Although forensic accounting has been a growing profession for many years, people frequently misunderstand exactly what it is that forensic accountants do!

What is forensics?

The term ‘forensic’ refers to the application of scientific methods and techniques in the investigation of a crime or a legal issue.

This approach is used in a number of different fields from medicine, to engineering, to accounting. Individuals who work in a forensic discipline are specially trained to gather and analyze evidence in a methodical, logical manner in order to come to conclusions and provide a professional opinion on certain questions.

What is a forensic accountant?

A forensic accountant is to someone who is a specialist at unraveling financial and compliance puzzles for businesses, nonprofits, governmental entities, and individuals, using precise processes and a systematic investigation of data. Forensic accountants are often certified public accountants (“CPAs”), however forensic accountants also enter the profession by alternative routes, such as through previous careers in a government agency like the Internal Revenue Service (“IRS”) or the Federal Bureau of Investigation (“FBI”).

A forensic accountant is usually called on to assist with a search for the facts and a truthful conclusion after some sort of devious or fraudulent financial activity has taken place. Matters in which a forensic accountant is typically involved range from bankruptcies, divorces, asset misappropriation, financial statement fraud, and shareholder disputes to a variety of corporate and nonprofit internal inquiries.

Forensic accountants may also be engaged proactively to conduct fraud risk assessments for corporations, charities, and municipalities or to assist an organization in evaluating and bolstering its internal controls, to prevent or deter fraudulent activity before it occurs.

What type of training is critical for a forensic accountant?

In order to be properly certified, a forensic accountant must meet the education, training, experience, and examination requirements of the profession while also participating in additional training to learn the methodologies and investigative techniques that are appropriate to present relevant evidence in a court of law.

Distinctive credentials held by forensic accountants include the “CFE” or Certified Fraud Examiner issued by the Association of Certified Fraud Examiners (“ACFE”) and the “CFF” or Certified in Financial Forensics issued by the American Institute of Certified Public Accountants (“AICPA”). Each of these is achieved only through rigorous education and testing - and continuing education requirements are necessary to maintain them. Both of these credentials are backed by professional standards that include the requirement to maintain integrity and objectivity with respect to the performance of an engagement.

In addition to skills and experience in investigative techniques and financial analysis, forensic accountants need to be able to communicate well, both orally and in writing. The best investigation or analysis in the world won’t be worth much if the findings cannot be conveyed in a straightforward manner to a judge and jury.

How do you select a forensic accountant?

Because of the sensitive financial nature of forensic engagements, it is essential to choose a highly qualified, seasoned professional.  In many instances, business owners, corporate leaders, or nonprofit executive directors will rely on the advice and counsel of their attorney to make the right selection.  Attorneys are well prepared to assist with this type of decision based on their understanding of both the complex examination and investigative process and the importance of fact-based research and analysis. Attorneys are also well positioned to help their clients identify an effective forensic accountant because of their existing relationships and contacts in the accounting profession.  As a result, the entity’s senior management team and the attorney frequently work together when preparing to interview and hire a forensic accountant.

What are the issues to consider?

The search process starts with having a clear understanding of the scope of the engagement and defining the specialized knowledge that will be most valuable for this unique situation. Clarifying the role of the forensic accountant enables them to leverage their skills and expertise in the most appropriate way.

An experienced forensic accountant will direct and administer complex investigations by:

  1. Processing and analyzing voluminous records and documents smoothly, efficiently and effectively using data mining to organize and manipulate large masses of data into a manageable and understandable work product;
  2. Having a familiarity with regulatory or law enforcement agencies and the legal process;
  3. Analyzing data and verifying the information presented by the opposition; and
  4. Offering valuable litigation support services including interviews, summary reports, deposition assistance, and additional analysis as necessary.

To be most effective, a forensic accountant should be brought in as soon as a financial crime or compromising legal issue is suspected or detected. The search for a forensic accountant might include interviewing familiar firms or asking for a referral from a trusted colleague for a forensic accountant with a strong reputation for excellence and proven experience in the fraud and forensics area.

How will a forensic accountant add value?

A forensic accountant who is trained to investigate and solve complicated financial cases combines a depth of specialized expertise with a distinctive outsider perspective.  As such, a forensic professional expands the attorney’s capabilities and provides the resources and facts that support a successful conclusion.

Having the right information is critical to ensuring a winning outcome. By posing critical questions and conducting the necessary due diligence, the attorney and the client will be more comfortable and confident with their choice for a forensic accountant.