What Is Forensic Accounting?

For many people, the term “forensic” conjures up images of dead bodies and crime scene investigations. The world of forensic accounting is much cleaner, although it serves an equally important purpose in the field of financial reporting. Forensic accountants act like financial detectives and may be involved in a number of different activities, including defining insurance payments, computing settlements, or calculating royalty benefits.

Forensic Accounting: What Does it Entail?

Typically, forensic accountants are involved in financial disputes that have been taken to the legal system. Their goal is to go through existing financial records to provide support for parties involved in legal cases. Forensic accountants work, primarily, in one of two areas.

Litigation support, which involves doing investigative work to determine realistic economic damages or to uncover other information needed to support a legal case.
Investigative accounting, which focuses on uncovering illegal activities.

Investigate, Interpret, and Catch!

If you had to define forensic accounting in a few words, those words would be investigate, interpret, and catch. Forensic accountants investigate accounting records and documents to look for signs of illegal activity or hidden assets. They then interpret the information to determine if, indeed, a white collar crime has been committed. If not, they try to find where the assets in question have been hidden. The final step is to prosecute the criminal using financial facts.

Forensic accountants investigate a number of situations or events, including:

Securities fraud
Money laundering
Embezzlement
Theft
Organized crime
Insurance fraud
Kickbacks
Pyramid schemes
Contract fraud
Hidden assets

In fact, when you become a forensic accountant, you will spend a lot of your time looking beneath the surface of transactions to track the flow of information, entries, data, and calculations that indicates which hidden records need to be uncovered. In addition, the job requires interviewing people at all levels of an organization, witnesses, and even possible victims.

Education Comes First

In order to work as a forensic accountant, you’ll typically need to hold a bachelor’s or master’s degree in accounting, as well as a Certified Public Accountant (CPA) credential.

Larger accounting firms or law offices may hire accountants to work specifically as forensics accountants, while accountants employed by smaller firms may be required to handle these situations as part of a larger workload. Governmental organizations, like the FBI and CIA, also hire forensic accountants to work on cases.

If you are interested in pursuing a career as a forensic accountant, the first step is to earn a bachelor’s degree in accounting and obtain your CPA designation.

This isn’t an easy process.

Typically, only 10-20 percent of test takers pass the exam on their first try. Once you pass your exam and gain a few years of experience in the field, you may want to pursue additional certification as either a Certified Forensic Accountant (CrFA) or a Certified Fraud Examiner (CFE).

Both of these certifications will help you earn a higher salary and advance in the field of forensic accounting. The American College of Forensic Examiners International (ACFEI) offers online courses to make earning these certifications more convenient.

Each year you will be required to attend approved workshops and seminars covering topics on fraud examination, fraud prevention, fraud detection, and new technologies as related to computer forensics.

Characteristics of a Great Forensic Accountant

When you become a certified forensic accountant, you will probably complete audits for law enforcement, bankruptcy or criminal attorneys, government agencies, financial or insurance organizations, and CPAs. You need to be the type of person who thinks logically and can organize information and evidence in a way that others can understand. You also need to have natural curiosity, patience, and tenacity.

Successful forensic accountants must be extremely detail-oriented, adept at discerning complicated financial statements, and knowledgeable about both legal and accounting practices. Although reading through financial statements can be tedious and time consuming, accuracy is imperative for forensic accountants.

Since forensic accountants may be required to testify as witnesses in legal trials, they must also be composed and able to simplify complicated financial matters for the judge and members of the jury.

Forensic accountants must also be good communicators. It is often necessary to interview anyone who can offer important information concerning an investigation. During your course of study, you will learn accounting, auditing, and methods of obtaining expert testimony.

Follow the Money: Forensic Accounting Salaries

Forensic accountants often spend time tracing money back to its source. But when it comes to earnings, you can follow the money right back to a great salary. Here are the average salaries of forensic accountants, based on the average number of years of experience, per Payscale.com:

One to four years: $50,995
Five to nine years: $66,460
10 to 19 years: $84,331
20 years or more: $83,497

You will notice that the people working more than 20 years have hit the top of the scale, but remember those older workers who have worked in the industry for 30 or 40 years began their careers at much lower salaries than are paid today. With the rapid growth in technology, the demand for forensic accountants is accelerating, and that is just one reason why salaries are propelling forward also.

If you want to earn an excellent salary and enjoy accounting work, then you can follow the money by pursuing a career as a forensic accountant!

Location Does Matter

Like most jobs, the state in which you work does matter in terms of earning the maximum salary. For example, Payscale.com reports that forensic accountants in California earn $95,000 annually, while in Florida they earn an average salary of $50,849. New York is paying average salaries of $72,093 and Texas is paying $71,899.

The type of work you do also impacts the salary level. Senior forensic accountants earn an average of $57,808 while internal audit managers are earning $85,935, which is a significant difference.

However, no matter how you look at the salary picture, the forensic accountant is paid well. So you can earn good money, enjoy a challenging career, and have the satisfaction of knowing you are doing important work.

Investigating Success

The job prospects for forensic accountants are excellent. One of the reasons for this is that the sophistication of technology has led to more sophisticated white collar crimes. It takes an expert forensic accountant to ferret out the web of transactions. Forensic accountants may investigate divorces, organized crime offenses, or corporate embezzlement using complex money transfers.

Not just anyone can handle this type of work, and that’s why the industry pays such an excellent salary!