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Follow the Money: How to Become a Forensic Accountant

Published on: May 10, 2022

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TV shows like "CSI" and "Forensic Files" introduced most to the world of forensics. It’s not all about dead bodies and collecting DNA evidence, though. Instead, forensics is the use of scientific techniques to investigate crimes and, sometimes, you have to follow the money.

Forensic accounting might be the career for you if you have an aptitude for math, computer science or auditing and want to be part of law enforcement. So, what is this exciting field and how can you start your journey toward a forensic accounting degree?

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What Is a Forensic Accountant?

A forensic accountant investigates fraud, bribery, money laundering and embezzlement by studying financial records and transactions, tracking assets and other tasks. Forensic accountants specialize in a variety of areas, including securities fraud, asset misappropriation, identity theft, compensation disputes, and trademark and patent infringement.

Law enforcement agencies, such as the FBI and IRS, and fraud investigation units of major corporations and financial institutions frequently turn to these highly skilled professionals for assistance in locating and analyzing evidence for the investigation and prosecution of financial crimes. Legal teams also call upon forensic accountants to act as expert witnesses in their cases. Forensic accountants are increasingly in demand in corporate departments such as internal audit, finance, compliance and worldwide investigations.

Forensic accountants may also aid in the hunt for hidden assets in divorce proceedings and other civil actions such as breach of contract, tort, arguments over corporate acquisitions, breaches of warranty or business valuation disputes.

What Do Forensic Accountants Do?

Forensic auditing involves investigating financial activities using accounting and analytical abilities. They are frequently called upon as experts in judicial matters involving financial fraud or embezzlement and can utilize their talents to uncover what those statistics are trying to hide with their combination of accounting knowledge and ability to interpret the story the data may tell. 

A forensic accountant may be required to develop visual aids to support trial evidence in addition to testifying in court. Forensic accounting in corporate investigations comprises tracking money, asset identification and recovery, and due diligence evaluations. Due to their high level of participation in legal matters and experience with the judicial system, forensic accountants may seek extra training in alternative dispute resolution (ADR).

In complicated and high-profile financial crimes, forensic accounting is frequently used. For example, the extent and mechanics of Bernie Madoff's Ponzi scheme are now understood because forensic accountants dismantled the plan and explained it in court.

Forensic accountants are responsible for a variety of tasks. They can investigate fraud based on transactions in either a civil or criminal role. In addition to reviewing financial statements, some forensic accountants assist in connecting the dots by reviewing publicly available information. That often involves social media sites such as Facebook or Instagram. For example, they scan photos of a person in a specific location or with an extravagant purchase that offer an explanation of why the numbers don't add up.

These specialists' contributions toward criminal cases are some of the most visible components of forensic accounting as a vocation. They employ their abilities to evaluate financial data and even investigate personal behavior that may indicate money laundering, fake tax returns or embezzlement. If a person is involved in illegal or criminal activities, such as selling drugs or engaging in other illegal behaviors, forensic accountants look for patterns and investigate why a person's income may have increased dramatically in a short period, as well as how and why it's divided among different bank accounts.

Forensic accountants may collaborate with attorneys to unearth or support evidence of personal and business concerns in civil proceedings. They may be called in to help with divorce settlements, bankruptcy processes or business takeover conflicts. They employ their talents in these situations to look for hidden assets or violations of contracts.

What Is the Difference Between Forensic Accounting and Financial Accounting?

The production of financial statements per Generally Accepted Accounting Principles (GAAP) is known as financial accounting. It adheres to rules and principles established and enforced by the Financial Accounting Standard Board (FASB). Financial accounting for publicly traded corporations also adheres to the Public Company Accounting Oversight Board (PCAOB).

Financial statements for publicly traded corporations must be audited by a financial accountant annually. A financial accountant will examine a company's historical data and provide an opinion in accordance with GAAP and GAAS principles, using a well-defined set of methods to audit the financial statements.

Financial accounting is a routine audit that all public companies go through. Even private businesses might hire a financial accountant. However, forensic accounting jobs are more specialized and done to prove or disprove a crime. Typically, a financial accountant is paid for by a corporation as part of the financial budget. The cost for a forensic accountant would more likely be a legal expense, as they would be part of a criminal or civil investigation.

Where Do Forensic Accountants Work?

Although forensic accountants help solve crimes, they don’t have to work for law enforcement. Instead, forensic accountants can work in public accounting firms, businesses specializing in risk consulting, and forensic accounting services. They might also work with attorneys, law enforcement agencies, insurance corporations, government organizations and financial institutions.

Forensic Accountant Skills

Since they are often expert witnesses in court, forensic accountants must have strong analytical and investigative skills and a complete understanding of accounting and legal expertise. In addition, they may need advanced skills and knowledge in areas such as investigation and auditing.

Forensic accountants, like all other accountants, must be detail oriented. The act of discovering financial anomalies and recognizing tiny disparities that might signal a broader pattern of fraud necessitates close attention and focus. Forensic accountants spend a significant amount of time analyzing and interpreting numbers. Furthermore, they must meticulously document their inquiry in an orderly manner.

It is critical for forensic accountants to be versatile problem solvers. The path of an inquiry may be abruptly altered due to fresh information or other circumstances. Therefore, a forensic accountant must be imaginative enough to consider alternative situations and possibilities and determine whether they are compatible with the facts.

Forensic Accountant Salary and Job Outlook

The Bureau of Labor Statistics reports that the salary of an accountant or auditor is around $77,250 annually; professionals working for the FBI or other government agencies may make closer to $90,000 per year.

In general, the job outlook in the accounting field is growing at a faster than average rate, and specializations such as forensics will likely grow in demand as cybercrime rates continue to increase.

What Are the Steps to Becoming a Forensic Accountant?

The journey toward being a forensic accountant starts with the right education.

Forensic Accountant Education and Requirements

There are several routes to becoming a forensic accountant, but the majority have a bachelor's degree in accounting, finance, economics, business or a related discipline. They may also have a forensic accounting degree.

To become a certified fraud examiner (CFE), you must obtain a bachelor's degree in accounting or finance. You must additionally pass an exam demonstrating your competency in four essential areas: fraud prevention and deterrence, financial transactions and deception schemes, and the law and investigation techniques.

Some opt to get a certified public accountant (CPA) license instead of the CFE. However, CPA candidates must also have professional experience in order to sit for the CPA test. Therefore, many students work in entry-level employment during or after their undergraduate or graduate studies.

Forensic accountants may obtain certification from the American Institute of CPAs (AICPA), the Association of Certified Fraud Examiners (ACFE), or the National Association of Forensic Accountants (NAFA) before, during or after pursuing a CPA license.

How Long Does It Take to Become a Forensic Accountant?

Basic education should take between four and six years to earn the relevant degrees. It will take longer to get the proper certifications, but you may be able to work at entry-level accounting jobs while you move towards better opportunities. You will need some accounting experience to take many certifications exams, including CPA and CFE.

Can You Be a Forensic Accountant Without a CPA?

While you don't have to be a CPA to be a forensic accountant, having that knowledge can help you stand out from the crowd when applying for employment. This is especially true if you have experience with internal investigations and financial crimes.

Many organizations now want employees with forensic accounting certifications, such as the Certified Fraud Examiner. It is also critical for a forensic accountant's success to keep up with financial sector changes. In addition, you should take advantage of professional development programs in your sector to stay current on banking, investing and accounting operations.

If you are a detailed-oriented person who loves a good financial mystery, then being a forensic accountant might be the perfect fit. Find out more about our online accounting degree program at Husson University. Visit our website today for more information.

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Sources

https://www.cfoedge.com/blog/controls/whats-the-difference-between-financial-accounting-forensic-accounting/

https://www.indeed.com/career-advice/pay-salary/how-much-do-forensic-accountants-make

https://www.forensicscolleges.com/blog/htb/how-to-become-forensic-accountant

https://www.criminaljusticedegreeschools.com/careers/forensic-accountant/#:~:text=How%20long%20does%20it%20take,on%2Dthe%2Djob%20training

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