Last updated by
June 10, 2022
Forensic accounting requires the combined use of auditing, accounting, and investigative skills. If you are interested in becoming a forensic accountant, this post will be your comprehensive guide
Are you thinking about pursuing a career in forensic accounting? Well, you are in the right place, as this article will offer you complete guidance on what it means to be a forensic accountant and how to become one.
Forensic accounting requires the combined use of auditing, accounting, and investigative skills. If you are interested in becoming a forensic accountant, this post will be your comprehensive guide. You will learn about what forensic accounting is? And the qualifications and skills you need to become a forensic accountant.
Once you have finished reading this article, you will have extensive knowledge about forensic accounting and its branches. You will have complete knowhow about what will be your job description as a forensic accountant, the future career prospects, and how much you will be able to earn.
We have gathered this information from some of the most reliable sources. The goal is to give you authentic information to choose forensic accounting as your career pathway. So, without further ado, let us dive right into the meat of the article and get you acquainted with forensic accounting.
Table of contents
Forensic accounting is about conducting an examination of an individual’s or business’s finances. It requires accountants to utilize their auditing, accounting, and investigative skills to provide a complete financial analysis for legal proceedings.
It is typically the insurance industry that uses forensic accounting to prevent themselves from false claims and associated damages. Other entities that can use forensic accounting or hire forensic accountants are banks, government agencies, the police force, and public accounting firms.
As a forensic accountant, you will not deal with numbers alone. It will require you to have a broader and detailed look into the business’s operations and situations. Forensic accounting is mostly useful to investigate embezzlement and fraudulent cases to determine the nature of financial crime/s in court.
A forensic accountant is a financial investigator responsible for assets identification, recovery, tracking and tracing funds, and reviewing an individual’s or business’s overall financial dealings.
Forensic accounting is all about the analysis and interpretation of complex financial dealings and creating a summary for legal, financial crime cases. As a forensic accountant, you will be responsible for gathering financial evidence, managing this information via computer applications, and compiling reports.
It will be your job to communicate the findings in the form of a presentation or report. Additionally, you might have to testify in court and prepare a visual representation to support your conclusions.
In case you are thinking about becoming a forensic accountant, you must know the full scale of its application. This way, you will know the prospects of industries you will be able to work in. So, let us look into these applications in a little bit more detail.
At times individuals and companies commit tax frauds and misrepresent their financial circumstances to evade taxes. Forensic accounting allows you to trace a company’s earnings in order to determine their tax bracket and the extent of fraud they committed.
As a forensic accountant, you will also be responsible for proving that the accused did not commit any tax fraud.
If a business or stockbroker commits fraud by providing fake information about their investors, this is known as securities fraud. Apart from identifying the culprits, forensic accounting helps investors avoid falling on the wrong side of the law and commit any scams by mistake.
Money laundering is the most challenging type of financial fraud, and even forensic accounting finds it hard to trace where illegal money is coming from. To be a forensic accountant working in the money laundering field, you will need strong analytical and investigative skills.
Attention to details is another skill-set required to separate legit financial transactions from illegal money transfers in small amounts.
Sometimes people hide their finances or steal money in a relationship. In such cases, forensic accounting helps sort out financial disputes amongst family members.
Forensic accounting plays a valuable role in the recovery protocols whenever a business or individual files for bankruptcy or faces drastic economic losses.
Forensic accountants look at the business’s financial situation and investigate any signs of foul play or misrepresentation in economic losses. You can also help companies regain their economic stability by discovering evidence of frauds that were not their fault.
Some of the other applications of forensic accounting include embezzlement, property theft, payroll fraud, insurance claim frauds, and cybersecurity breaches.
There are various steps involved in the audit process of forensic accounting. Each method requires a specific set of protocols to follow. Here is a brief explanation of each process.
The investigation process begins with the collection of evidences and data whenever a fraudulent activity is suspicious. Forensic accountants look at the data and look out for any discrepancies and wrongdoings. These identifiers work as red flags indicating fraudulent activities.
As a forensic accountant, you may also have to interview the organization’s employees to gain information and identify any false claims. Once you have all the information, it will allow you to create a hypothesis of what happened and how to assess the business financial affairs further.
The next step after the investigation is to compile the data in a reporting format. This helps you develop a case and present a financial summary of your findings to the hiring party. You give a detailed explanation of how the fraud was committed and who the culprits were.
As a forensic accountant, you are also responsible for determining the way forward to handle the case, and a business can prevent future incidents. In case of legal proceedings, a forensic accountant may also play a critical role in the case by giving their expert opinion and explaining their findings to the court.
This is the final process where a forensic accountant appears as an expert witness to give a detailed analysis of financial crime. This includes presenting the facts to the judge and the jury and explaining the entire case in understandable and straightforward terms. Moreover, as a forensic accountant, you may also have to testify against the offenders.
In simple terms, a forensic accountant plays a vital role in the entire litigation process from start to finish.
Forensic accountants are subject matter experts who excel in investigating financial crimes, frauds, and other forms of monetary misrepresentation. If you wish to become a forensic accountant, you will be forming analysis around financial information to allow the attorneys to prosecute involved culprits.
These may be individuals working in companies, people or businesses funding illegal activities, and insurance companies involved in misrepresenting facts. It will be a part of your professional training to dig deeper into the financial activities and identify any red flags.
You will learn to analyze, interpret and create detailed reports of complex financial issues. Additionally, you will also learn about the legal procedures and concepts pertaining to financial crimes. It will be a part of your job to be a good communicator as you will be responsible for presenting financial findings in detail and with clarity in from of the courtroom.
Have you always dreamt of working in a specialist role? Then choosing forensic accountancy as a career pathway might be an ideal answer. This will require you to have meticulous analytical skills and attention to detail.
It goes without saying that you must also be exceptionally good with numerical skills to complement your investigative mindset. The combination of these two will allow you to investigate the following.
As a forensic accountant, your role will also require uncovering information and specifying irregularities purposefully hidden to commit and justify financial fraud. You will also learn to quantify actual financial losses, track and recover illegal funds.
Additionally, you will also create reports and reconstruct the scenario to explain how a particular financial crime occurred. Although research is a critical aspect of the job description of a forensic accountant, it only requires a small portion of time to investigate fraud.
Other areas of utilizing your expertise as a forensic accountant may include.
You can also work in a company as a forensic accountant to prevent fraudulent activities by formulating new techniques and rules. This will allow the businesses to minimize their risk of financial crimes and build a good reputation within their niche.
In order to become a forensic accountant, you must earn a degree in accountancy to give you a solid foundation to work in the field. However, this is not obligatory, and you can get a degree in a subject of your choice.
After the completion of your degree, you will have to undertake professional training as a contracted employee for a company. Moreover, you will also need to complete a professional qualification/certification with a specialty in forensic accounting from an experienced and recognized awarding body.
You can either attend a traditional institute or study online to earn a diploma or certification in forensic accounting. If you wish, you can even pursue an undergraduate or post-graduate degree in the field.
If you are wondering where to earn your certification, The Institute of Certified Forensic Accountants (ICFA) is a global awarding body. They offer multidisciplinary programs in forensic accounting. You can even earn a higher level CPFAcct, i.e., Certified Professional Forensic Accountant.
Here is a comprehensive list of skills you will need in order to become a forensic accountant.
If you are starting a career as a forensic accountant, gaining prior experience as a trainee may be challenging. However, you can gain experience in any accountancy firm and use it as a foundation to build your career. Some of the recommended areas to work in include internal audit, taxation, and risk assessment.
It would be a great idea to obtain a summer internship in a prominent accountancy firm. This may allow you to get an opportunity and spend some time around forensic accountants or even work in forensic accounting department.
In case you get an internship, try to look for a rotation internship program that allows you to work in various departments throughout your tenure.
If you are wondering how many working hours you might have to work as a forensic accountant, it depends on the sector you will work in. However, typically it will be a 9 to 5 job from Monday to Friday.
That said, due to the nature of your profession, sometimes you might have to log in extra working hours, including late evenings and weekends. This will only be the case when you have to meet urgent commitments and deadlines in legal cases.
You can even set up your own practice and work independently. This way, you will be able to have more control over what hours you chose to work.
According to BLS, as a graduate starting your career in financial accounting, you can expect a starting salary of $57,000. The average median salary of a forensic accountant is somewhere around $70,500, which can go as high as $87,000.
During your first ten years as a financial accountant, you can expect a decent pay rise. However, the later years will not make a considerable difference to your payroll. That said, you can expect to enhance the monetary returns via company benefits, bonuses, medical insurance, car allowances, profit-sharing schemes, and pensions.
More and more businesses are thriving to ensure that they are fully compliant with financial legalities and reforms in order to avoid any scandals. Therefore, the profession of forensic accounting is high in demand.
According to the Bureau of Labor Statistics (BLS), the jobs in forensic accounting will grow by 13% by 2022.
You might have to work on clients’ premises at times and may even stay overnight to complete your investigations in certain scenarios.
Remember that forensic accounting is a niche area of expertise; therefore, being a forensic accountant makes you a subject matter expert. Once you chose this profession as a career pathway, it will require you to work in a dynamic, fast-paced, and exciting field.
If you are good at what you do, the options to progress higher up the professional ladder become far more obvious. In addition to working as a forensic accountant, you will be able to take a more senior role of team leader or management responsibilities.
There is a wide variety of industries you can choose to work in. you can choose to apply with employers in both the private and public sectors. If you fancy working for the U.S government, you can apply to work for the armed forces, public administration offices, legal firms, and other government agencies.
If nothing else, you can target large accountancy firms to start your career in forensic accounting. These firms do have forensic accounting departments these days. In case you are of an entrepreneurial mindset, why not set up your own practice and start a forensic accounting business.
Once you have achieved your qualification, it is time to gain professional membership with a recognized body specializing in forensic accountancy. There are the five most prominent professional forensic accounting bodies in the U.S.
Gaining a membership from one of the above-mentioned professional bodies specializing in forensic accounting is not mandatory. However, they do provide you the benefit of appearing far more legit and competitive over other candidates.
Now, apart from these, you will also appear in court to present your finding in a legal fashion. So you can gain some basic knowledge in legal expertise for a professional edge. This will give you confidence and edge over other professional forensic accountants to voice your opinion in court with confidence and in a professional manner.
While the field of forensic accountancy requires you to excel at numerical, analytical, investigative, and creative skills, it is one of the most dynamic and exciting professions to work in. Every case will bring a new challenge, and it is not your typical desk job.
In some cases, you may get an opportunity to grow personally and professionally working for various clients in different locations. The career might give you a chance to travel during your assignments as well.
After reading this guide, if you have made up your mind to pursue a career in forensic accounting, then here are the common areas you can choose to practice in.