Whether you're planning your education in accounting or already have your Bachelor's degree and are working towards your Master's it's an excellent idea to take a hard look at specialized areas such as forensic accounting within the realm of certified public accountants (CPA). Because most states require both a Bachelor's degree and at least two years accounting experience before you can become a CPA it makes sense to focus your coursework, internships, and work experience in a specific area of accounting so you're ahead of the game by the time you qualify for certification.
According to the Association of Certified Fraud Examiners (ACFE) forensic accounting is a combination of investigative skills and accounting knowledge that gives litigation support in cases of fraud. The word "forensic" means suitable for use in a court of law, and as a forensic accountant you'll be tasked with following the money trail looking for fraudulent activity and perhaps testify in court as to the path you followed in your investigation.
The specialized area of forensic accounting is growing at a rapid rate and because the demand is high those who hold the Certified Fraud Examiner (CFE) credential earn over 30 percent more than CPAs without the certificate. Because the field of accounting is projected to grow at a healthy rate of 10 percent over the next decade those who hold the title of CFE will stand out from the crowd and will also most likely be in the top of the earnings tier for accountants.
Typical Functions of Forensic Accounting
Because the term "forensic accounting" is defined as the application of accounting evidence in regards to criminal evidence and legal proceedings it is to that standard forensic accounting investigations are held. Since forensic accounts are often called as professional witnesses to give testimony on their findings the position is a combination of accountant, auditor, and investigator. They may assess accounts presentations and accounting systems to determine whether the numbers mesh, assist in professional negligence claims to determine whether business persons acted in an ethical and legal manner, or may be tasked with investigating assumed or actual proceeds from fraudulent gains in order to determine the amount of criminal proceeds or negligence of those involved.
A forensic accountant may be used to quantify and calculate economic damages and losses through either contract or tort, to determine a business valuation, or to investigate disagreements relating to company buyouts, breaches of warranty, or acquisitions.
There are two main areas that forensic accounting encompasses: investigations and litigation support. On the investigative area they may be called to determine whether a criminal action has taken place such as security fraud, identity theft, employee theft, or insurance fraud. They may also be called to investigate hidden assets in civil matters such as a divorce case.
In the area of litigation support a forensic accountant is used to explain the factual presentation of the economic issues of a case in either pending or existing litigation. They are charged with quantifying the specific damages in legal disputes in order to resolve cases during mediation and may be called to testify as a professional witness if the case reaches the courtroom. This is what sets a forensic accountant apart from a CPA: they must not only collect the evidence of the paper trail but must be able to present it in a concise manner that is easily understood by the jury members and judge.
Forensic accountants must be suspicious number detectives. They must know legal issues and have the ability to apply their accounting knowledge to the courtroom. They must have a wide range of knowledge and talents to cover all aspects of an investigation. They may be asked to help with depositions, write reports, testify in court, assist in criminal and civil investigations, and conduct fraud investigations. Unlike fraud auditing which tries to anticipate a fraudulent situation, forensic accounting occurs after the fact when a company suspects theft, embezzlement, or fraud has already occurred.
Possible Careers and Duties
There are five main areas where forensic accountants are employed: accounting firms, corporate security and risk management firms, law firms, financial consulting firms, and law enforcement. Here's a look at each area and the typical duties of their forensic accountants:
Corporate security & risk management firms
Financial consulting firms
Governmental departments (FBI, CIA, IRS)
Although there is no typical workday for a forensic accountant because the responsibilities are so wide ranging it's important to point out that being a forensic accountant doesn't resemble a television investigator who finds all vital information within minutes. As with other CPA positions most days will be spent behind a desk working with numbers. The main difference is that in civilian firms instead of balancing books and tax returns you'll be investigating for signs of wrongdoing such as fraud and embezzlement.
A career in law enforcement is much different for a forensic accountant as it is one of the fastest growing law enforcement fields. A prime example is the FBI as they are actively recruiting forensic accountants. As an FBI forensic accountant you may be tasked with a wide range of ever- changing assignments investigating major crimes such as:
The FBI also uses forensic accountants in:
As a law enforcement forensic accountant your duties would reflect legal prosecution of the criminal focus of the investigation in respect to their financial trail:
Education and Degree Options
For a career in forensic accounting you should plan to earn at minimum a Bachelor's degree and preferably a Master's degree in order to qualify for the widest range of positions. Because most state require a minimum number of accounting courses as part of your educational requirements to become a CPA you should plan your education accordingly with forensic accounting as your end goal. You should first determine that your school of choice is accredited then find the CPA requirements for your state. Any internship should encompass forensics if possible, and once you've earned your degree and passed the CPA exam you should try to gain your required experience in the forensic accounting field while qualifying for your CPA licensure.
Note that while most firms as well as law enforcement doesn't always require you to be a CPA in order for you to become a forensic accountant it is preferred, so you should make becoming a CPA your first educational goal. The American Institute of Certified Public Accountants (AICPA) recommends future forensic accountants complete the Fundamentals of Forensic Accounting Certificate Program which is a 12 module course; you should take as many forensic accounting courses available while earning your degree. Note that because forensic accounting is the legal and investigative aspect of the accounting field it may be a wise choice to declare criminal justice as your minor so you can take courses related to your long term goal Here are some sample courses that fall in the forensic accounting category:
Certification Credentials and Licensure
Besides qualifying for your state CPA licensure you should also plan to earn your Certified Fraud Examiner (CFE) Certified in Financial Forensics (CFF), or both.
The CFE is determined on a point basis. Education, experience, and certifications are all taken into consideration so if you have a Bachelor's degree and CPA licensure your only requirement is two years experience in an area specific to the detection or deterrence of fraud. This is where your internship and CPA experience requirements can help you save time on your path to becoming a forensic accountant. The following areas of experience are accepted:
The CFF credential is granted by the AICPA to qualified CPAs. To sit for the CFF exam you must meet both educational and experience requirements as follows:
While neither forensic credential is required to work as a forensic accountant you should plan to earn at least one. You should also look at the specific experience preferred by your employer of choice while working on your experience requirements. For example, the FBI prefers to hire those with a Bachelor or Master's degree, hold CPA licensure, and hold certification from CFE or CFF as well as experience in the following areas:
FBI Preferred Professional Experience
Most states require Continued Professional Education (CPE) once you hold your CPA licensure so you should plan to use this requirement to your advantage to keep abreast of new developments in the world of forensic accounting.