Forensic Accountants Uncover the Hidden Bottom Line

Merriam-Webster defines “forensic” as the “application of scientific methods and techniques to the investigation of crime.” Forensic science is the investigative framework used as evidence in court. In the case of financial fraud, trails of evidence can follow a complex path across the globe, through multiple shell accounts, where money is shifted, transferred, and laundered beyond all recognition. Or at least that’s what criminals engaged in such activity hope.

Unfortunately, the hopes of these dishonest people too often become reality. Following the chain of dishonesty and deception is a growing challenge in the global, digitized economy.

Perhaps in a perfect world, where everyone was honest and transparent, there wouldn’t be a great need for forensic accountants. In the real world, however, this “cloak and dagger” corner of the accounting world is a specialization with increasing demand.

The Issue of Fraud

In its 2018 “Report to the Nations,” the Association of Certified Fraud Examiners estimated that “a typical organization loses 5 percent of its annual revenues to fraud,” according to Fraud Magazine. “Applied to the estimated 2016 Gross World Product,” this translates to “potential global fraud losses approaching $4 trillion.”

The report studied 2,960 cases of occupational fraud against organizations in 125 countries and across 23 major industrial sectors. Ranging from small local businesses to multinational behemoths, reported collective losses for the study period totaled more than $7 billion.

Uncovering and bringing to account this rampant fraud is the job of the forensic accountant.

The Job of Forensic Accounting

Forensic accounting employs an unusual combination of accounting and investigative skills. A forensic accountant uses this diverse skill set to support “actual or anticipated disputes or litigation,” says the Forensic CPA Society on its website.

The Association of Certified Fraud Examiners classifies the scope of forensic accounting into four broad categories:

  1. Performs forensic research to trace funds and identify assets for recovery
  2. Conducts forensic analysis of financial data
  3. Prepares forensic accounting reports from financial findings
  4. Prepares analytical data for litigation and testifies as needed

Given the sensitive and specialized nature of their work, forensic accountants are often called upon as expert witnesses in court.

The career outlook for Forensic Accountants

With the proper training and experience, specialists in forensic accounting pursue careers in law enforcement, insurance agencies, and law firms. They may work in consulting firms specializing in risk assessment or government organizations and in-house forensic accounting departments for large corporations.

According to the Bureau of Labor Statistics data, as of 2018, the median annual income for accountants and auditors, including forensic accounts, is $70,500. However, salaries often reach $122,000 and higher.

As noted earlier, we do not live in a perfect world. One trade-off of a modern economy is that the unscrupulous will exploit its vulnerabilities. There is strong demand for skilled forensic accountants in both the public and private sectors. For those who would commit financial fraud, there is a forensic accountant to fear.