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How to Become a Forensic Accountant and Fight Financial Crime

10 Min Read

Hearing the word “forensics” usually conjures up an image of investigators examining and collecting evidence at a crime scene, and then conducting further studies and tests in a lab. But the term applies to financial offenses as well, and the field of forensic accounting affords great opportunities for people interested in investigative auditing techniques, criminology, and courtroom procedures.

What is Forensic Accounting?

Forensic accounting is the use of records, summaries, analyses, and reports to examine the finances of individuals or businesses. Those who work in this profession have specialized education and training in detecting, investigating, and preventing financial crimes. They possess expertise in criminology as well as investigative auditing techniques and courtroom procedures.

Forensic accountants are sought after by many organizations of diverse types, including Certified Public Accountant (CPA) firms, various corporations, and government agencies. Their knowledge and skill sets are invaluable in monitoring financial practices and transactions to identify fraud, money laundering, embezzlement, insider trading, bribery and corruption, and other violations. Governments also utilize these professionals to detect, track, and stop terrorist financing, human trafficking, and illegal drug dealing. And individuals hire these professionals for help in various civil cases. This often involves searching for hidden assets in divorce cases and bankruptcies. Forensic accountants perform valuations of businesses for estates and partner disputes, as well as determine economic damages in all sorts of civil cases.

What Does a Forensic Accountant Do?

Forensic accountants perform an array of tasks, including the tracing of funds, identification and recovery of assets, and due diligence reviews. They develop computer applications to help them manage and analyze the data they collect. These professionals can specialize in various areas of the field, including investment fraud, bankruptcy fraud, insurance claims, personal injury, and breach of contract.

Criminal Cases

Frequently, forensic accountants also work with government organizations, law enforcement, and banks to prevent, detect, and solve crimes through highly technical work, especially the analysis of cash flow into and out of the bank accounts of offenders. They begin by acquiring all pertinent banking records, e.g. checks, deposit slips, wire transfers, and statements, from the account(s) of the suspected criminal. Then, they prepare a cash flow statement showing the movement of funds received and disbursed from the suspect’s account(s), which can be used as a detailed record of how the crime was committed.

As one of the most important duties of forensic accountants is to explain the nature of financial crimes to judges, lawyers, and juries, they are often involved in legal proceedings in court. Their participation includes testifying as experts and preparing visual aids to support evidence in trials.

Investopedia

Taking Down Bernie Madoff

One of the most well-known examples is the work that Harry Markopolos did in 2008 – 2009 to dissect and explain to the court the infamous Ponzi scheme orchestrated by Bernie Madoff, the money manager who defrauded thousands of investors out of approximately $65 billion. Markopolos had been investigating Madoff since 1999, when he had discovered that the wealthy financier must be committing fraud after attempting to replicate Madoff’s returns through some analytical detective work.

The forensic accountant reported his findings to the SEC and made numerous filings to the agency over the course of the next several years, persisting despite their slow response. His work on the case also included trips to London, Geneva, Paris, and Zurich in 2002, where he found evidence that Madoff’s biggest investors were likely European.

Three years later, Markopolos’ colleague Frank Casey confirmed that Madoff was trying to borrow money from European banks, which was another key point in the investigation, as it indicated that the fraudster’s scheme was running low on funds. This was further substantiated in 2007, when Neil Chelo, another of Markopolos’ colleagues, acquired Madoff’s portfolio of trading positions and found that it demonstrated no ability to earn a positive return.

Other major findings that helped Markopolos expose Madoff as a criminal included the discovery that the auditors for his financial statements were different for three consecutive years from 2004 – 2006, which was highly unusual. Additionally, in August 2007, all hedge funds suffered losses except for Madoff’s.

Markopolos sent his final submission to the SEC in April 2008. The following September, the stock market crashed and panicked investors rushed to try to redeem the value of their financial contributions. Three months later, having run out of money to meet these investor redemptions, Madoff confessed and was turned in by his own sons.

Find out more about the role forensic accountants played in the case in this NPR episode.

Identifying and Tracking Terrorists After 9/11

Sometimes, forensic accountants are called to investigate far worse crimes — and even save lives. Soon after 9/11, the U.S. federal government formed the Foreign Terrorist Asset Tracking Center, bringing together forensic accountants and other financial investigators from the CIA, FBI, NSA, U.S. Customs Service, Secret Service, and other agencies. The group’s mission was to follow the money trail of the suspected — and later confirmed — Al-Qaeda extremists responsible for the attacks, and to provide financial expertise to aid the government in catching and bringing to justice all of those perpetrators who were still alive.

Beyond 9/11, the Foreign Terrorist Asset Tracking Center was designed to identify other current and future extremists, shut down their funding operations, track their movements, and stop attacks before they happen.

The FBI also created a subdivision within their own organization known as the Terrorist Financing Operations Section (TFOS), which employs forensic accountants and other professionals to assist the Bureau in their investigations.

By checking credit histories, reviewing banking activity, and making inquiries via government databases, these forensic accountants can uncover confirmed and suspected terrorists’ personal information, including citizenship, birth dates, and phone numbers. They can discover other unlawful activity unrelated to terrorism, previous known business and personal associations, travel and communication patterns, and suspicious purchases as well.

The aforementioned techniques can also be useful in connecting cases previously thought to be unrelated, establishing historical timelines, and producing additional leads that enable investigators to employ more sophisticated methods, such as court-authorized electronic surveillance.

Additionally, forensic accountants working for the government coordinate efforts with America’s global partners in intelligence and law enforcement to ensure a cooperative and comprehensive counterterrorism strategy. They also operate in conjunction with domestic law enforcement and regulatory communities.

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Civil Cases

Outside of criminal investigations, forensic accountants commonly operate on behalf of insurance companies, quantifying damages related to motor vehicle accidents, medical malpractice, and other civil claims for the purpose of dispute resolution via settlements or court decisions, according to Investopedia. Other civil matters in which forensic accountants offer their services include breaches of contracts, tort, disputes over company acquisitions, breaches of warranty, product liability claims, copyright infringement, and business valuation disagreements.

Additionally, they do work for clients going through divorces, primarily performing valuations of closely held businesses, investigations to determine whether or not spouses are concealing income or assets, and tax consequences and cash flow analyses to help calculate appropriate payments for child support, maintenance, and equitable division of property or debt.

In valuations, forensic accountants typically review at least the last five years of a business’s financial documents, e.g., income or profit-and-loss statements, balance sheets, accounts receivable, and more. It’s also customary for them to conduct an on-site visit at the business in question and interview the owner to do some more detective work that will allow for an accurate evaluation of the company’s financial status.

When looking into the possibility of hidden revenue or assets, forensic accountants generally look for the red flag of a lifestyle that does not match the reported income. They also think critically about whether or not the expenses are appropriate for the type of business, consider who controls the flow of money into and out of the company, and compare the company’s income to the deposits it has made. Investigations can also include statistical comparisons of the business to similar businesses in the industry.

When the owner of the company also owns the property on which it operates and leases that real estate to the company, a forensic accountant will perform a cash flow analysis to find out if the owner is diverting company funds to themselves as unreported income.

Career Outlook and Required Skills

The U.S. Bureau of Labor Statistics reports a promising trajectory for job growth. Forensic accountants essentially play two roles at the same time — forensic science technician and accountant — and these are projected to grow at rates of 15% and 5%, respectively, through 2029.

One particular area of high potential for people interested in this field is cybersecurity. As cybercrime increases in frequency, magnitude, and sophistication, forensic accountants will continue to be in demand to track the flow of money — especially cryptocurrency such as Bitcoin — from ransomware and other digital attacks, in order to catch the perpetrators and recover the extorted funds. Forensic accountants will also continue to be needed to measure the economic loss or damages from ransomware, data breaches, and other cybercrimes, as well as to help businesses and governments plan ahead in order to mitigate and prevent such attacks.

How much do forensic accountants make? The average annual salary for the profession is $71,832, and this will vary based on location, experience, and whether you’re working for a small-to-midsize business, a large corporation, or the government.

This vital role requires a unique skill set. Part of understanding how to become a forensic accountant involves recognizing that the job requires a high degree of proficiency in various skills, such as paying close attention to detail to uncover financial irregularities and minute discrepancies as well as interviewing people to get critical information. Other important skills include analyzing evidence; communicating conclusions in oral and written forms to law enforcement, government agencies, and courts; and thinking creatively to solve problems and adapt to new discoveries or changes in the investigation.

How to Become a Forensic Accountant

The journey to land a job as a forensic accountant begins with earning a bachelor’s or master’s degree. Obtaining additional education in criminal justice or law enforcement is helpful as well.

Candidates are also required to become CPAs by passing the four-part Uniform Certified Public Accountant Examination. The test covers financial accounting and reporting, auditing and attestation, business environment and concepts, and regulation. There is an optional specific certification in forensic accounting (CFA) as well; even though it’s not required, it’s recommended because it increases credibility and may make it easier for candidates to find employment. Another optional credential that serves as an alternative to that one is certification as a fraud examiner (CFE) through the Association of Certified Fraud Examiners.

The majority of positions in the field require one to three years of experience in accounting, which is typically gained through work as a general accountant. And professionals must complete continuing education courses in accounting, finance, and business throughout their careers in order to retain their licenses.

You can earn the experience you need for the role you want while working on your forensic accounting degree online. While some positions only require a bachelor’s degree, increasingly more positions expect a master’s degree for high-level, in-demand roles.

The online M.S. in Accounting: Forensics Concentration from the University of New Haven will prepare you with the education and skills you need to thrive in the field of forensic accounting. Courses provide training in forensic auditing techniques, approaches, and ethical issues, and are taught by instructors who are real-world experts with relevant experience in public accounting and corporate finance. Furthermore, the program’s flexible, accelerated format is tailored to the needs of working adults with demanding schedules.

Upon finishing your M.S. degree requirements, you will have attained the 150 hours of education necessary to earn your CPA license. Additionally, the University’s esteemed career development center is available to help you with interview preparation, salary negotiation tips, and more.

To learn more about the program and how to become a forensic accountant, call an enrollment counselor at 1 (855) 474-8465, email getstarted@newhaven.edu, or click here to fill out our contact form.

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