Forensic Accounting: Definition and Overview

Forensic Accounting: Definition and Overview was originally published on Forage.

employee holding money while looking at calculator for forensic accounting job

Forensic accounting is a type of accounting that “follows the money” and analyzes financial information to look for evidence of potential financial misconduct. Forensic accountants investigate companies’ and people’s financial records and use accounting and legal skills to interpret and communicate their findings to others.

In this guide, we’ll cover:

What Is Forensic Accounting?

Forensic accounting is a type of accounting that investigates financial information for potential evidence of crimes. Forensic accountants use accounting, auditing, and investigative skills to understand whether a person or company has committed financial misconduct, such as embezzlement or fraud.

One unique aspect of forensic accounting — different from what a typical accountant does — is that forensic accountants use legal skills to determine if financial activity is illegal and often present their findings in court.

“Forensic accounting encompasses the provision of litigation support and investigation accounting services,” Alan Schachter, senior managing director, economic damages and business valuation at Guidepost Solutions, says. “It provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate, and ultimately dispute resolution.”

Forensic Accounting Jobs

Forensic accountants can work in a variety of sectors, whether in public practice or for insurance companies, banks, police forces, or government agencies, Schachter says.

In an accounting firm, these accountants will work on an advisory team or, in a larger company, in a special forensic accounting division. In a consulting firm, they’ll work for a risk management consultant. Lawyers, law enforcement agencies, insurance companies, and government organizations will also hire forensic accountants full-time or on a contract basis.

The average forensic accounting salary is $76,169, according to Comparably. Salaries may depend on what sector the accountant works in; for example, the U.S. Bureau of Labor Statistics states that accountants working in finance and insurance had higher average salaries than those working in government.

How to Get Into Forensic Accounting

Education and Certification

Most forensic accountants major in a related field like accounting, finance, or economics to gain their career skills. Some employers require a master’s in accounting or an MBA with a focus on accounting.

Many, but not all, forensic accountants are also certified public accountants (CPAs). CPAs are accountants with a specified amount of experience and education who have passed the CPA exam. While this certification isn’t required, it can help increase forensic accountants’ job prospects and pay and gives them credibility when testifying in court.

Further certification includes the certified fraud examiner (CFE) certification. To become a CFE, forensic accountants need a degree, a CPA certification, relevant work experience, and to pass a series of CFE exams. While this certification isn’t required of forensic accountants, it can further develop their credibility and job prospects and deepen their knowledge of fraud.

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“The general educational background and skill set for general accountants/CPAs and forensic accountants is often very similar, but a forensic accountant must have a more skeptical mindset and should have a general understanding of the legal system,” Matthew Greenblatt, senior managing director at FTI Consulting, says. “[They] should be ready to defend their conclusions in a litigation, including, but not limited to, providing expert testimony in deposition or at trial.”

Other skills include:

  • Fraud investigation
  • Data analysis
  • Internal and external auditing techniques
  • Writing skills
  • Investigate skills
  • Interrogative skills

>>>MORE: JPMorgan Chase & Co’s Internal Audit Analyst Virtual Experience Program.

Pros and Cons of Working in Forensic Accounting

In this field, you never know what case you might work on next — and while some are exciting and high-profile, others can be contentious and even dangerous.

“I’ve had the opportunity to work on the largest and highest profile frauds in the history of the world (e.g., the Madoff scandal) all the way to much smaller cases involving breach of contract disputes and highly contested divorce matters,” Greenblatt says. 

You need to be “ready to handle anything,” says Robert Bonavito, CPA with over 30 years of forensic accounting experience. This includes dangerous situations and “crazy daily scenarios. For example, I’ve worked with a very dangerous client who had to be handcuffed, straitjacketed, and surrounded by guards. You need to be able to deal with dangerous situations and make tough decisions every day. You also need to be able to sort through cases and decide which ones are worth taking. Sometimes taking on a case is a risk because you’re not sure how it’ll turn out, but you do it because you want to help your client.”

Forensic accounting can lead to stressful situations and cases, but also resolutions that make a positive impact on people’s lives.

“I help people in complex, unique situations,” Bonavito says. “Forensic accounting is truly about helping people.”

Interested in learning more about accounting and gaining accounting skills? Try a Forage accounting virtual experience program.

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The post Forensic Accounting: Definition and Overview appeared first on Forage.