions and previous accounting experience is advantageous when applying for a position. You may consider applying for an entry-level position to gain this experience. An entry-level role in a forensic accountancy firm may be ideal, but any accountancy experience can be valuable. Working in an entry-level accountancy position may also give you the opportunity to complete further qualifications as an accountant, such as becoming a CPA, as you earn.
5. Consider further certification
To increase your chances of securing employment in a highly competitive job market and to increase your overall earning potential, you may wish to consider pursuing further, specialised certification. Designations as a Certified Fraud Examiner or Certified Forensic Accountant can make your application stand out from others. Some employers may require such certifications for certain positions. Examination for many of these certifications requires you to have several years of professional experience as an accountant.
Key skills for a forensic accountant
Successful forensic accountants may develop strong skills in several areas. These skills include:
Forensic accountants require strong written and verbal communication skills. They can summarise the results of their investigative work into written reports. The investigations they carry out can often be highly complex, but they're often able to summarise this complex information in a way that non-experts can understand. They may also support their reports with oral presentations, or act as expert witnesses, so strong verbal communication skills are an advantage.
Forensic accountants may also conduct interviews during their investigations to get a better understanding of the documents and reports they're examining. It is important they're able to conduct these interviews in a way that puts the person they're talking to at ease and creates an environment where they're relaxed and able to accurately share whatever information they have. Active listening and other similar communicative skills are vital in conducting a successful interview.
Financial accountants can effectively analyse all the information they collect from their review of documentation and interviews to determine the specifics of whatever financial crimes may have taken place. They often have great attention to detail as they analyse this information to identify any irregularities or discrepancies. They also typically have this same care and attention to detail in documenting their investigation, carefully laying out all the steps they take, demonstrating repeatable methods and findings and ensuring their investigation can stand up to legal scrutiny.
Forensic accountants tend to be adaptable, dynamic problem solvers. The nature of an investigation can change quickly as investigators discover new information. They can rapidly and effectively map out different scenarios that may fit with this information and confidently conclude which is best supported by the evidence available. They often examine all aspects of their investigation critically to solve the problems they're faced with.
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