What Does a Forensic Accountant Do?

Forensic accounting is a specialized niche within the larger field of accounting. While a forensic accountant has certainly been trained in all of the basic areas as any other accountant, a professional in this field has also received specific training related to investigating financial crimes, spotting signs of questionable financial data, and much more. As financial crimes become more and more common due to the high-tech nature of the modern economy, forensic accountants have become increasingly important.

We’d like to use this article to introduce you to the field of forensic accounting and what it has to offer to both businesses and individuals. By the end of this page, you’ll not only have an answer to the question of “what do forensic accountants do?”, but you’ll also have a good understanding of whether or not you need to hire forensic accountants for the issues you are facing.

Should the need for a forensic accountant arise, Space Coast Forensics should be your first call. With the education and experience needed to pore over financial records and uncover any signs of fraud, you’ll get great results in a timely manner when partnering with our firm. We are proud to offer forensic accounting not only in our home state of Florida but also for clients located anywhere else. It all starts with a phone call or message, so reach out today and let’s discuss your needs.

Skills and Qualifications for Forensic Accounting

If someone wants to become a forensic accountant, the first step is to understand the process and what will be required to eventually hold this title and do the work that forensic accountants do for their variety of clients. Given the importance of this job and the vital role it can play for many businesses – and individuals – only the most qualified will be able to work in this field and find lasting success.

Before even considering entering into forensic accounting, it is necessary to have a background in standard accounting. To build that foundation, it’s important to have a good education in accounting or finance, starting with a bachelor’s degree. However, it might not be enough to build a lasting, successful career holding only an undergrad degree, so many who pursue this field will go on to study for a master’s degree, perhaps specifically in forensic accounting.

In addition to having a strong relevant education, it’s also important to hold professional certifications related to this work. For starters, becoming a Certified Public Accountant is a path that most will take, and it’s possible that an individual will perform traditional CPA work before transitioning more specifically into the forensic accountant space. Beyond holding a CPA, a Certified Fraud Examiner designation is also a standard level for professionals in this field to reach. With a combination of an active CPA and CFE, one would be on the right track to perform meaningful work for clients in this space.

We shouldn’t wrap up this section without pointing out how important it is for forensic accountants to accumulate plenty of experience in the field. Education and certifications are great, and they certainly do matter, but there is no substitute for getting out there in the real world and doing actual work that required various accounting and investigative techniques. Many forensic accountants build up a base of accounting experience in traditional roles before finding themselves feeling called to shift over and join the ranks of certified fraud examiners.

Fraud Investigations Are a Core Responsibility

You could easily say that investigating fraud is at the heart of what forensic accounting is all about. Sure, there are plenty of other duties in this profession, and we will touch on many of those later on this page, but tracking down financial crimes through the use of financial records and other means is really at the core of what it is to be a forensic accountant.

In many cases, forensic accountants will be called in when the accounting department within a business, or perhaps a contracted accountant, can’t quite seem to make sense of what is happening in the books. This means there is some sort of irregularity that can’t be explained through the usual issues that pop up in the accounting world, and fraud may be suspected. At this point, it’s not even certain that fraud has taken place – it’s just a point where the business needs help making sense of its financial records and a Certified Fraud Examiner is the right choice for the task.

As the process of a fraud investigation unfolds, the job might also entail attempting to recover assets that have been misappropriated in various ways. Sometimes, this is pretty simple, but not always. In some cases, the crime is rather advanced and complex, and it can take an experienced professional in this field to unwind everything that was done to cover up the money trail. Using a proven forensic accountant can pay for itself many times over in the form of assets that are recovered along the way.

For many organizations, fraud investigations will be kicked off when something suspicious is going on and a closer look is warranted. For bigger corporations, however, fraud prevention is the name of the game, and money will be invested on an ongoing basis to detect fraud issues as soon as they get started, rather than waiting until later on when the damage is much more. Ideally, the systems will be in place that allow fraud to be prevented in the first place, and we’ll talk more about that part of forensic accounting later on this page.

Assigning Value to Businesses

There are many occasions when it becomes necessary for a business to seek out an accurate valuation. Perhaps the most obvious of these occasions is when the business owner is getting ready to sell. In order to make a fair deal and make sure they get the most possible value out of the sale, a business owner may turn to a forensic accountant to take a close look at all aspects of the company’s financial situation to assign a market value to the entity.

When looking at what is required to accurately value a business, it lines up nicely with the skills and knowledge possessed by forensic accountants. The process starts by gathering up as much relevant financial information as possible about the business and how it has been operating in recent years. Of course, this is something that forensic accountants do regularly, so it’s a natural fit and business owners can be confident that the investigative skills of their chosen forensic accounting firm will uncover all of the information needed to complete a proper valuation.

Once all of the documentation has been collected, the work of using that data to determine how much the business is worth can begin. In some cases, this will be pretty straightforward, while it can be rather complex on other occasions. For example, if there is some inconsistency noticed in the financial statements, those issues will be addressed and investigated to determine if fraud is to blame – or perhaps just some faulty accounting. Again, as with the previous step, this is a job that a forensic accountant is uniquely qualified to handle.

Additional steps in the valuation process that will need to be managed include selecting the right valuation method and evaluating the overall market conditions surrounding the business. Some of the valuation method options include the market approach, income approach, and asset-based approach. It’s not that one of these is better or more accurate than the other – it’s just a case of picking out the right method for the situation at hand and the type of business that is being valued.

Offering Expert Testimony

It’s common for forensic accountants to find themselves in court. Not as a defendant, of course, but rather serving as expert witnesses in trials of various kinds. Forensic accounting is a powerful tool that can be used to make a case in one direction or another, so lawyers will regularly call in forensic accountants to prove their point and present evidence to a jury in a professional, rational manner.

The most important skill for a forensic accountant to bring to the courtroom, in addition to in-depth knowledge of their profession, is the ability to present complicated accounting concepts to a jury of non-accountants. While the work they do on the case to unravel fraud schemes or analyze a complex set of books can be highly technical, a technical explanation really isn’t going to work when talking to the jury, or even the judge. Instead, it’s the ability to break down complicated findings within financial documents into simple presentations that can make a forensic accountant so valuable on the stand.

Additionally, forensic accountants who serve as expert witnesses need to be able to hold up to the pressure that they might face during a cross-examination. The opposing lawyer is sure to attempt to poke holes in their presentation and highlight possible weak points in the case, for the forensic accountant will need to be confident in the work they’ve done and the information they have offered. In some cases, it’s best to wait a little while into a forensic accounting career so the experience and confidence needed to be a good expert on the stand can be developed fully.

While presenting information about suspected financial fraud is one way a forensic accountant can be used as an expert, they can also play the opposite role and serve as a witness for the defense. If financial fraud is alleged, it might be possible for the defense to use forensic accountants to review the relevant financial data and show how a crime was not actually committed.

Expert testimony might be most notable when it happens in front of a jury in open court, but that’s not the only arena. Perhaps even more likely is the possibility of presenting information as an expert during an arbitration hearing or in the mediation process. The implications of arbitration or mediation can be significant, so forensic accountants play an important role in making sure the final decisions in these proceedings are fair and just.

Preventing Cases of Fraud

The best outcome of all for forensic accountants is when they can help to prevent fraud from occurring in the first place. There is certainly a thrill involved in unraveling a complex web of financial transactions to prove that improprieties have occurred, but that still means that the business has been victimized and some of that money may never be recovered. By getting out ahead of the game and working actively to prevent fraud, forensic accountants can save businesses countless dollars and leave the owners and managers free to focus on more productive matters.

One of the primary methods for preventing fraud is through the process of risk assessment and building good internal controls. Experienced forensic accountants can look at how a business operates and can identify potential weak points in their system that need to be tightened up. This could mean a pattern of transactions that might be able to be exploited by someone aiming to commit fraud, or it could just be that too many people have too many financial privileges, and as a result, there is an increased likelihood that something will go wrong. Generally speaking, it’s a best practice to give people only the level of access they absolutely need to do their jobs, and a forensic accountant can help to design a system where that is the case.

It’s also possible to use this type of accountant to offer some training to specific groups or individuals within the company on how to spot signs of fraud early on. Those who work in the business are most likely to see things early, so it’s useful to provide them with the training needed to know what to watch out for. Through training, forensic accountants can pass along a portion of their knowledge so it can be applied by the team as a whole, and it will be harder for anyone within that team to get away with fraudulent activities.

Finally, building a schedule of ongoing forensic audits is a good plan for any business that is serious about theft prevention. Investing a moderate amount of time and money to bring in a qualified accountant for ongoing financial investigations can wind up saving both money and frustration in the long run.

Retain Forensic Accounting Services with Space Coast

Working with a proven forensic accountant may be exactly what you need to sort out financial records and get to the bottom of what has been happening in your personal or professional life. If you think forensic accountants might be called for in your situation, please feel free to reach out to us today to learn more about our services. Even if you already have a standard certified public accountant for basic accounting tasks, it may still be necessary to bring in a forensic accounting specialist to dive deep and look for financial evidence related to your concerns. Space Coast Forensics is ready and waiting to get started!

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