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What is Forensic Accounting?
According to the Association of Certified Fraud Examiners (ACFE), forensic accounting is a combination of analytical skills, investigative skills, and accounting knowledge that gives litigation support in cases of fraud detection within financial data. The word 'forensic' refers to the methods or technology used to investigate a crime and forensic accountants are tasked with following a money trail, tracking fraudulent activity through financial transactions or financial records, asset tracing, and perhaps testify in court as an expert witness and explaining the path you followed in your investigation.
A forensic accounting career may have you working in an entry level position or in higher level forensic accounting positions if you have learned advanced skills with a master level degree of a fraud examiner credential or CFE certification. Accounting professionals in this field may investigate finanical crimes, perform a regulatory compliance audit, track financial assets, perform loss prevention tasks, investigate money laundering or contract disputes, and more. Job opportunities for forensic accountants and other accounting professionals in the field include entry level positions and higher with insurance companies, state or federal U.S. government agencies, and other groups depending on your career goals.
Whether you're planning your education in accounting or already have your bachelor's in forensic accounting and are working toward your master's, it's an excellent idea to take a hard look at specialized areas such a a forensic accounting degree as a certified public accountant (CPA). Because most states require that students earn both a bachelor's degree in accounting or more advanced education of a graduate degree (150 credit hours) and at least two years accounting experience before you can earn a current CPA license, it makes sense to pursue your coursework, internships, and work experience in a specific area of accounting so you're ahead of the game by the time you qualify for the certification process.
The specialized area like a concentration in forensic accounting and fraud examiners is growing at a rapid rate and, because the demand is high, those who hold the Certified Fraud Examiner (CFE) credential earn over 30% more than those who hold a current CPA license without the certificate. Because the field of accounting is projected to grow at a healthy rate of 10% over the next decade, those who hold the title in forensic accounting, with CFE certification, will stand out from the crowd and, most likely, their median salary will be in the top of the earnings tier for accountants.
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What Does A Forensic Accountant Do?
Because the term 'forensic accounting' is defined as the application of accounting evidence in regard to criminal evidence and legal proceedings it is to that standard forensic accounting investigations are held. Since forensic accounts are often called as professional witnesses to give testimony on their findings on the legal elements of financial reporting and overall finances, the position is a combination of accountant, auditor, and investigator. They may assess accounts, filings, and accounting systems to determine whether the numbers and financial activities mesh, assist in professional negligence claims to determine whether business persons acted in an ethical and legal manner, or may be tasked with investigating assumed or actual proceeds from fraudulent gains in order to determine the amount of criminal proceeds or negligence of those involved.
Forensic accounting may be used to quantify and calculate economic damages and losses through either contract or torts law, to determine a business valuation, or to investigate disagreements relating to company buyouts, breaches of warranty, or acquisitions.
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There are two main areas that forensic accounting encompasses: investigations and litigation support. On the investigative area they may be called to determine whether a criminal action has taken place such as security fraud, identity theft, employee theft, or insurance fraud and provide that information to a client. They may also be called to investigate hidden assets in civil matters such as a divorce case where there are multiple interested parties or bankruptcy, where people may hide assets to remain solvent even as they claim they have none and a thorough examination of their financial activities is needed.
In the area of litigation, the support of forensic accountants or fraud examiners is used to explain the factual presentation of the economic issues of a case in litigation. They are charged with quantifying the specific damages in legal disputes in order to resolve cases during mediation and may be called to testify as a professional witness if the case reaches the courtroom. This is what sets those with a forensic accounting certificate apart from a CPA: they must not only collect the evidence of the paper trail but must be able to present it in a concise manner that is easily understood by the jury members and judge.
Forensic accountants must be suspicious number detectives. They must know legal issues and have the ability to apply their accounting knowledge to the courtroom. They must have a wide range of knowledge and talents to cover all aspects of an investigation. They may be asked to help with depositions, write reports, testify in court, assist in criminal and civil investigations, and conduct fraud investigations. Unlike fraud auditing which tries to anticipate a fraudulent situation, forensic accounting occurs after the fact when a company suspects theft, embezzlement, or fraud has already occurred.
What are Possible Careers and Duties?
There are five main areas of forensic accounting: accounting firms, corporate security and risk management firms, law firms, financial consulting firms, and law enforcement.
Here's a look at each area and the typical duties in forensic accounting:
- Uncover fraud
- Collect evidence
- Perform computer forensics
- Conduct interviews
- Quantify financial losses in cases of misconduct
- Translate technical jargon into common language
- Testify as a professional witness in court
Corporate security & risk management firms
- Ensure organizational compliance with procedures and laws
- Analyze changes in taxes, exchange rates, law, and cultural attitudes in relation to their influence on profits and operations
- Protect financial assets from external and internal threats, including economic circumstances and political issues
- Audit financial statements
- Act as an consultant for financial issues
- Assist in locating financial experts for use as witnesses
- Conduct investigative audits
- Translate complex financial reports into simplified language
Financial consulting firms
- Investigate fraud, corruption, and regulatory scrutiny
- Analyze and reconstruct digital information and financial records
- Conduct interviews
- Assess fraud vulnerability
- Analyze embezzlement allegations
Governmental departments (FBI, CIA, IRS)
- Build financial profiles of suspects
- Investigate financial history of spies, criminals, and terrorists
- Track sources of illicit funding
- Gather evidence
- Assist in the execution of search warrants pertaining to financials
- Take part in financial interrogations
- Compile financial investigative reports
- Meet with prosecutors to discuss testimony and strategy
- Testify as expert witness
Although there is no typical workday for forensic accountants because their responsibilities are so wide ranging it's important to point out that forensic accounting doesn't resemble a television investigator who finds all vital information within minutes. As with other accounting positions, most days in forensic accounting will be spent behind a desk working with numbers. The main difference is that, instead of balancing books and tax returns, you'll be investigating for signs of wrongdoing such as fraud and embezzlement.
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A career in law is much different from forensic accounting and it is one of the fastest growing fields. This makes forensic accounting is a great career choice. A prime example is the FBI as they are actively recruiting forensic accountants into entry level positions. As an FBI in forensic accounting, you'll need advanced skills as you may be tasked with a wide range of ever-changing assignments investigating financial activities and major crimes such as:
- Corporate fraud
- Healthcare fraud
- Securities and commodities fraud
- Financial institution fraud
- Mortgage fraud
The FBI also uses forensic accountants in:
- Organized crime
- Public corruption
- Violent crime
In forensic accounting, your duties would reflect the need for legal prosecution of the criminal and focus the investigation on their financial trail:
- Perform research to track funds and identify assets
- Conduct forensic analysis of various financial data
- Prepare reports from financial findings
- Prepare analytical data
- Testify as needed
Forensic Accountant Salary Expectations
Average Forensic Accountant Salary: $68,900
Currently, forensic accountants are in high demand, much like other accounting positions across the United States. As with most professions, your salary and lifetime earning potential in this field are determined by a variety of factors. The most important factors are the highest level of education obtained, such as your bachelor of science business degree or a postgraduate accounting certificate, and experience. According to BLS.gov "Employment of accountants and auditors is projected to grow 10% from 2020 to 2030, faster than the average for all occupations. In general, employment growth of accountants and auditors is expected to be closely tied to the health of the overall economy."
|Entry Level||Mid Career||Late Career|
Average Salaries by Cities:
- Albuquerque, NM: $60,700
- Boston, MA: $54,500
- Chicago, IL: $77,200
- Washington D.C.: $95,000
- Dallas, TX: $59,400
- Houston, TX: $75,000
- Los Angeles, CA: $67,700
- Miami, FL: $69,200
- Orlando, FL: $57,400
- Philadelphia, PA: $72,700
- San Diego, CA: $70,800
- San Francisco, CA: $65,000
- *Salaries provided by PayScale
Online Education and Degree Requirements for Forensic Accountants
For a career in forensic accounting you should plan to earn at a minimum a of a bachelor of science in forensic accounting and preferably a Master's degree in forensic accounting in order to qualify for the widest range of positions. Because most state require a minimum number of accounting courses as part of your educational requirements to become a CPA you should plan your education accordingly with a bachelor of science degree in forensic accounting as your end goal. You should first determine that your school of choice is accredited then find the CPA requirements for your state. Any internship should encompass forensics if possible, and once you've earned your degree and passed the CPA exam you should try to gain your required experience in the forensic accounting field while qualifying for your CPA licensure.
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Obtaining a bachelor's degree will take around four years to complete if you go to school full time. Make sure that each credit hour counts towards your forensic accounting degree program. Each credit hour should enhance your degree program. Every school should offer a full time forensic accounting program that prepares them for accounting and fraud examination. Forensic accounting programs can be done completely online. You can get your bachelor's degree in forensic accounting online. An online accounting degree will be just as valuable as an in person forensic accounting bachelor degree.
Note that while most firms as well as law enforcement doesn't always require you to be a CPA in order for you to work in forensic accounting it is preferred, so you should make becoming a CPA your first educational goal. The American Institute of Certified Public Accountants (AICPA) recommends future forensic accountants complete the Fundamentals of Forensic Accounting Certificate Program which is a 12 module course; you should take as many forensic accounting courses available while earning your bachelor of science forensic accounting degree. Note that because forensic accounting is the legal and investigative aspect of the accounting field it may be a wise choice to declare criminal justice as your minor so you can take courses related to your long term goal.
Here are some sample courses that fall in the forensic accounting category:
- Understanding the Basic Structure of the Legal System
- Managing the Forensic Engagement
- Identifying and Obtaining Evidence
- Conducting Effective Interviews
- Common Investigative Techniques
- Deposition and Testimony
- Calculating Intellectual Property Infringement Damages
- Family Law Engagements
- Fraud Prevention, Detection, and Response
- Financial Statement Fraud and Asset Misappropriation
- Valuations in Litigation Matters
- Auditing and Forensic Accounting
- Detection/Prevention Fraudulent Financial Statements
- Interview Techniques/Legal Aspects Fraud
- Investigating with Computers
Certification Credentials and Licensure
Besides qualifying for your state CPA licensure you should also plan to earn your Certified Fraud Examiner (CFE) Certified in Financial Forensics (CFF), or both.
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The CFE is determined on a point basis. Education, experience, and certifications are all taken into consideration so if you have a forensic accounting bachelor's in forensic accounting and CPA licensure your only requirement is two years experience in an area specific to the detection or deterrence of fraud. This is where your internship and CPA experience requirements can help you save time on your path to forensic accounting.
The following areas of experience are accepted:
- Accounting and Auditing: with certain responsibilities for the detection and deterrence of fraud in specific areas
- Criminology and Sociology: professionals with education or research in the fraud and white-collar crime dimensions of criminology or sociology
- Fraud Investigation: Experience in the investigation of civil or criminal fraud, or of white-collar crime for law enforcement agencies or in the private sector
- Loss Prevention: Security directors for corporations and associations who deal with issues of loss prevention or security consultants dealing with fraud-related issues may claim this experience
- Law: Candidates with experience in the legal field might qualify if experience deals with some consideration of fraud.
The CFF credential is granted by the AICPA to qualified CPAs. To sit for the CFF exam you must meet both educational and experience requirements as follows:
- Education: CFF candidates must have 75 hours of forensic accounting continuing professional development (CPD) within the five year period preceding the date of the CFF application.
- Business Experience: CFF candidates must have a minimum of 1,000 hours of forensic accounting business experience within the five year period preceding the date of the CFF application.
While neither forensic credential is required to work in forensic accounting, you should plan to earn at least one. You should also look at the specific experience preferred by your employer of choice while working on your experience requirements. For example, the FBI prefers to hire those with a bachelor's in forensic accounting or Master's degree, hold CPA licensure, and hold certification from CFE or CFF as well as experience in the following areas:
FBI Preferred Professional Experience
- Forensic Accounting
- Public Accounting
- Government Accounting/Auditing
- Corporate Accounting/Internal Auditing
- Litigation Support and Dispute Services
- Financial Services Industry
Most states require Continued Professional Education (CPE) once you hold your CPA licensure so you should plan to use this requirement to your advantage to keep abreast of new developments in the world of forensic accounting.