Forensic accounting is a speciality field of accountancy. Forensic accounting employs accounting, auditing, and investigative skills to conduct an examination into a corporation's financial statements that can be used in court. Forensic accounting must be sufficiently thorough and complete so that an accountant can deliver his finding in some adversarial legal proceeding, or within some judicial or administrative review. The word "Forensic" means "suitable for use in a court of law", and it is to that standard and likely outcome that forensic accountants generally are require to work. Forensic accountants are also commonly referred to as forensic auditors or investigative auditors. Forensic accountants very frequently provide expert evidence, and in some cases expert testimony, at the eventual trial.
Forensic accounting assignments relating to civil disputes may fall into one of several different categories: disagreements relating to company acquisitions—perhaps earn outs or breaches of warranties; calculating and quantifying losses and economic damages, whether suffered through tort or breach of contract; and business valuation. It is not uncommon for forensic accountants to be involved in professional negligence claims where they will be required to assess and comment on the work of other professionals. Surprisingly, forensic accountants are also engaged in family and marital law cases for the purpose of analyzing lifestyle for spousal support purposes, in order to evaluate income available for equitable distribution among spouses as well as childsupport.
Forensic Accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organizations. Forensic accounting and litigation support includes services CPAs provide in legal matters. Engagements relating to criminal matters most often arise as a result of a fraud that's been perpetrated. Accountants conduct criminal investigations and work in many different types of police and federal and state government agencies. Since financial fraud is rampant, accountants have important responsibilities with many federal government agencies and the number of forensic accountants employed by the government is growing. For example, individuals with 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 also frequently involved in the analysis of accounting systems and accounts presentation—in essence to determine if the numbers reported reflect reality.
A forensic accountant is typically involved in the following:
Almost all of the larger accounting firms, as well as fair number of the medium-sized and boutique accounting firms, have specialty forensic accounting departments. Within these departments, there may be additional groups with sub-specializations. For example, some forensic accountants may specialize in insurance claims, personal injury claims, construction, fraud, or royalty audits.
- Investigating and analyzing financial evidence;
- Developing computerized applications to assist in the analysis and presentation of financial evidence;
- Communicating their findings in the form of reports, exhibits and collections of documents; and
- Assisting in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence.
Today, forensic accountants are playing a more proactive role in risk reduction by designing and performing extended procedures as part of the statutory audit, acting as advisers to audit committees, fraud deterrence engagements, and participating directly in investment analyst research.
The Forensic Accountants Society of North America (FASNA) lists the most common types of cases taken on by their members:
FASNA members have worked on cases in the following industries:
- Inventory/property loss
- Business income loss
- Employee dishonesty
- Personal injury or wrongful death claims
- Post judgment matters/calculations
- Truth in lending/ truth in leasing
- Loss of income/earnings
- Divorce and fidelity claims
- Expert testimony
- Business valuation
As a forensic accounting professional, you can choose to work within a firm or as a freelance consultant. Compensation for forensic accountants is typically higher because firms charge more for litigation support that requires forensic accounting than for regular accounting. The forensic accounting industry is expecting fast growth as well as an increase in career opportunities since the number of white collar and cyber-crimes is also increasing.
- 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
Before beginning a career as an accountant, a person must have an accounting degree. Many colleges and universities offer 2 year associate’s degrees and 4 year bachelor’s degrees. We have provided the names of highly esteemed and respected national accounting programs for your convenience. Accountants interested in working for the federal government in such agencies as the Treasury Department, Internal Revenue Service, or the Federal Bureau of Investigation must earn a 4 year bachelor’s degree. Likewise, to get licensed as a CPA, it is necessary to possess a bachelor’s in accounting degree; however, potential candidates can become certified CPAs if they have a bachelor’s degree in business, but they must have taken some accounting classes.
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