Even though forensic accounting has grown rapidly in the past decade, many people really don’t understand exactly what forensic accountants do. Here is some information about the profession.
- The term ‘forensic’ refers to the application of scientific methods and techniques in the investigation of a crime or a legal issue. Therefore, forensic accounting is often required when an issue is being litigated and a financial argument needs to be decided in a court of law.
- Forensic accountants are specialists at unraveling financial and compliance puzzles for businesses, nonprofits, governmental entities, and individuals, using precise processes and a systematic investigation of data.
- They are usually called on to assist with a search for the facts and for a truthful conclusion after some sort of devious or fraudulent financial activity has taken place.
- Forensic accountants work on bankruptcies, divorces, asset misappropriations, financial statement fraud, contract disputes, damage calculations, shareholder disputes, and a variety of corporate internal inquiries.
- Corporations, charities, and municipalities also engage forensic accountants to conduct proactive fraud risk assessments or to evaluate and bolster their internal controls, so they can prevent or deter fraudulent activity before it occurs.
- Forensic accountants are often certified public accountants (CPAs) but may also have worked for a government agency before retiring and entering the private sector.
Knowing the above, you may realize a forensic accountant could be able to help you. But is it worth it to hire one? Here is how a forensic accountant will add value.
- A forensic accountant who is trained to investigate and solve complicated financial cases combines a depth of specialized expertise with a distinctive outsider perspective.
- They can expand the attorney’s capabilities and provide the resources and facts that support a successful case resolution.
- Leveraging the expertise of the right forensic accountant can help you achieve a more favorable outcome in your case.
If you’ve decided to hire a forensic accountant, here are some issues you should consider when bringing one on.
- Bring them in early, even if you don’t need them immediately. They can help with strategy, discovery, and rebutting opposing experts, so leverage their expertise to avoid mistakes.
- Work together to clearly define the scope of the engagement and requisite specialized knowledge. Also, share your end-game goals so your forensic accountant can be effective.
- Your forensic accountant should be able to manage voluminous records and documents and distill the information into an understandable report using facts to support their professional opinions.
- Familiarity with regulatory or law enforcement agencies and the legal process is an important characteristic, but a forensic accountant should not make legal conclusions or interpretations.
- A forensic accountant should exercise common sense and remain objective. It is the attorney’s job to advocate for the client; the forensic accountant’s job is to analyze the data and support an expert opinion with facts, not to formulate an opinion that favors the client, regardless of what the data indicate.
But how do you select a forensic accountant?
- Ask for referrals from a trusted colleague.
- Include accountants in your professional network.
- Some forensic accountants are specialists with a deep knowledge of one particular area. Others may be generalists. Interview several prospects to ensure you select the best one for the job.
- Choose a highly qualified, seasoned professional.
Are you thinking about training to be a forensic accountant? Here’s what you need to know.
- Professional credentials include the Certified Fraud Examiner (CFE) issued by the Association of Certified Fraud Examiners (ACFE) and the Certified in Financial Forensics (CFF) designation issued by the American Institute of Certified Public Accountants (AICPA).
- These credentials are earned through education, training, experience, and examination requirements, and continuing education requirements are necessary to maintain professional designations.
- Professional standards require integrity and objectivity, and verbal and written communication skills are critical. Reports should be in plain language rather than industry-specific jargon that is difficult for non-expert readers to understand.
Rebecca Fitzhugh is member of Sobel & Co., LLC in Livingston, New Jersey serving in the Forensic Accounting/Litigation Services group.