The Essential Guide to Forensic Accounting

For better or worse, there's never been a better time to be a forensic accountant. In recent years, financial scandals like the Madoff Ponzi scheme, Lehman Brother's falsified loans, and the Samsung bribery case, have shown how important trained, experienced financial investigators really are. In the era of globalization, Big Data, and deregulation, there's a lot of temptation to make a fast buck or take advantage of consumer trust for a bigger payday. To fight corruption and keep markets fair, there is an ever-growing need for forensic accountants who can find, analyze, and communicate fraud and deception to the authorities and to the public.

However, it's not all fraud and deception. Granted, that's the exciting stuff, but forensic accountants have a role in all sorts of financial, business, and legal settings. Forensic accountants help investors do their due diligence, analyzing deals to suss out potential fraud. They investigate bankruptcies, mergers, and acquisitions, to make sure all parties involved are showing their cards. Forensic accountants help law firms in divorce cases, dragging out any financial skeletons in the closet, and they work in insurance companies verifying whether claims are legitimate and how much loss the company will take on certain clients.

In short, where there are questions about financial transparency, legitimacy, or shenanigans, you'll find forensic accountants. They're the Sherlocks of the Brooks Brothers set.

Forensic Accountant Job Description 

Every financial audit or investigation is going to have its unique wrinkles, because there's no such thing as a textbook crime, but the work of forensic accounting is fairly standardized. Forensic accountants go through a three-step process:

  • Discovery – Finding the evidence when there's a suspicion of wrongdoing.
  • Analysis – Examining the evidence to figure out who did what to whom and how. (It's always the butler.)
  • Report – This is where the storytelling comes in – laying out the evidence for clarity, and explaining every aspect of the case in detail.

The responsibilities of a forensic accountant will include preparing their findings with the understanding that their research will probably be used in court, either in a civil suit or a criminal prosecution. A forensic accountant will provide litigation support, and this can entail calculating the economic damage, for example, when somebody violates a written contract. In addition, he or she will provide what is referred to as investigative accounting. This can involve assignments related to insurance or securities fraud, wrongdoing related to kickbacks, employee theft, and more.

A forensic accountant will need to possess auditing skills to conduct in-depth examinations of complex financial records and accounts, and he or she must be available to communicate with other members of the legal investigations team to keep them up to date as developments occur. A major part of the forensic accountant job description is the ability to effectively convey financial information in a manner that is appropriate for a court setting.

What Will You Learn in a Master's in Forensic Accounting Program?

A Master's in Forensic Account degree program is the place to hone your skills and develop the expertise that helps make you a confident professional. The training to help students meet forensic accounting certification requirements will enable them to see beyond the numbers to the scenarios that helped create them. They'll gain an understanding of the business situations that can drive certain patterns of transactions, and they will learn how to provide expert financial analysis for people who are not versed in accounting.

A lot of what forensic accountants do is the same thing investigators have always done: look for clues, establish patterns, find motivation. But in the 21st century, computer technology has transformed business, and along with it, transformed financial crime. Of course, it's also transformed financial investigation. A strong, contemporary forensic accounting program will spend a lot of time developing students' skills in data collection, data analytics, and data visualization. As blockchain technology impacts accounting, data skills may become the most important aspect of forensic accounting, so look for a program that is technologically forward, or you're forcing yourself to learn it later.

As a forensic accountant, you will find yourself conducting audits, so a good master's program will offer real-life case studies and practice in forensic audits, internal audits, and external audits. The first type, forensic audits, examine a company's finances for signs of fraud, cover-ups, or just plain incompetence. An example of this would be the analysis of rent payment receipts to determine if they fit the definition for breach of contract. Internal audits, on the other hand, are reports that have been prepared by a company's own auditing team to review their financial protocol and procedures. External audits are those performed by an outside source to provide credibility and authority to the legal assertions being made.

Strong forensic accounting programs will include extensive legal study, and business schools will actually work in an interdisciplinary way with their university's law school. It's essential that forensic accountants understand the precepts and legal definitions that pertain to both civil and criminal court proceedings, as these can differ significantly from one another. In many cases, the culmination of the forensic accountant's investigation will be a summary of findings, breaking down complex financial transactions into language that a jury can understand. Many forensic accounting programs today will actually train students in giving court testimony, including practice in mock trials.

How Forensic Accountants Do Their Sleuthing 

Forensic accountants must be knowledgeable with various computer software programs, including Microsoft Word, Excel, and PowerPoint, for the purposes of gathering and analyzing information. Job candidates will need to learn online researching skills and the use of database management and analytical software.

Ethics will play a large role in forensic accounting, and students will need to display a high level of personal integrity to conduct their work in a thoroughly honest manner. Forensic accountants will also need to be able to successfully pass a background check, as many jobs will require a security clearance. Take down any embarrassing Facebook pictures right now.

In addition, forensic accountants must be team players, as they are likely to work in environments where they must collaborate with other professionals. They will be responsible for reviewing damage reports from the opposing experts to discover the strengths and weaknesses of their presented case, and they will give consultation to decision makers to best decide how financial reparations should be made.

To keep their certifications, forensic accountants will need continuing education credits in the form of conferences and workshops, and most employers will also stage periodic training sessions to help them stay up to date in their field. As newer technologies emerge, forensic accountants must learn how to use them, and they should read periodicals and studies to keep abreast of the latest developments in their line of work.

Steps to Becoming a Forensic Accountant

Your college's forensic accounting program will cover the body of information that pertains to the American Institute of Certified Public Accountants and should include:

Some things students will learn involve:

  • planning a forensic engagement
  • gathering information
  • forensic interviewing protocols
  • creating reports
  • providing court testimony

Students will also be certified to work in the following areas:

  • bankruptcies
  • reorganizations
  • insolvencies
  • family law
  • preventing and detecting fraud
  • forensic analysis coupled with computer technologies
  • misrepresentation of financial statements

Most employers will require that their applicants possess a bachelor's or master's degree in one of the following areas: forensic accounting, finance, or general accounting, and graduates will find it is beneficial to be CFF certified when looking for employment.

Students must be proficient in analytical theories and the many ways of acquiring funds to successfully deconstruct white collar crime. Students must also possess a complete mastery of general accounting, as they will need to disentangle complex embezzlement schemes, detect money laundering, and find hidden assets. They will also need to understand governmental regulations regarding finances.

Forensics Accounting Salary Expectations

Forensics accounting salary statistics show that people working in this profession can earn between $44,000 to $113,026 per year. The median income for forensic accountants is $64,806, and the average salary is $63,645. These figures can be influenced by a number of factors, including whether the forensic accountant works on a freelance basis from his or her own practice or whether he or she works for an employer.

Forensic accountants can find employment working in law enforcement, insurance companies, and government agencies. Obviously, there are forensic accounting jobs to be had in banks, financial houses, and investment firms as well. The highest-paid jobs are generally found working for the SEC or after forensic accountants have advanced to higher levels of upper management.

This field is expected to grow by 10% between 2016 and 2026, according to the Bureau of Labor Statistics, and experts believe that the median wage could rise to between $80,000 to $85,000 by the end of the decade. This is different than the field of general accounting, where salaries have remained steady at $61,000, on average, for at least the last five years. People who already have degrees in accounting can easily qualify for a higher wage by completing the coursework to receive their financial forensics credentials.

According to Payscale, research also shows a positive correlation between the years worked in forensic accounting and a higher rate of pay. Entry-level forensic accountants with one to five years of experience tend to make an average of $60,000. At five to ten years of experience, this number increases to an average of $79,000, and forensic accountants with greater than twenty years of experience earn $100,000 per year on average.