From tax evasion to money laundering, when it comes to unraveling financial mysteries, forensic accountants are the unsung superheroes. Combining their investigative and problem-solving skills with their prowess in data analysis, they’re able to solve the seemingly unsolvable.
But how do they do it—and what do they do, exactly?
Today, we’re doing a little sleuthing of our own as we untangle the mystery of forensic accounting.
What Is a Forensic Accountant (and What Do They Do?)
Forensic accountants are certified public accountants (CPAs), and sometimes certified fraud examiners (CFEs), who specialize in examining the finances of individuals and businesses. They often work for insurance companies, law enforcement agencies, or financial institutions, dedicating their efforts to uncovering evidence of financial crimes.
Their daily responsibilities depend on their particular skill set and the nature of each case but generally include:
- Conducting financial audits.
- Analyzing financial records.
- Identifying irregularities or discrepancies in financial documents.
- Tracing funds and assets.
- Interviewing individuals involved in the case.
- Preparing reports for legal proceedings.
- Collaborating with legal teams and law enforcement.
- Providing expert testimony in court proceedings.
Types of Financial Crimes
One of the enticing aspects of forensic accounting is that there are numerous types of crimes to investigate, and no two cases are exactly alike. Whether they work for the FBI or a private financial firm, forensic accountants help solve a diverse range of financial crimes:
- Fraudulent financial reporting occurs when an individual or company falsifies financial statements with the intent to mislead stakeholders regarding their financial performance. Often to help obtain financing, their financial statements relay that they earned more than they did or claimed more assets than they had.
- Asset misappropriation involves the unauthorized use of an organization’s resources. For example, if an individual responsible for managing an organization’s finances uses those assets for personal gain (also known as embezzlement), that person could manipulate the company’s accounting records to avoid detection.
- Money laundering involves disguising the origins of illegally obtained money. If you’ve seen the Netflix show “Ozark,” you might be familiar with this form of financial crime, particularly the laundering of funds made from drug trafficking. People also launder money to clean the proceeds obtained from activities such as illegal gambling, corruption, and fraud.
- Insurance fraud occurs when someone makes false claims to an insurance company to gain benefits or compensation. From staging elaborate accidents to exaggerating the extent of one’s injuries, insurance fraud can take various forms, all aimed at deceiving the insurance company for financial gain.
Those aren’t the only types of financial crimes that forensic accountants tackle. Other common types include:
- Tax evasion
- Bribery and corruption
- Securities fraud
- Hidden assets
- Corporate fraud
Techniques Used in Forensic Accounting
In addition to soft skills like attention to detail and problem-solving, forensic accountants are specially trained in relevant areas to ensure they can effectively solve complex financial mysteries, including:
- Collecting relevant data
Forensic accountants meticulously collect and analyze financial documents including income statements, balance sheets, and bank statements to uncover irregularities and discrepancies. These documents are essential for assessing the legitimacy (or illegitimacy) of an individual or company’s financial transactions.
- Analyzing financial statements
After examining the available financial data, forensic accountants analyze this documentation to assess the financial accuracy of the individual or business. Assessing trends and key performance indicators helps them discover potential inconsistencies that may allude to financial crimes.
- Conducting interviews and interrogations
From witnesses to whistleblowers, forensic accountants speak with numerous individuals to gather evidence for their cases. Through specialized questioning techniques designed to elicit specific details, they can assess the credibility of the individuals they’re interrogating, acquiring more evidence to strengthen their investigations.
Advance Your Accounting Career with a degree in Accounting From UTPB
Whether you’re passionate about forensic accounting, guiding clients toward long-term financial success, or exploring another area of accounting, UTPB offers three online programs designed to equip you for a broad range of roles in the industry:
- Bachelor of Business Administration in Accounting
If you’re just beginning your accounting career, our online BBA in accounting is the perfect place to start. The online courses provide a broad skillset necessary for accountants, with core courses such as Auditing, Principles of Finance, Federal Income Tax, and more.
- Master of Professional Accountancy
Our flexible 36-credit program is entirely online, ideal for busy working professionals who value the freedom to learn at their own pace. Throughout the program, you’ll engage in a comprehensive curriculum composed of core accounting courses crafted to prepare you for CPA licensure. With courses that span a range of topics, including Fraud Examination and Forensic Accounting, Information Systems Management, and Financial Management, our program empowers you to delve deep into specialty areas of your choice, shaping your expertise for future career opportunities.
- Master of Business Administration with accounting emphasis
You can complete this 33- to 42-credit online program in as little as four semesters and develop the specialized skills needed for leadership roles in accounting.
Choose the program that aligns with your professional aspirations and apply today!
Sources:
https://www.investopedia.com/terms/f/forensicaccounting.asp
https://www.investopedia.com/terms/w/white-collar-crime.asp#toc-money-laundering