Forensic Accounting Topics

What is Forensic Accounting?

Forensic accounting is a profession at the intersection of finance and law enforcement.  A forensic accountant is usually involved in investigating white-collar crimes related to finance, and evidence discovered by a forensic accountant is often a substantial force in proving whether an illegal maneuver has taken place in the business world.

Forensic accountants must speak both the language of numbers and the language of law, and be comfortable working with finance professionals as well as members of the legal and law enforcement community.  Some workers in this field will also be called upon to translate complex financial matters into easily understood layman’s terms, in order to present findings to a jury.

Forensic Accounting in Finance Cases

According to the U.S. Bureau of Labor Statistics. a forensic accountant is likely to be part of criminal investigations related to financial crimes, particularly in the following realms:

• Securities fraud
• Embezzlement and insider stock trading
• Bankruptcy fraud
• Insurance fraud
• Health care fraud, especially fraudulent billing
• Contract disputes
• Money laundering, in particular as it relates to organized crime

The role that forensic accounting plays in these cases often includes uncovering evidence that a crime has taken place, and a forensic accountant may work in collaboration with a legal team, with investigators from the police department, or with other law enforcement professionals.

Forensic Accounting in Other Criminal Cases

While forensic accounting skills are most relevant to finance-based cases, a forensic accountant’s knowledge is sometimes used in investigation of other crimes.  For example, when it is necessary to prove a suspect’s involvement by following the trail of a payment for an illegal act, a forensic accountant may take the lead on that aspect of the case.

In rarer situations, a forensic accountant may be asked to help determine whether or not a suspect is under financial pressure, which can be part of a legal strategy when showing adequate motivation for a crime.  In these kinds of cases, a forensic accountant may be called as an expert witness to interpret and explain data before a jury.

Forensic Accounting at a Federal Level

Forensic accountants working for the federal government may be tasked with even greater responsibility, and more complex projects, than those serving in other private or public arenas.  According to spokespeople at the Federal Bureau of Investigation. forensic accounting is a key part of the FBI’s strategy in cases as diverse as criminal matters, counterterrorism, and even foreign counterintelligence investigations.

Forensic Accounting in the Private Sector

Forensic accountants are also employed by businesses that are seeking to identify and prevent fraud within their own companies, or with business partners.  A forensic accountant may be employed by a corporation that wishes to prove it has clean practices to its stockholders, or may be asked to investigate a potential partner before a merger or acquisition takes place.

Classes and Course Topics

Forensic accounting schools must teach a variety of subjects to students on a pre-professional diploma track, including topics from both from the world of accountancy and numbers, and from the world of law and legal statutes.  While there are many approaches to the material, there are some key facts and areas of knowledge that any good forensic accounting school will cover.

Before you choose a forensic accounting program, take a look at these common curriculum subjects and compare them to the coursework you’ll be expected to take.  If you spot any big gaps in what your forensic accounting school offers, that’s a red flag that you may want to consider enrolling in a different program.

If you have concerns about whether these topic areas are adequately covered by your forensic accounting program, talk to your advisor, or to faculty members at the school, and see what their perspective can offer.  A good forensic accounting program will prepare you for working in the professional world by covering subjects in the areas of accountancy and law, as well as specialized topic niches in forensic accounting.

Accounting Coursework

Forensic accountants must start with a basic grasp of accounting and auditing methods, vocabulary, and techniques before specializing in the forensic niche.  A good forensic accounting school will either ensure students can demonstrate previous knowledge of these topics (i.e. the school will require a B.A. in accounting or a CPA license before granting admission) or will provide training in the following areas:

• Analyzing and preparing financial statements and note disclosures.
• Debits, credits, and calculating interest and balances.
• How to compute key financial ratios.
• Current auditing standards and procedures.
• Forms of evidence used in auditing.
• Business law and ethics, and the governing bodies responsible for overseeing and enforcing standards in the business world.

Core Forensic Accounting Classes

According to a report on forensic accounting training prepared by West Virginia University for the National Institute of Justice, in addition to a firm grounding in general accountancy topics, these are the key subject areas that forensic accountants should be trained in:

• Criminology, with an emphasis on financial crimes and frauds.
• Legal procedures and ethical issues of investigation and law enforcement.
• Fraud prevention, including both theoretical study of approaches and methods, and hands-on techniques for investigation and detection.
• Litigation, including research, analysis, valuation, dispute investigation, conflict resolution, arbitration and mediation.

Before committing to a forensic accounting training program, make sure that it provides adequate training in each of these areas, so that you get the background you need to excel in this career.

License & Certificate Information

Forensic accountants must have multiple forms of certification in order to practice their craft at the most advanced, and most lucrative, levels of the profession.  Before embarking on this challenging career, years of training are required in order to master both the financial and legal vocabulary that this position demands.  You will need to earn both a general accounting license, and a specific forensics-related certificate, in order to reach the top of this field.

Does a Forensic Accountant Need a CPA License?

Yes, a professional forensic accountant who desires to advance beyond junior positions in the field needs to earn a Certified Public Accountant (CPA) license in order to work.  According to the U.S. Bureau of Labor Statistics. a CPA license to practice in each state in the U.S. must granted by a State Board of Accountancy in that state; there is no such thing as a national accountancy certificate, although there is a nationally recognized exam that is the first step to attaining a license in all 50 states.

That test is the Uniform CPA Examination, a test with four sections, which is administered by the American Institute of Certified Public Accountants .  Less than 50 percent of those who attempt the test pass all four sections on their first try.  Not all four parts must be passed at once, but in order to earn a CPA license it is required by nearly all U.S. states that a candidate pass all the sections of the exam within a window of 18 months.

In addition to passing the exam, most state boards require demonstrated accounting experience, either through 150 hours of related coursework, or sometimes through equivalent practice in the field.  The specifics of eligibility for a CPA license vary from one state’s board to the next.

What About Becoming a Certified Fraud Examiner, or Earning a Forensic Accounting Certificate?

These kinds of industry certificates are often offered by continuing education and graduate programs, and sometimes by undergraduate institutions that focus specifically on professional training.  A diploma of this kind helps demonstrate to a potential employer that you are interested in, knowledgeable about, and committed to a career in forensic accounting.

However, while these credentials can be a strong step on a career path to forensic accounting, they are not a substitute or an equivalent for a CPA license.  There are some jobs in the forensic accounting field that are available to applicants who hold a diploma or certificate, but there are many more jobs that also require a CPA license.

Many professionals pursue these more specialized certificates after earning their CPA credential in order to increase job opportunities and to learn more about the forensics field of accountancy.

Job Outlook

The forensic accounting job growth rate in the United States between now and 2018 will be substantially higher than the national average for other jobs, according to the experts at the U.S. Bureau of Labor Statistics ; however, not all of these jobs will be the same or require the same qualifications.

Find out the hard numbers on jobs in the forensic accounting arena, the facts on why this field is expanding so rapidly, plus tips on how to compete in the forensic accounting job market.

Forensic Accounting Job Growth

The projected rise in jobs sounds cheerful, but what does it really mean in terms of how many positions, and in what areas of the field?  Here are some numbers that will help you make concrete sense of the upcoming trends:

• Between 2008 and 2018, experts predict the creation of 279,400 new accounting jobs in total, with forensic accounting as one of the top growth areas.
• Many of these jobs will be in the private sector, as forensic accounting practices are adopted more widely outside of government agencies.
• There are likely to be particularly high concentrations of new jobs among businesses that are expanding through globalization.

Why Forensic Accounting is an Expanding Field

There are a number of contributing factors driving the demand for forensic accountants in the private sector:

• Changes in financial law.
• New government regulations regarding corporations.
• Stockholders demanding greater accountability from businesses.
• Greater numbers of new companies, and existing companies hiring new employees, as the economy swings up over the next decade.

Competing in the Forensic Accounting Job Market

As the number of jobs increase, the visibility of this profession will rise, which means more qualified applicants competing to land positions.  There are steps you can take to stand out from the crowd — both in terms of advanced training and in terms of niche specialization.

• A CPA license opens many doors in this career, and it will help you advance more quickly, as it makes you more valuable during certain types of accounting processes, such as an internal audit.  Every state has its own licensing requirements for CPAs, which you can learn about from the American Institute of CPAs.
• Developing management expertise, so that you can provide consultation and advice in addition to parsing and explaining data, will make you more useful to an employer and help you get attention during a job search.
• Knowledge of accounting rules in the arena of international trade and mergers is expected to prove especially valuable for forensic accountants in the next decade.  Training in the International Financial Reporting Standards (IFRS) is a good place to start for this specialization.
• A master’s degree in accounting, or in business administration with an accounting focus, will help you gain a job both through the “wow” factor of your qualifications and through the interpersonal networking with mentors that you will experience while earning your degree.

Traits of a Successful Forensic Accountant

Being a top-tier forensic accountant is about more than just having a good head for figures and a facility with numbers.  Read on to find out about the personality traits and non-accounting skills that are an advantage for this growing career, and learn about some real-life cases where forensic accountants used those capabilities to succeed.

According to Joseph L. Ford. the associate deputy director of the FBI, it is important for forensic accountants to have the following qualities:

• Be experienced and trained.
• Be willing to be tough during the investigative process.
• Be perceptive about seeing the potential implications of financial red flags.

Experience and Training for Forensic Accountants

What does it mean for an accountant in this field to really be experienced and trained?  The answer is that there’s no such thing; a truly outstanding individual will be continually in the process of learning and improving during the course of his or her entire career.  While this may start with earning an accounting degree or CPA license, it’s not enough to get a diploma or pass the exam and then leave education by the wayside.

As laws and regulations change, it is important that forensic accountants stay abreast of those developments by attending professional seminars and conferences.  Professional associations like the American Institute of CPAs often assist their members in keeping up with progress in the field.  Even as the number of jobs grows a predicted 22 percent between now and 2018, staying competitive by pursuing this kind of advanced training will become even more important for employees.

Forensic Accountants During Investigations

When forensic accountants are on cases, they must be willing to look beyond appearances and question the activities and motives of seemingly sympathetic people and organizations.  For example, by investigating charities like Chicago’s Benevolence International Foundation in the U.S. in 2002, forensic accountants were able to uncover links to racketeering crimes and to al Qaeda.

Whether employed privately by a firm or company, or publicly by a government agency, forensic accountants must strive to remain independent, unbiased, and rigorous, no matter how intense or uncomfortable the investigation.  A strong moral sense, an uncompromising attitude, a willingness to question authority, and the ability to resist pressure and coercion, are all valuable personality traits in this line of work.

Forensic Accountants as First Line of Defense

Often, as in the conviction of Joseph Massino. a forensic accountant will be the first person to discover hard evidence of criminal activity.  A vigilant eye is not enough in these situations; the FBI stresses the importance to accountants of documenting and reporting any and all red flags so that further investigation and appropriate action can be taken.  A few strange numbers during a routine audit can be the catalyst for a full investigation.

To be a truly effective forensic accountant, it is important to see not just the numbers, but the story they tell.  Whether that story is a happy one for a company with clean books and records, or a more complicated one for a company or individual involved in money laundering or other criminal activities, being able to see the implications behind the data is part of what makes an individual stand out in this field, and rocket up the career ladder.

Related Careers

The field of accounting is widespread, with professionals working in every state and in every developed country in the world. Accounting professionals are always in high demand and those who are qualified rarely have difficulty finding steady employment, no matter where they are.

Similarly, the field of criminal justice is active in every state and all over the world. Wherever there is crime, there are individuals who are committed to criminal justice and hold some professional role in the industry. Forensic accountants are unique hybrids of these two worlds. They are usually Certified Public Accountants (CPAs) and are commonly members of accounting organizations; however, they are also criminal justice professionals and need to have a thorough understanding of financial law and of the legal system as they may be called on to actively participate in court proceedings. Therefore, because this career straddles two professional spheres, there are many careers that are related to the skills of a forensic accountant.

Other Careers in Accounting

There are many types of accountants. Some are personal accountants and help individuals make financial decisions, prepare for big financial moves (like investments and home purchases) and file their taxes each year. Personal accountants must be CPAs and may work for third-party organizations, like H&R Block or Liberty Tax Service, or they may be self-employed. Corporate accountants work for major businesses, helping them manage everything from tax returns to project management budgets.

Some accountants work for the Internal Revenue Service (IRS). These accountants are often called auditors and are responsible for analyzing the millions of tax returns that are filed every year to ensure that they are accurate and compliant with federal law. If there is a discrepancy in a tax return, an auditor will be dispatched to determine the problem. Like forensic accountants, IRS accountants must be detail oriented and have a thorough understanding of tax law.

Other Careers in the Criminal Justice System

Forensic accountants are investigators, so professionals who work as detectives and private investigators need to have the same mindset as forensic accountants. They put together the pieces to solve puzzles, then put their findings in a presentable format to either defend or prosecute those who are accused of white collar crime. Private investigators and detectives may need to work with forensic accountants, on occasion.

Other criminal justice professionals are paralegals, who, like forensic accountants, need to conduct a lot of research and forensic scientists. Forensic scientists analyze findings from a crime scene to help put the clues together and solve all kinds of crimes.

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