The importance of forensic accountants took off after 2008, when shaky lending practices and the massive Bernie Madoff Ponzi scheme exposed widespread mismanagement and fraud in U.S. financial companies. Forensic accountants see through the reported numbers to find trends and hidden deceptions that can cause companies and investors billions.
What Forensic Accountants Do
A forensic accountant is part accountant and part investigator – someone who conducts deep analyses of financial reports, studies the paths of transactions and identifies assets for recovery. Forensic accountants work for accounting firms, risk management consulting firms, law firms, law enforcement agencies, insurance companies, government agencies and financial institutions. Most positions require one to three years experience in general accounting and a certification such as certified fraud examiner, certified public accountant or chartered accountant.
Forensic accountants look for evidence of fraud whenever money changes hands – for example, in mortgage transactions or healthcare billing. Finding evidence of marked-up services, kickbacks or unbundling – billing separately for services that are required to be billed together at a reduced cost – can take many hours poring through print and computer files.
Forensic accountants must often sift through many layers of records in many locations in order to find evidence of fraud. Evidence of skimming money from the cash revenues, fraudulent credit card transactions or off-book payroll can be challenging to pin down. In addition, forensic accountants may have to find evidence of shell companies that bill for fictitious services or heavily marked-up goods; price fixing and collusion among competitors within an industry; or even ghost employees who collect pay but do not actually work there.
Because forensic accountants must often follow long and winding paths through the financial records they peruse, they may find that pools of money travel through various departments, companies and entities. Following these trails requires interviewing many types of people, ranging from other accountants to managers to CEOs. A big challenge, therefore, is knowing whom to interview and how to conduct an interview that helps the accountant solve the case, reveal fraud or recover money.
Unlike general accountants, who may work in relative solitude their whole careers, forensic accountants may be called to the witness stand in court cases. This presents a huge challenge to aspiring forensic accountants who might be called upon to give and defend testimony. Many people are simply uncomfortable expressing their stories before a courtroom or when they are crossed-examined by an intimidating attorney.
Forensic accountants should be able to simplify and communicate information, and not just as it relates to court cases. They need to be able to translate abstract numbers into written or oral reports that non-accountants can understand. Forensic accountants also need a certain amount of investigative intuition that may not be easy – or even possible – to learn.