Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. “Forensic” means “suitable for use in a court of law”, and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial. These professionals can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organizations.
Some of the disciplines where forensic accounting is utilized:
Litigation Support: Parties involved in legal disputes use the quantifications to assist in resolving disputes via settlements or court decisions. For example, this may arise due to compensation and benefit disputes.
Investigation: This encompasses the determination of whether criminal matters occurred. Such crimes may include employee theft, securities fraud, falsification of financial statement information, identify theft or insurance fraud.
Insurance Industry: The forensic accountant may be asked to quantify the economic damages arising from a vehicle accident or a case of medical malpractice. The accountant must be knowledgeable about the legislative process relating to these cases.
A bachelor’s or master’s degree in forensic accounting, accounting, finance or a related field is required for forensic accountants. Additional education in criminal justice, finance, or law enforcement is a plus. However, anyone considering a career in this field should realize that the focus is on the subject of accounting. Also, according to the FBI, forensic professionals typically begin as certified public accountants (CPAs) and employ similar detecting skills to “follow the money” and build criminal cases when financial statements or records are amiss.
There are colleges who have undergraduate programs tailored to Forensic Accounting. One such program is offered by Franklin University whose Forensic Accounting Major is available 100% online. Students take many of the same classes as our undergraduate Accounting Degree Program, but you’ll also take concentrated coursework in occupational fraud forensics. From fraud examination to interviewing techniques to legal elements to corporate governance and internal control assessment. In addition, their curriculum is based on industry standards, including Generally Accepted Accounting Principles (GAAP), auditing standards of the American Institute of Certified Public Accountants (AICPA), and fraud detection and prevention techniques of the Association of Certified Fraud Examiners (ACFE).
The Franklin curriculum includes: Financial accounting & reporting, auditing & internal controls, ethical standards & regulatory compliance, fraud examination, electronic discovery, and fraud reporting & litigation. Another example is Southern New Hampshire University‘s online undergraduate degree in forensic accounting. Their program emphasizes accounting, taxation and auditing.
According to the ACFE, most forensic accountants gain experience as general accountants before specializing in the forensic aspect. This organization is the world’s largest anti-fraud provider of training and education with nearly 80,000 members worldwide. They stress the importance of post-degree certification by obtaining the Certified Fraud Examiner (CFE) credential. CFEs are trained to identify the warning signs and red flags that indicate evidence of fraud and fraud risk. Another bonus is that according to the 2015/16 compensation guide for anti-fraud professionals, CFEs earn an average of 23% more than non-certified colleagues. In fact, the CFE certification may be as significant as your degree, as it is recognized in the hiring and promotion policies of leading organizations, including the FBI, the U.S. Department of Defense, and the Forensic Audits and Special Investigations Units of the U.S. Government Accountability Office.
In the survey entitled “Compensation Guide for Anti-Fraud Professionals,” the Association of Certified Fraud Examiners (ACFE 2015-2016) found that forensic accountants are among the highest paid accounting professionals. Salaries range from the 25th percentile at $84,370 to $155,000 at the 75th percentile. This differs dramatically from the self-reported site, PayScale, that compiled data from 268 forensic accountants. Their stated 50th percentile is only $64,939 annually.