When running a business, success often boils down to the numbers that dictate a company’s financial health.
Sometimes, however, these numbers don’t tell the whole story. Forensic accounting is a field dedicated to unpacking all of the elements within a company’s financial reporting to ensure legality and accuracy in a business’s reported financial information.
Before diving further into the world of forensic accounting, let’s break the term down. “Forensic” signals a field that is related to the investigation of a crime. This signifies that a job as a forensic accountant that may be a bit different from the everyday role of a public accountant.
What is forensic accounting?
Forensic accounting examines the finances of a business through a legal lens. It is an all-inclusive look into the finances, proceedings, and background information of a company’s operations regarding their financial information.
We’ll take a look at what the field entails, the practical uses of forensic accounting, and the types of careers available in the industry.
Forensic accounting: key elements, when to use, and careers
Forensic accounting is a way to break down the complexity of a company’s financial information through in-depth analysis and interpretation. The level of detail to which forensic accountants must analyze and report on cases is narrow enough to be eligible for use in court. This is a field that prioritizes thorough, specific, and focused investigation and research into complex financial situations.
Elements of forensic accounting
Let’s start diving deeper into forensic accounting with an example. If a company is taken to court by a former or current employee over a compensation dispute, a forensic accountant would be able to dive into the case and be used as a witness to determine the validity of the accusations.
So what would the forensic accountant be doing in this case? Often times, they are using their accounting and auditing skills and acting as investigators to determine the order of events that took place.
This investigation can be centered on calculating losses or other economic damages, breaches of contract, designing balance sheets, disagreements over agreements between companies, or quarrels over business valuations. In most criminal areas that forensic accountants are involved in, potential fraud is typically the area they are asked to look into. By assessing a company’s accounts and accounting methods, a forensic accountant focuses mainly on seeing if the numbers reported by a business reflect reality.
For example, reimbursing unauthorized charges could put you in debt – something a forensic accountant may have to look into. With G2 Track, you can better manage your employee spend and ensure spending transparency.
Forensic accounting is the backbone of holding businesses to a standard of accuracy and truth-telling in terms of their finances. There are ample incentives for companies to lie or bend the truth around their financial information, from tax-paying purposes to employee compensation and contractual agreements. Forensic accounting is a field dedicated to using both experienced knowledge of the accounting cycle as well as robust business operations knowledge to uphold honest accounting practices.
Forensic accounting is commonly used in fields such as criminal investigation, litigation support, internal auditing, and insurance evaluations. An important skill for any forensic accountant is the ability to remain impartial. Any case a forensic accountant works on carries the reputations of companies or individuals, and accusations of wrongdoing in reflecting a company’s financial information can have long-lasting effects.
Forensic accounting careers
Key skills for a career as a forensic accountant include oral and written communication skills, as accountants will have to analyze documents, write reports, and potentially testify in court. As far as qualifications go, forensic accounting careers will almost always require you pass the Uniform Certified Public Accountant (CPA) Examination to become licensed as a public accountant. Experience with accounting software also gives you strong experience for a forensic accounting career.
Despite the time and monetary investments needed to pass the CPA exam, forensic accounting jobs have only grown in recent years due to a greater number of financial disclosure and dealing regulations on both the federal and state levels. The Bureau of Labor Statistics projects that employment for all accountants and auditors will grow 10% in the next ten years.
Forensic accounting is a field in which experienced accounting professionals are able to help maintain the integrity of financial information reported by businesses. There are many different paths one can go down when pursuing a career in accounting.
For accountants with excellent oral and written communication skills as well as a knack for deep analysis, an investigative career in forensic accounting may be perfect.