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March 22, 2022

What is a Forensic Accountant?

In the accounting profession, there are many paths you can take to make your career your own. Forensic accounting is one option that sometimes gains intrigue and attention with those starting their accounting careers or when evaluating new directions. We’ve all been pulled in by popular television shows like the CSI series, but what do forensic accountants really do? And is this a good career path for you? Below we help answer these questions and give a high-level overview of the types of work a forensic accountant might perform.

Defining Forensic Accounting

The term “forensic” is derived from the Latin word forensis, which means “of or pertaining to the public forum”. Today, the word forensic is an adjective meaning “suitable for use in a court of law or public debate”. The definition of forensic science is the application of scientific principles and techniques which are suitable for use in court. Likewise, forensic accounting is a specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation.

What do Forensic Accountants do?

Forensic accounting is often divided into two main categories: (1) investigative services and (2) litigation/dispute services. In reality, these two categories are intertwined and overlapping, with an infinite number of subcategories and service types.

Forensic Investigations

When many people think of forensic accounting, they tend to think of fraud investigation or “following the money”. Perhaps you think of a movie like “The Accountant”, or a television show like the Jack Ryan series. When people ask me if that is what forensic accounting is like, I usually reply that yes, that is exactly what it is like…but replace the weapons and action with spreadsheets and financial analysis.

Forensic investigations are a combination of accounting and investigative techniques used to discover, prove or even rule out potential financial crimes. They can be performed in anticipation of criminal or civil litigation, or in some cases are performed in anticipation of filing an insurance claim to recover fraud-related losses. Investigative techniques can also be employed on a preventative basis to form systems to detect fraud or prevent fraud from occurring in the first place.

The types of investigative projects are as numerous as the schemes that they are designed to investigate. Examples include, but are certainly not limited to, investigations of:

  • Embezzlement
  • Asset misappropriation
  • Financial statement fraud, also known as “cooking the books”
  • Corruption schemes
  • Securities fraud
  • Tax evasion
  • Money laundering
  • Ponzi schemes

The list is endless and ever-evolving as new schemes are constantly concocted. For example, in recent years, with cyber-attacks on the rise, forensic accountants may be asked to assist in the investigation of cyber-related fraud. Forensic accountants must stay on top of emerging schemes and issues, remain technologically literate, and always remember that fraudsters are one step ahead.

Litigation and Dispute

While fraud investigation certainly falls into the purview of forensic accounting, the forensic accounting field is actually far broader, encapsulating a myriad of services and engagements. Forensic accountants are often engaged to assist in disputes, either in a consulting or testifying capacity.

As a consultant, a forensic accountant may be hired by an attorney to assist in collecting, analyzing, and interpreting financial information that is pertinent to a given case. Nearly every lawsuit has at least some financial aspect. Forensic accountants may also be engaged to serve as an expert witness. As an expert witness, the forensic accountant is uniquely positioned to testify at trial on financial matters due to their specialized knowledge or proficiency in the field of accounting.

Some examples of litigation and dispute related projects include:

  • Measurement of economic damages and/or lost profits
  • Asset tracing in family law or divorce proceedings
  • Measurement of losses due to business interruption
  • Accounting assistance in business disputes
  • Quantifying effects of intellectual property infringement
  • Assisting the court in bankruptcy proceedings
  • Assistance in professional malpractice lawsuits
  • Valuation of business interests and other assets

As you can see, the work of a forensic accountant is not limited to fraud investigation alone. Regardless of the type of service, a forensic accountant must be familiar with jurisdictional laws, the court system, and the process of gathering, analyzing, and preserving evidence. They must also be adept at communicating the results of complex analyses in a simple, understandable, and meaningful way.

Interested in learning more about forensic accounting or finding a forensic accountant? Anders has a team of Forensic and Litigation advisors who work on litigation and dispute, fraud and forensics and valuation engagements. Visit our Careers page to see what it’s like to work at Anders and check out open positions.

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