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What is Forensic Accounting?

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If you're considering a career in accounting, you've likely just started to discover the variety of possible job paths that may be open to you. Common types of accountants include CPAs, CMAs, tax accountants, auditors, and forensic accountants—but what is forensic accounting, and how do you know if it's a good option for you?

Forensic accountants are pulled in after a known or suspected instance of (possibly criminal) activity that has resulted in a financial loss, and are tasked with investigating the dispute in preparation for litigation. In criminal cases, this may include investigating financial records in the aftermath of potential criminal activity such as theft, fraud, or embezzlement. Forensic accountants may also be involved in settling civil disputes by assessing damages suffered by a specific party due to negligence or breach of contract, evaluating accuracy and truthfulness of a company's financial records during bankruptcy, or tracking down financial assets that have been hidden or lost.

How Do Forensic Accountants Differ From Other Types of Accountants?

If you're still wondering, "What is forensic accounting actually used for?" or, "How is it different from other types of accountants?" we've broken down the major skills and responsibilities below:

  • Forensic accountants begin working after a loss or criminal act has already happened. This is different than auditors, who are often brought in proactively to ensure that no mistakes or acts of negligence go undetected, and who therefore are tasked with catching errors and preventing losses before they occur.
  • Forensic accountants need to be familiar with the legal system and financial laws. As a forensic accountant, you will be required to write reports and supply documentation for court cases, and may be called on to testify regarding your investigation and findings.
  • Forensic accountants use existing data to tell a story. Forensic accountants essentially wade through all the complex data in financial records pertaining to an event or dispute in order to construct a clear, easily understandable version of what happened. They help those who aren't accountants or financial experts understand a situation in order to make a ruling about damages, fault, and sometimes criminal guilt or innocence.
  • Strong investigative skills are required. Because forensic accountants often have to determine whether or not financial records have been altered or falsified, their work is not simply a matter of checking that all math and documented figures add up correctly.

(For more information on the main skills and strengths necessary for a career in forensic accounting, see the American Institute of Certified Public Accountants' (AICPA) report "Characteristics and Skills of the Forensic Accountant.")

Forensic Accounting Jobs

Forensic accountants may work in a number of industries in both the public and private sector. Large corporations often have forensic accountants, and due to the increased likelihood of fraudulent activity, insurance companies typically have a forensic accounting division. Public accounting firms and consulting firms that specialize in risk consulting also employ forensic accountants for cases involving bankruptcy, breach of contract, and disputes following mergers and acquisitions.

Private law firms, law enforcement agencies (such as the FBI), and a number of government agencies also employ forensic accountants. Jobs in these fields will focus more on fraud and other criminal activities, and are more likely to involve regular court appearances. There is also a growing need for forensic accountants who can work with computer memory and digital media in order to trace electronic and internet activity that may have been tied to fraud or money laundering.

Ready to learn more? Explore the online forensic accounting program at AIU.