For decades, the field of accounting, including forensic accounting, has been viewed as a boring job preferred by people with an overwhelming love of numbers. Thanks to the extensive publicity surrounding the financial malfeasance on the part of many large companies during the past several years forensic accounting is becoming an essential part of any investigation into financial wrongdoing. Forensic accountants have the training and passion to uncover financial trails that many corporate thieves believe were covered.
The important role of forensic accounting
Forensic investigation has gained a reputation in popular media as a field in which a crime scene is investigated, a body is autopsied and the criminals responsible are arrested (more often than not in a blaze of gunfire). Forensic accounting, while related to crime, isn’t covered as extensively in popular TV shows. However, it has played a significant role in the uncovering of several large profile financial fraud cases as of late. Forensic accountants work quietly but determinedly to uncover evidence of financial wrongdoing within a company, whether the fraud has been perpetrated by a bookkeeper in a small local business or by the chief financial officer of a multi-national corporation. The forensic accountant uses a number of different tools to reconstruct financial activities that a suspect may have worked hard to hide.
As financial wrongdoing by banks and other financial institutions have come to light over the past decade, forensic accountants and their colleagues—typically computer experts—use their training and expertise to reconstruct data that show a financial crime has been committed. Forensic accountants investigate all kinds of financial wrongdoing. These may include business issues such as cashiers who pocket cash during a sales transaction, managers who set up fake accounts into which they funnel funds, or company executives who pay dividends to original investors from the funds of subsequent investors. Forensic accountants are also often called on to uncover hidden assets in divorce cases.
Forensic accounting today
The basic role of forensic accountants in uncovering fraud hasn’t changed dramatically during the first decade of the 21st century, but it has become more visible and more complex. Finding hidden assets and funds stashed away is a big part of a forensic accountant’s job today. Computer experts also play a significant role in bringing fraud to light by recreating data hidden on or even removed from computer databases. Forensic accountants are also typically trained to be skilled interviewers who can evaluate the actions of suspected employees or company executives.
Most importantly, the typical forensic accountant today is an investigator. A forensic accountant is experienced in determining whether mismanaged funds are the result of deliberate fraud or simply due to inexperienced or uneducated employees or executives. He or she fills a number of different roles, although the most important and well-known one is determining how fraud occurred and who is responsible for it. A forensic accountant also may be called on to access the financial impact on a business due to product liability claims or infringement on an existing patent.
Forensic accountants and ethics
Following several highly publicized accounting scandals at the beginning of the 21st century, including the fraud uncovered at corporate giants Enron and WorldCom, Congress passed the Sarbanes-Oxley Act in July 2002. The act set forth enhanced financial guidelines for corporations as well as accounting firms to help prevent further financial scandals. The Sarbanes-Oxley Act has added a measure of protection to consumers as well as to companies. Forensics accountants, working with this federal law as well as with a code of ethics mandated by the Institute of Certified Forensic Accountants, are a strong line of defense for investors and consumers as well as for companies that have dedicated themselves to transparency in their financial dealings. Unfortunately (though this is good news for forensic accountants) since financial fraud and wrongdoing still garner headlines, forensic accountants will continue to be an important component in the investigation of financial wrongdoing. The job outlook is expected to grow at a rate of about 16% over the next 10 years.