Forensic accounting is one of the fastest-growing and most dynamic fields in business today. In this blog post, we’ll delve into what forensic accounting is, why it’s so important, some common techniques used by forensic accountants, and what forensic accountants typically look for in their cases. Hopefully, by the end of this post you’ll never have to wonder why forensic accounting is important again.
What is Forensic Accounting?
Forensic accounting is an investigative discipline that combines the knowledge of accounting, auditing, and investigative skills to discover financial fraud. Forensic accountants are in increasing demand, as their value has in recent years been recognized not only by law enforcement agencies but also by private corporations who seek to use forensic accountants for internal audit purposes and in the spirit of compliance with investigative departments.
Forensic accountants can spot discrepancies in a balance that might have been missed by an auditor because the level of investigation they conduct is far more involved than auditors, who typically only examine statements that are materially misstated.
Why is Forensic Accounting Important?
The importance of forensic accountants cannot be overstated within the fraud-prevention industry. They play a critical role in uncovering fraud, and often the digital evidence collected by these specialists is the tipping point in cases against fraudsters that would otherwise lack sufficient proof. Forensic accountants are in a unique position that combines the analytical aspect of accounting with the investigative techniques of police work.
Forensic accountants are often CPA certified, and the investigative role that involves rooting out financial crimes such as fraud, bribery, money laundering, and embezzlement is just as important in their career.
Where Do Forensic Accountants Work?
With their extensive knowledge of financial analysis and investigative skills, forensic accountants lead a dynamic career. They can conduct internal audits for corporations or collaborate with law enforcement to unearth fraudulent activity. From small businesses up to federal agencies and white-collar crime investigations, these experts remain vigilant in protecting our economic resources from criminal intent.
Forensic accountants regularly transition from public work into the private sector, as their skills are in high demand in the corporate world. For well-established specialists, the sky’s the limit in terms of career maneuverability.
What Do Forensic Accountants Look For?
Forensic accountants play a very important role in the investigation and prosecution of criminal cases, as they sift through complicated documents and financial records to identify irregularities and potential crimes. When someone is suspected of fraud, tax evasion, money laundering, or any other type of financial crime, the forensic accountant dives deep into the numbers to determine who was involved and how much was stolen or misused.
These specialists look for evidence such as unusual transfers between accounts, unauthorized transactions with no explanation, discrepancies between income and expenses, phantom companies set up to hide illegal proceeds, and any other red flags that may have been overlooked by law enforcement. In addition to these auditor flags, the forensic accountant will also provide background research into a suspect through digital investigation. In short, they are highly trained specialists who use their expertise and knowledge of accounting in combination with digital investigation to find the missing pieces of financial puzzles.
Forensic accounting is a vital process in the business world as it helps to ensure accuracy and transparency in financial reporting. Hiring a forensic accountant can be costly, but it is worth the investment to protect your business. Here at Forensics Accounting Corporation, our forensic accountants regularly unearth accounts of fraud that would otherwise remain undetected, even in unsuspecting cases. If you would like to exercise the services of our expert team, book an appointment today to get started on ensuring the integrity of your financial reports.