There are plenty of potential careers to consider for those interested in accounting. One up-and-coming path in this broader field is that of forensic accounting, where professionals look specifically at financial transactions while applying their analytical skills.
So, what is forensic accounting, and when is it used? How do you go about becoming a forensic accountant? We answer this and more below.
Understanding Forensic Accounting
One of the most appealing aspects of a career in forensic accounting is its relevance across a wide range of industries—so, no matter where your interests may lie, you can put your skills to work.
Defining Forensic Accounting in Modern Finance
Today, individuals and businesses alike generate more financial data than ever before. Statements from various bank accounts, online transactions, and other financial data are a very real part of our everyday lives; unfortunately, so are financial crimes like fraud. All of this, in addition to ongoing corruption in the business world, has led to forensic accounting becoming an integral part of modern finance.
The Evolution of Forensic Accounting
The field of forensic accounting has been developing and changing rapidly for the past decade, especially amid emerging laws and regulations regarding fraud, finance, and data privacy. Meanwhile, periods of corruption in modern history (such as the savings and loan scandal of the ’80s and ’90s) have spearheaded the demand for more robust forensic accounting techniques.
Examples of When Forensic Accounting Is Used
Forensic accounting is used anytime there is a need to investigate an individual or a company’s financial practices. Most often, forensic accountants are called in when a business owner or individual is suspected of a financial crime and further investigation is needed.
Below are some of the most common examples of forensic accounting at work:
Money Laundering
Money laundering occurs when money is illegally obtained and then transferred covertly, often to a foreign bank account or another legitimate business. Forensic accountants are frequently called upon to uncover instances of money laundering among businesses and individuals alike.
Tax Evasion
When a person or business fails to pay taxes (or doesn’t pay the correct amount), this can be known as tax evasion. Forensic accountants may investigate charges of tax evasion on behalf of the IRS.
Bankruptcy
If a person or business applies for bankruptcy, forensic accountants can also play a central role in investigating related finances and transactions. The information they uncover can help courts determine whether or not a bankruptcy declaration will be granted.
Divorce Proceedings
When there are finance-related conflicts in a divorce proceeding, forensic accountants may be brought in to investigate further. This is especially common in instances where one spouse is accused of hiding money or otherwise mishandling funds.
Insurance
Fraudulent insurance claims are a prevalent issue in the United States, and many insurance companies are seeking ways to crack down on them. As a result, insurance firms may hire forensic accountants to help them prove cases of insurance fraud.
Economics
In certain instances, forensic accountants may be relied upon not to investigate a particular financial crime but rather simply analyze and make predictions about overall trends in the field.
The Role of Forensic Accountants
The role of a forensic accountant is essential regardless of scenario or industry. On any given day, a forensic accountant can take on a role as a fraud examiner, expert witness, or even a risk management professional.
Litigation Support and Expert Witness Services
One of the most common roles forensic accountants take on during their careers is providing litigation support and expert witness services. Typically, this occurs when they are in charge of investigating an alleged crime. In this role, the forensic accountant may analyze financial data and make recommendations regarding whether there is enough evidence to prosecute the crime.
In some scenarios, forensic accountants might serve as expert witnesses, too, offering testimony on behalf of a law enforcement agency or other organization during court proceedings.
Regulatory Compliance and Risk Management
Some businesses (namely larger corporations) may also hire forensic accountants for guidance when it comes to regulatory compliance and risk management. These forensic accountants could be brought on board full time or relied upon occasionally as independent contractors, providing recommendations to help the business avoid compliance and regulatory issues.
Skills and Qualifications for Forensic Accountants
If a career as a forensic accountant seems intriguing, you might wonder what kinds of skills and qualifications you need to succeed in this field.
Essential Skills for Success in Forensic Accounting
Forensic accountants should possess numerous hard and soft skills to do their jobs well. Some examples of these soft skills include:
- Strong attention to detail
- Solid communication skills (both verbal and written)
- Excellent analytical and problem-solving skills
Likewise, forensic accountants should have their fair share of technical expertise in the following areas:
- Trial testimony (especially when serving as an expert witness)
- Finance
- Regulatory compliance
- Asset tracing
- Investigations
Although this is not an exhaustive list of skills, it can give aspiring forensic accountants a better idea of specific areas they may need to work on in order to become successful in their careers.
Educational Pathways and Certifications
Along with sharpening these key skills, forensic accountants must have a formal education and training before they can get into this competitive field.
At the very least, most employers will look for candidates with a bachelor’s degree in accounting, forensic accounting, or another related field. For more advanced positions, a graduate degree (such as a master’s in accounting) may be preferred.
On top of obtaining a formal degree, aspiring forensic accountants should strive to gain as much experience in the field as possible. Having a background in insurance, investigations, or even law enforcement can be useful here.
Pursuing additional certifications and designations is also a great way to set yourself apart as a forensic accounting professional. Many go on to join the Association of Certified Fraud Examiners as a means of differentiating themselves, meeting certain work requirements, and passing the CFE exam.
Breaking Into the Field of Forensic Accounting
For many forensic accountants, breaking into the field isn’t necessarily as simple as following a step-by-step process. Instead, a number of experiences may help ease the transition into this line of work.
Steps to Becoming a Forensic Accountant
Of course, striving toward a career as a forensic accountant must begin with you obtaining the necessary education, degree, or certification as described above. From there, however, it’s all about gaining experience. Usually, this first means seeking an entry-level position as an accountant or auditor. While it may not be a direct forensic accounting role, these types of jobs can equip you with valuable experience.
The more experience you gain going forward, the better developed your accounting skills will become. You might start applying for forensic accountant openings at insurance companies, law enforcement agencies, or other private businesses. Along the way, committing to ongoing learning and professional development in the form of additional designations, workshops, and classes can serve you well as you make a name for yourself in this field.
Where Do Forensic Accountants Work?
There are numerous industries and places where forensic accountants work—ranging from law enforcement agencies and insurance companies to small businesses and large corporations.
Industries in Need of Forensic Accounting Services
The public, private, and nonprofit sectors all need forensic accountants for a variety of reasons.
In the public sector, law enforcement agencies often hire forensic accountants to conduct investigations related to financial crimes as well as provide expert witness testimony and other legal support in the courtroom. In addition, it is not uncommon for insurance companies to hire forensic accountants to research insurance claims and financial statements, looking for signs of fraud or other wrongdoing. Nonprofit and for-profit businesses may also work with forensic accountants for guidance on regulatory compliance and other industry-related laws.
In many cases, private and independent consulting firms hire forensic accountants to work on a contractual basis. When this happens, accounting professionals may be hired full-time or work as independent contractors. This can be a worthwhile opportunity to explore if you have an interest in working as a freelancer with more flexibility and versatility in your career.
Government Agencies Opportunities
Law enforcement agencies are the most likely government agencies to hire forensic accountants. This can include anything from small police departments to larger organizations such as the FBI. These professionals may be hired at the local, state, or even federal level.
The Importance of Forensic Accountants in Today’s Economy
In today’s connected and global economy, there is a growing need for experienced, knowledgeable forensic accountants to protect businesses from financial crimes, improve transparency, and maximize accountability.
Protecting Businesses From Financial Crimes
Unfortunately, financial crimes like money laundering, tax evasion, and fraud can have a substantial impact on businesses of all sizes. Forensic accountants play a critical role in uncovering instances of financial crimes and doing their part to get criminals prosecuted. This, in turn, protects the innocent and helps the economy in the process.
Enhancing Transparency and Accountability
The work of a forensic accountant also contributes to the overall accountability and transparency of a company’s financial reports, helping businesses of all industries and sizes follow regulatory compliance laws and adhere to other key standards. With this greater sense of transparency and accountability, businesses can follow ethical practices while investors and consumers enjoy enhanced confidence in dealing with these businesses.
Interested in Studying Accounting?
Serving as a forensic accountant requires considerable skill, patience, and problem-solving. However, if this area of accounting sounds interesting to you, then it may be time to explore degree options to help you develop the foundational skills and knowledge needed to work in the accounting field.
At Johnson & Wales University, we’re proud to offer both an online Bachelor’s in Accounting and an online Master’s in Accounting to suit our students’ needs. Both programs are designed with career-focused curriculums and can be completed 100% online for your convenience. Reach out to learn more about JWU’s degree program offerings, call 855-JWU-1881, email [email protected], or request more information to get started.