What Does A Forensic Accountant Do? A Complete Guide
Updated 26 January 2023
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Transparency and answerability in a company's transactions and its day-to-day operations are valuable to have. Therefore, most organisations may often find it necessary to hire forensic accountants. Understanding the duties of a forensic accountant can be crucial before deciding if it is a good option for you. In this article, we discuss what does a forensic accountant do, review the skills and qualifications required to become one and understand the scope of forensic accounting.
What does a forensic accountant do?
Knowing the answer to, "What does a forensic accountant do?" can help you prepare better if you wish to pursue a career in this field. Forensic accounting often combines auditing, accounting and investigative skills that might be necessary to evaluate financial records and uncover financial wrongdoings such as money laundering, embezzlement, tax evasion, among others. It may require a systematic and well-rounded approach to financial statements and following the flow of money to assess a problem and recover assets.
Companies usually hire the services of forensic accountants to analyse and examine accounting systems and procedures related to criminal and legal enquiries. Forensic accountants can make a big difference when it comes to a firm's financial stability and well-being. They can use their expertise to gather financial evidence, create software to run the data, and explain their observations through reports and presentations. They generally work in these areas:
Forensic accountants can work for a variety of clients in litigation support, including injured parties, accused persons, private businesses, city, state and national agencies. People often hire forensic accountants to measure damages in monetary terms in case of legal disputes, such as divorce proceedings or property disputes. This quantification or financial assessment can help in resolving lawsuits for compensation or benefits disagreement between parties. If the disagreement goes to court, forensic accountants may also provide expert testimony.
Read more: What Is A Civil Lawyer? A Complete Guide
Insurance claims and frauds
Insurance companies may consult forensic accountants when an insurance claim is difficult or contains several aspects of accounting that cover multiple areas of insurance coverage. For instance, they may request a forensic accountant to estimate the financial losses caused by car accidents or personal injuries. They may engage closely with the policyholder and the insurance adjustor throughout the process. They usually discuss the review procedure and examine the various financial documents available. The forensic accountant may collaborate with other experts to verify the different aspects involved in the claim.
Read more: What Is An Insurance Underwriter? (And How To Become One)
Forensic accountants may often help concerned parties discover potential financial crimes, report them to relevant authorities, prevent them if possible and retrieve lost funds. They may help resolve or investigate financial crimes such as:
Embezzlement: Embezzlement happens when you entrust a person to manage, secure or use property or finances and they steal or misuse it. The person who embezzles may have permission to use the resources, though not to misspend them.
Employee theft: Employee theft is the unauthorised use, theft or misuse of an employer's resources. This could include theft of funds, trade secrets or merchandise.
Insider trading: Insider trading is when someone with private or insider information about a publicly listed company buys or sells its stock.
Identity theft: Identity theft happens when someone uses another's personal information, such as their name, ATM pin or credit card number, to conduct fraud or steal from them.
Investment or securities fraud: Securities fraud is a dishonest practice in the stock or commodities market that encourages investors to buy or sell shares by presenting them with incorrect information.
Market manipulation: Market manipulation is the act of intentionally raising or lowering the value of a stock or otherwise influencing the performance of the market for personal gain.
Money laundering: Money laundering is a way of hiding criminal activity and converting the income from unlawful activities into legitimate money.
Tax evasion: Tax evasion or tax fraud is a criminal offence in which a person or company knowingly either avoids paying or underpays their fair share of taxes by concealing actual income or showing false expenses.
Read more: How To Become A Tax Consultant: Skills, Education And Salary
Responsibilities of a forensic accountant
As a forensic accountant, you might often utilise your skills to perform detailed investigations to discover information, find particular differences in financial papers and calculate exact losses. Here are some responsibilities that forensic accountants may fulfil:
Anti-fraud risk assessment: Financial accountants may evaluate financial documents and procedures to focus on areas that could likely be fraudulent. They may help with internal audits, response strategies and fraud prevention while taking moral and legal factors into account.
Due diligence in legal contracts: Forensic accountants often examine contracts and royalty deals to detect fraud and misuse. They generally show due diligence by considering ethical, legal and regulatory practices while carrying out financial investigations on all parties involved in contracts and related paperwork.
Bookkeeping investigation: Forensic accountants usually examine accounting data and transactions to look for misrepresented or dishonest activities. To track illegal acts such as bribes, theft and fraud, forensic accountants may often analyse corporate, retail and personal finances.
Investigation of insurance claims: Forensic accountants may review information relating to insurance claims to determine if payments made by insurance firms follow policy conditions. They detect frauds with the help of modern computing tools, along with legal and financial documents.
Litigation discovery process: Forensic accountants may gather financial data to prepare for trials in civil and criminal cases. They may collect all relevant documents and present them to lawyers and court authorities at hearings, trials and arbitrations as part of the litigation discovery process.
Trial testimony: Forensic accountants may testify for plaintiffs or defendants in both civil and criminal cases. Forensic accountants who are investigating fraud, embezzlement or tax evasion may also give verbal testimony of their conclusions.
Read more: Basics Of Accounting - Terminology, Principles And Concepts
How to become a forensic accountant
Candidates who want to pursue a career in forensic accounting can follow the steps given below:
1. Earn your college degree
Choosing a discipline in commerce with a major like business or accounting usually helps you with your forensic accounting career. You can complete your bachelor's degree in a relevant field. After that, you may choose to pursue either extra certificate courses or a master's degree. These may help you gain essential skills related to the field.
2. Get a master's degree
After your bachelor's, you may choose to pursue a master's degree in forensic accounting. While having a master's degree may not be compulsory, many prospective employers may often choose to hire candidates who have completed their master's program. You can stay ahead in your career by choosing internship possibilities along with your studies that usually allow you to gain practical knowledge in the field.
3. Earn additional certification
Pursuing additional certifications can help you gain some industry-specific skills. Several renowned private and government institutes offer certificate and degree courses in forensic accounting. Forensic accountants generally also require a chartered accountant or a certified public accountant certification.
Read more: What Does An Assistant Audit Officer Do? A Complete Guide
Skills and qualities of a forensic accountant
Forensic accountants are generally knowledgeable in financial, legal, regulatory and investigative processes and maintain impartiality during an investigation and when serving as litigation support. To accomplish their duties and responsibilities, forensic accountants usually require the following skills:
Analytical skills: A forensic accountant may require strong analytical and research skills, including data analysis and critical thinking capabilities to help them during investigations of fraud and other financial crimes.
Auditing skills: Many forensic accountants often require expertise in auditing to evaluate financial documents, identify discrepancies or faults in these records and investigate suspected fraud.
Communication skills: Forensic accountants usually require effective communication skills to appear as expert witnesses, write financial reports and question witnesses. They typically use non-technical language to collect details of a case to speak with witnesses, investigators and others.
Computer skills: As technology can play a bigger part in the business, forensic accountants may require excellent computer skills to conduct cyber investigations and handle big data analysis.
Investigative skills: Forensic accountants generally rely on their investigation skills and attention to detail while performing duties like looking into bookkeeping fraud and preparing legal cases.
Organisation skills: Forensic accountants may frequently work with a wide range of documents and investigate various cases. This often requires them to organise data and complete investigations systematically and logically.
Problem-solving skills: A forensic accountant may require effective problem-solving skills to contribute to the discovery of illegal financial activities. The ability to pay close attention to detail and examine any irregularities and errors can be critical while handling most fraud cases and recovering lost assets.
Math skills: Forensic accountants may often determine the meaning of a series of numbers and perform basic calculations to see what is going on with a collection of financial records quickly.
Explore more articles
- What Is an Urban Planner? Definition and Career Advice
- What Does A Mechanical Engineer Do? (With Career Advice)
- How To Become A Music Teacher (Responsibilities And Skills)
- Physical Therapist Vs. Physiotherapist: Learn The Difference
- Personnel Management Vs Human Resource Management (FAQs)
- How To Become a Hospital Administrator: A Complete Guide
- How To Become A Virtual Assistant: A Step-by-Step Guide
- What Does A News Anchor Do? (With Skills And Qualifications)
- Guide: How To Become A Digital Marketing Executive
- How To Earn A TEFL Certification: A Step-By-Step Guide
- How To Get A Data Science Internship (With Skills And FAQs)
- How To Become A Penetration Tester: A Complete Guide