Unless you are an accounting insider (and let’s face it, few of us are crazy enough to be one of those!), there is a strong chance you have never heard of forensic accounting in your life. We are not upset. It is completely understandable.
To the average person, accountants are just accountants. People who love numbers, spreadsheets and the minutiae inherent to figures and data. However, there are specializations in what is actually quite a broad profession. So where to forensic accountants fit into this world you are just now learning exists?
Forensic CPA Group out of Jacksonville would love nothing more than to answer that question for you! Because if you are a business owner, chief financial officer or even just an individual with money — and we all have at least some of that — than you could find yourself in a position one day where forensic accounting is your new best friend.
So we will start, as any good accountant should do, at the basics. In this post, we will help you better understand just exactly what a forensic accountant is and what they do. We hope you find it helpful!
Thanks to the popularity of criminal television shows and the extremely significant advancements in technology, the word forensic has a sort of hip sound to it. People think DNA and linking tiny pieces of evidence to catch the bad guy. In some ways, the spirit of that connotation rings true in forensic accounting, even if the drama of shows like CSI is left out.
There are no “aha” forensic moments like television dramas have an affinity for, but rather a judicious, detailed approach to accounting that combines auditing, investigative skills and traditional accounting in order to examine the finances of an individual or business.
In reality, forensic accountants combine a set of particular skills to provide an accounting analysis which can be used in legal procedures. They look beyond the plain numbers and deal with the practical business of a given situation. Forensic accountants are commonly referred to as fraud investigators or fraud auditors and deal with white-collar crimes such as embezzlement.
- Forensic accounting is a combination of accounting, investigative techniques and auditing in order to uncover financial criminal actions such as embezzlement.
- The purpose of a forensic accounting is to obtain information and explain the financial crimes in legal proceedings or in court.
- Forensic accountants are commonly referred to as fraud investigators or fraud auditors.
Often times, forensic accountants are employed by insurance companies, government agencies, banks or police forces. Any industry in which money is overseen by a person, or group of people, could be at risk for those funds being tampered with illegally.
Forensic accountants compile the evidence they find, develop systems in which to manage that data and communicate their findings through reports or presentations. Because crimes are committed, this involves litigation and often court, so they also act as expert witnesses. For internal business investigations, forensic accountants will trace funds, identify assets and asset recovery. With the appropriate training, they can also act in alternative dispute resolution (commonly found in insurance claims) because of their familiarity with the judicial system.
- Forensic accountants research numbers and evidence in order to trace funds and identify assets for recovery.
- Conduct investigations and analyze financial data to find irregularities to the figures.
- Prepares reports from those financial reportings to draw conclusions about the investigation.
- Collects the analytical data for litigation and can testify in court as needed with their expert opinion based on the investigation of the data.
When it comes to litigation support, forensic accounting it used when there needs to be quantification of the damages resulting from the criminal action. This can help resolve settlements to avoid lengthy, costly court proceedings or to aid in court decisions.
Forensic accounting is commonly used to establish if a financial crime was committed or to assess criminal intent. These crimes can include embezzlement, fraud, employee theft, falsified financial statements or insurance fraud. Criminals committing these felonies are often apt at covering up their tracks or muddying the waters, meaning a forensic account needs to make sense of the situation in a way other less-trained eyes can recognize and understand.
Skills and Education
Without question, forensic accounting requires every fraud investigator to possess a strong understanding and skill set within traditional accounting practices as the foundation of their job. They must be able to analyze, interpret and summarize financial data and business actions, which are often complex.
It is also essential to fully comprehend any applicable laws and regulations involving financial institutions and handling of money. Forensic accounting frequently attracts accountants who have a particular interest in the investigation and deeper dive into accounting in order to uncover crimes and protect the financial well-being of companies and individuals.
All forensic accountants need to pass the Uniform Certified Public Accountant Examination to become a Certified Public Accountant (CPA) and most have a least a bachelor’s degree in accounting, if not more extensive education and field experience. Most forensic accountants have some level of knowledge in criminal law, business law, information systems and sociology. All can be important when searching for potentially criminal activity, criminal intent and asset analysis.
- All forensic accountants are required to pass and maintain the same certifications as any other CPA.
- Most all forensic accountants have at least a bachelor’s degree in accounting, but many have additional education and field experience.
- Forensic accounting combines interest and knowledge in other areas such as criminal law, business law, sociology among many others.
- Analyzing data, tracing funds, determining assets and litigation support are all critical elements to forensic accounting’s daily requirements.
Contact Us Today!
Now that you have a much better understanding ( we sincerely hope you do!) of what forensic accounting is, and what forensic accountants do, you are better equipped to recognize which situations in which forensic accounting is required and why you would want one on your side! We will dive into more detail in another post later on into specific scenarios forensic accounting generally finds involvement, but in the meantime, if you feel you may need a forensic accountant in Jacksonville of your own, or simply want some more details, contact us today and protect your financial interests!