Anyone who has followed the implosion of the crypto exchange FTX has seen the growing need for individuals and businesses to employ forensic accountants. In recognition of their specialized training and skills, forensic accountants earn more than traditional accountants, starting at close to $100,000—but the appeal of the job is more than financial.
Forensic accountants are the detectives of accountancy. They can be hired to work on a number of types of cases, and in the course of their work employ many of the same skills that detectives do.
- Divorce Proceedings — Forensic accountants can determine that neither spouse is hiding assets or trying to skim money away from marital accounts prior to the divorce. Forensic accountants delve into key financial details and present a clear picture of how each partner has been spending, and can also assist with asset valuation.
- Corporate Disputes — Forensic accountants are adept at investigating embezzlement or theft, white-collar crimes which have become increasingly prevalent in recent years.
- Securities Fraud — Investment fraud, or securities fraud, is a serious crime. Unfortunately, it can also be very difficult to prove. Forensic accountants look over all the details of false investment information, which can help provide better overall insight into how fraud may have occurred.
- Money Laundering — To prove money laundering, it's often incredibly important to trace exactly where the money is gone. Modern money launderers are savvy. They try to hide where that money is coming in and where it's going out, washing it through legitimate businesses in an effort to make it appear "clean." But an accounting detective can help look over those details, dig through the evidence, and find that financial trail.
- Civil and Criminal Disputes — A lot of both civil and criminal disputes occur because of money. An accounting detective can be a valuable asset on a team investigating those disputes, because the detective can go over those details and get a better feel for where the money has gone, what spending has taken place, and more.
What Detective Skills Do Forensic Accountants Need?
Forensic accountants may need a number of key skills in order to excel at the highest possible level in their fields.
The Ability to Question People
Forensic accountants should be able to question people directly and get a solid feel for the information being presented to them. Data that looks "odd" may turn out to be relatively simple once someone gives necessary background information, or transactions that look straightforward turn out to be much more complicated when the human element is introduced. Forensic accountants need to be able to sift through both types of information.
Attention to Detail
Forensic accountants must have the patience to be able to sift through critical details. That may mean a lot of time spent looking over the books and examining the internal controls in place to gain an understanding of the flow of information. Attention to details helps establish the "audit trail" that shows how the wrongdoing was committed and leads to the evidence needed to prosecute.
Critical Thinking
Critical thinking is an essential part of working as a forensic accountant. Forensic accountants must sift through and analyze information, connect seemingly unrelated transactions, and trace key details back to source documents. Therefore, strong critical thinking skills are what sets forensic accountants apart from other accountants.
Forensic accountants are the detectives of accountancy. They can be hired to work on a number of types of cases, and in the course of their work employ many of the same skills that detectives do.
Excellent Writing Skills
Forensic accountants prepare writing findings and reports what they have observed, discovered, as well as the results of their analysis. Therefore, these individuals require excellent writing skills to organize and present their findings in a concise and succinct manner. Furthermore, forensic accountants' writing skills must be unbiased and solely based on the facts supported by adequate documentation.
Knowledge of Emerging Technologies
Since most of today's financial information is automated by the use of robotics and artificial Intelligence, forensic accountants must understand the role technology plays in accounting processes. In today's world, a significant amount of accounting is cloud-based and the use of mobile accounting is rapidly increasing.
In addition, advancements have been made in data mining and data extraction. Accordingly, forensic accountants must understand these technologies as well as keep up-to-date with their advancements.
Knowledge of the Law
Although a legal background is helpful, it is not required. However, when investigating illegal activities and fraud, a forensic accountant should have knowledge of Federal and state laws as well as the Securities and Exchange Commission's (SEC) rules. Forensic accountants need to understand what is legal and what is not, as well as the level of evidence required for prosecution and conviction.
In addition, forensic accountants are called upon to testify in court regarding their investigation and findings.
Developing the Detective’s Mindset
If an accountant prepares a tax return for a person, they are required to ask, "Do you have detailed records for this?" If the client says yes, under the law the accountant is allowed to take their word and prepare the return based on that.
However, that is not the world of forensic accountant. Forensic accounting involves peeling back each layer and seeing what's underneath to make sure that everything is correct. And if it's not correct, does it lead to a weakness in the accounting procedures and internal controls? Is it due to embezzlement? Is it due to fraud? Like detectives, forensic accounts follow the clues and the leads and share their conclusions with their client.
Janice Stoudemire, founder and president of Palmetto Academic Consulting Services Inc., is recognized as a leader and advocate for outcomes assessment and student learning. Her credentials include CPA, CGMA, ABA, ATA, five years of professional work experience, and a master’s in accountancy (specializing in taxation) from the University of South Carolina.
Janice retired from Midlands Technical College (MTC) after 25 years of teaching and serving as the founder and co-director of MTC’s Assessment Institute. Her dedication and contributions to education over the years resulted in the accumulation of more than 20 teaching and service awards at the local, state, and national level.
For 20-plus years she has developed learning resources in accounting and taxation for several publishers. Janice is a past president of Accreditation Council for Business Schools and Programs (ACBSP), a global accrediting body for high-quality baccalaureate and associate-degree business programs. She chaired the associate-degree commission and served on the association's Board of Directors and Accreditation Governance Board. In addition, she has been a site evaluator for ACBSP and the Southern Association of Colleges and Schools.
Currently, she serves as a CPA Content Developer for UWorld Roger CPA Review. She can be reached at jstoudemire@uworld.com and can be found on LinkedIn.
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