If you've been asking yourself "What is Forensic Accounting?" then you're in good company. Thanks to numerous high-profile programs such as CSI, there's no doubt that Forensic Accounting has caught the imagination of many wannabe accounting detectives.
But if you read the huge amount of internet information about what Forensic Accounting is you'd be forgiven for thinking that whoever wrote the material had swallowed a legal dictionary.
Seriously. It can be very confusing.
And since you're trying to find out all the details you can about it as a career then it may not be clear but to be a Forensic Accountant you're expected to already have had many years of auditing/accounting experience.
Or put another way, it's highly unlikely you can pursue it as a career from Day 1 out of college or university.
Yeah, we know. Not exactly too clear from the "stuff" you've been reading is it?
Anyway. Back to the track. What is Forensic Accounting? To do this properly we first of all need to explain a few things.
We're guessing that you think it's just about investigating frauds, chasing bad guys/gals and sticking them in the slammer. Yay! Sounds like fun and it's where most people will want to start but these days there's a lot more to it than that.
And like most of the accounting profession don't be surprised by just how diverse it can be. The opportunities are endless so for once let your imagination stray a bit as we walk though some of the forensic accounting speciliaties.
The key areas of Forensic Accounting are:
That's a big list of things, so let's give you a brief explanation for each of them:
The bread and butter of Forensic accountants: this is where you become the detective, work out what went wrong, who did it, how they did it and how much money they've stolen.
And you're expected to present all your analysis in court or to the police.
You can go here for fuller details on forensic accounting and fraud investigation.
The list is endless:
Forensic accountants have to assess the impact of these disputes and in many cases tragedies.
As an example, let's say an aircraft maker is expecting a supply of engines from a another company within an agreed timeframe. The engine supplier fails to meet the deadline and has now breached the contract.
Inevitably a huge fight will break out, the lawyers get called in and not long after so do we. And it could be for either side as they seek to justify their positions.
At the end of the day the job is to work out just how much money one party is expected to pay the other in compensation. And to get both parties to accept your analysis.
We're sure everyone can relate to this. You lose something. You claim it on insurance. Now imagine huge claims on complex transactions. There's work to be done to estimate just how much the loss actually is and to then convince the insurance company that it's accurate.
When couples break-up the financial side of things usually turns nasty pretty quickly as each party lays claim to what is rightfully theirs.
The Forensic Accountant has to get in there and assess who has what, checking the assets/liabilities that exist, placing a value on them and then explaining all of that to the lawyers and the couples.
And of course, it may all to go court.
Most people would think of this work arising where business and partnerships need to break-up, like any bad marriage unfortunately.
However, but it doesn't necessarily mean a dispute has caused it.
For example, a businessman retires and wants to sell his part of the company to a daughter, son or colleague.
Key work includes:
The challenge here is getting the various parties involved agreeing to the valuation. Not easy in the slightest as buyers want it cheap and sellers want it expensive.
Here's where things turn a bit brighter. Whilst the first five items on our list are mainly about the resolution of problems, Business Intelligence is all about providing - to management - insight into how their business is running which will help them to focus on where to deploy their resources.
For example, it will helps management discover where money is being lost so that a decision to divest (sell) a company can be made.
So, there you have it - we hope we've answered the question of "What is Forensic Accounting?".
And we hope you agree that taking the opportunity to pursue a forensic accounting certification will lead to a career that's a lot broader than you'd imagine. It's a fast growing space of the accountancy profession for a good reason - it moves away from what many perceive as the mundane world of audit and assurance.
However, to be a successful Forensic accountant you need have a solid training in those very areas. As the old saying goes, you have to walk before you can run.
In our case? You have to audit before you investigate.