The word forensic in itself describes its meaning, as investigating something using scientific tests to find out the facts about a crime or fraud. Forensic accounting is the process of detecting financial crimes, such as fraud or monetary manipulation, and examining the financial records to uncover illegal activities within an organization. This process of investigating illegal activity is performed by some specialized forensic accountant. They are hired for these types of tasks by law enforcement agencies.
In this blog, we will discuss what is forensic accounting, what does a forensic accountant do?, what is a forensic audit?, the degree you needed to be a forensic accountant, an overview of fraud in accounting, and what is a forensic CPA?.
What Does a Forensic Accountant Do?
Forensic accountants have the specialization in the investigation of fraud or illegal activity performed within an organization. They are not only hired by law enforcement agencies most of the big organizations also hire forensic accountants to prevent internal fraud in the company.
Usually, the forensic accountant tracks the suspicious transactions and patterns in money movement to figure out where things went wrong and who is the reason behind it, reduces financial losses, recovers stolen funds, helps the organization to strengthen internal controls, forensic accountant helps ensure compliance with the regulations by auditing financial records and uncovering any potential wrongdoing.
What is a Forensic Audit?
A forensic audit is a specific type of audit that concentrates on investigating the financial records and transactions of an organization. A forensic audit applies specialized auditing techniques to discover evidence of suspicious activity. It uses technology and data analysis tools to spot unusual transactions, analyze cash flow and uncover hidden assets. It checks whether the financial statements are accurate or not.
What Degree Do You Need to be a Forensic Accountant?
You can become a forensic accountant by pursuing the forensic accounting degrees given below:
Degree
- Bachelor of Science (B.S.) in Accounting (this is the main degree used for forensic accounting)
- Bachelor of Accounting
- Bachelor of Business Administration (BBA in Accounting)
- Bachelor of Science in Forensic Accounting
These are the degree you need to be a forensic accountant. Prepare them to become the best forensic accountants.
Certificates
Some certificates that are needed for Forensic accounting are:
- Certified Public Accountant (CPA)
- Certified Fraud Examiner (CFE)
- Certified in Financial Forensics (CFF)
What is Fraud in Accounting?
Fraud in accounting is the term used when someone tries to manipulate or hide financial accounting data to fool or mislead others so that they can not know the actual financial report for personal or organizational gain. Usually the fraud in accounting occurs when someone has changed the financial information to make a business look better or to steal some money by making a profit from the fraudulent accounting. To ensure fraud-free accounting, forensic accountants are hired by the organizations. Good accounting systems regularly check and careful reviews help find and stop fraud so financial information stays honest and accurate.
Types of Forensic Accounting
Various types of forensic auditing can take place, and they are typically grouped by the types of legal proceedings that they fall under. Here are some examples given:
- Financial theft
- Securities fraud
- Bankruptcy
- Defaulting on debt
- Economic damages
- M&A related lawsuits
- Tax fraud or evasion
- Privacy statement
- Divorce proceedings
What is a Forensic CPA?
A forensic CPA is a financial investigator who uses accounting, auditing and investigation skills to find financial fraud, misleading information, often for which they are trained. They also investigate legal cases like divorce, bankruptcy or white collar crime, acting as a financial detective. A FBI forensic accountant and a forensic accountant both work as financial detectives, they both prepare evidence for the legal cases and investigate fraud or financial misconduct.
Conclusion
Forensic accounting is a very essential to stay away from fraud, as you know, forensic accountants are prepared to investigate and find the culprit, no one can run away from them. These forensic accountants are also hired by large businesses so that the company can know who is misrepresenting the financial information in the company.