“Forensic accountants inhabit a cloak and dagger corner of the accounting world,” Justin Pope of the Associated Press explains, according to the Forensic CPA Society. “Their job: respond at a moment’s notice when a client spots trouble — anything from procurement fraud to a top executive cooking the books to industrial espionage.”
Intrigue aside, what are the day-to-day responsibilities of someone in this dynamic role? And how can an accounting degree help an emerging professional enter the forensic accounting field? Find out more about what happens at the intersection of investigative work and financial expertise.
What Is Forensic Accounting?
Forensic accounting is a key role within the field of financial forensics. Members of the forensic accounting profession use a combination of skills and expert knowledge to identify and provide evidence of financial crimes. The term “forensic” refers to the specific investigative methods used by these accounting professionals, as well as the fact that their findings may be used as court evidence.
As the FBI explains, forensic accountants live by one important mantra and mission: “Follow the money.” They are skilled professionals who can detect negligence or ill intent, reconstruct what actions took place, determine who is responsible, and produce court-worthy evidence to substantiate their conclusions. Forensic accountants accomplish all of this by combining encyclopedic business law knowledge and accounting expertise with keen investigative capabilities.
What Are the Duties of a Forensic Accountant?
Forensic accountant services and duties fall into two categories, according to the Forensic CPA Society: investigation and litigation support. As investigators, forensic accountants are responsible for determining whether fraud, theft, embezzlement, or other financial crimes have occurred. To support litigation, forensic accountants present their findings and evidence during a lawsuit, whether the matter is settled out of court or through a trial. When cases are brought to a court of law before a judge or jury, forensic accountants are called in to provide expert witness testimony.
White-collar crime and fraud investigations may be initiated by companies hoping to root out malicious actors within their own corporate structures or by law enforcement agencies following paper trails. From tracing the paths of illicit fund transfers to identifying and recovering money that has been moved illegally, there are plenty of roles for forensic accountants to fill.
How Does Forensic Accounting Differ from Auditing?
Auditing is similar to forensic accounting in that both roles focus on detecting irregularities in financial records. The difference has to do with when the investigation takes place. Auditors perform checks before there’s a presumption that something is wrong, whereas forensic accountants are hired after there’s a suspicion of wrongdoing.
As recalled by the Forensic CPA Society, Dr. Larry Crumbly, editor of the Journal of Forensic Accounting, likens each role to a different type of animal. He compares the external auditor to a guard dog, the internal auditor to a guide dog, and the forensic accountant to a bloodhound. Essentially, the external auditor keeps a watchful eye on a company’s accounts and an internal auditor leads the way to ensure compliance. A forensic accountant, however, is brought in to sniff out evidence of fraud.
What Certifications Do Forensic Accounting Professionals Need?
Someone seeking a specialized role in financial forensics can earn one or more designations to become a certified forensic accountant. Members of this profession can be:
- Certified Public Accountants (CPAs)
- Forensic Certified Public Accountants (FCPAs)
- Certified Fraud Examiners (CFEs)
After combining CPA, FCPA, or CFE credentials, an accounting professional will be certified in financial forensics and ready to take on the demanding work required in the forensic accounting role. But achieving any of these certifications requires the right type of education, such as an online Bachelor of Science in Accounting.
Who Hires Forensic Accountants?
According to the Association of Certified Fraud Examiners, forensic accountants can be hired by a variety of entities and for a range of reasons. Here are just a few possibilities:
- Insurance companies may enlist the help of these finance professionals when determining economic damages for insurance claims.
- Businesses and corporations in any industry can hire forensic accountants if they suspect employees have been stealing funds from company accounts.
- Attorneys or private parties might ask a forensic accountant to help discover hidden assets in high-value divorce cases.
- Financial institutions like banks and investment firms can invite these professionals to investigate securities fraud and other related crimes.
- Public accounting firms may hire forensic specialists for in-house financial forensics divisions, where they can uncover instances of accounting fraud.
- Law enforcement agencies, from police departments to the FBI, call on forensic accountants to gather evidence for ongoing cases.
Regardless of who they work for, forensic accountants can expect to interact with investigators and lawyers on a regular basis. Members of this profession must have a strong knowledge of the law so they can determine which financial activities are violations that need to be reported and prosecuted.
Are Forensic Accountants in Demand?
The accounting profession and the forensics industry are both experiencing steady growth, which means there will be plenty of employment opportunities for prospective forensic accountants in the next several years.
According to the U.S. Bureau of Labor Statistics, growth for accounting and auditing professionals is expected to continue at a rate of 6% between 2018 and 2028, which is one percentage point higher than the national average across all occupations. This means accountants and auditors can expect to see 90,700 new jobs created, for a total of more than 1.5 million positions in the field.
Meanwhile, the forensic technologies market is experiencing a 7.7% compound annual growth rate, putting it on track to reach a value of $19.2 billion by 2022, according to BCC Research. Notably, forensic accounting will continue to be one of the largest segments of this market, second only to computer forensics.
Why Is Forensic Accounting a Growing Field?
In the U.S., demand for forensic accountants continues to grow, despite an overall decrease in crime rates, according to BCC Research. The reason for this seeming incongruity is that modern technologies are creating new avenues for financial crime — as well as new categories of crime altogether. Innovations from mobile banking to cryptocurrency have given nefarious actors more opportunities to engage in malfeasance and fraud.
For instance, CipherTrace reported that some $4.26 billion in cryptocurrency funds was lost in 2019 alone through scams, insider fraud, cybertheft, and other means. A 2020 report published by the American Institute of Certified Public Accountants (AICPA) and Chartered Institute of Management Accountants (CIMA) highlighted the various challenges and necessary forensic techniques associated with these types of cryptocurrency crimes.
Additionally, Investopedia points toward the increasingly complex regulatory environment as another cause for the demand for experienced forensic accounting professionals. For example, the 2002 Sarbanes-Oxley (SOX) Act tightened industry standards to discourage fraudulent reporting. It also enacted tougher criminal penalties for any violators, making the investigative work of forensic accountants more consequential.
How Much Do Forensic Accountants Make?
The median salary for forensic accountants was $67,450 in August 2020, according to PayScale. However, actual compensation varies based on location, experience level, and a combination of other factors.
Workers with at least 10 years of forensic accounting experience can earn around $94,000. Additionally, those employed in the three largest U.S. cities also see increased earnings: New Yorkers earned 21% above the national average, Los Angelenos made 17% more, and Chicagoans earned 14% more in 2020, PayScale reveals. The BLS also notes that the top 10% of accounting and auditing professionals earned more than $124,450 in May 2019.
How Can an Accounting Degree Help You Become a Forensic Accountant?
Paired with a professional certification, a bachelor’s degree in accounting is typically the minimal level of education required for most accounting jobs, including forensic accounting positions.
An online Bachelor of Science in Accounting, can pave the way to an entry-level career in financial forensics. Graduates searching for intellectually challenging and meaningful work can unite their investigative skills and criminal justice interests.
To learn more about the online Bachelor of Science in Accounting available through UAB’s Collat School of Business and how it can set you up for a career in forensic accounting, visit the program page today.