Forensic Accounting…Its Not Just TV Drama

Many people have heard the word “forensic” bantered about in the news….perhaps in such ways as forensic medicine or forensic pathologist. Television shows such as “Forensic Files” and “CSI” are predicated on the investigation that follows the occurrence of an event, usually criminal in nature. Lately, the term has been used to describe the work performed by accounting specialists investigating the many Ponzi schemes that seem to have been uncovered by the economic downturn. These professionals are known as forensic accountants.

Webster’s defines forensic as “relating to or dealing with the application of scientific knowledge to legal problems.” Forensic accounting has become a key specialty of the accounting profession as the incidence of fraud has risen over the past five years. Forensic accountants possess specialized skills in accounting, auditing, and finance to be sure. At a minimum, accomplished forensic accountants are CPA’s. However, forensic accountants are also trained in quantitative methods and possess the ability to analyze large amounts of financial data using specialized software that is programmed to search for certain characteristics that are common in fraudulent schemes.

Forensic accountants are also knowledgeable about the certain areas of the law as it related to rule of evidence, courtroom procedure, and testimony. This is due to the fact that forensic accountants are often called upon to present the results of their findings to a court of law to assist a judge or jury in coming to a decision based upon the facts of the case.

Soft skill sets such as effective communication in oral and written form are also a requirement for an effective forensic accountant. The forensic accountant’s written report serves as the sum and substance of the conclusions formed as a result of the investigation. Public speaking skills are essential to credibly deliver those conclusions in a courtroom.

As an example of a forensic engagement, our firm analyzed payments made to a construction contractor for change orders on a construction job to determine if the additional charges were justified. In examining the time cards of the workers assigned to that project, we found that the contractor billed for more than 12,000 hours that it didn’t incur.

Keep an eye on the news reports and you’ll see more and more forensic investigations that are handled by forensic accountants in the weeks ahead.