When you hear the term forensic accountant, you might envisage images of Ben Affleck, who plays a forensic accountant with some dubious clients, being hunted by the FBI, outwitting criminals out to get him and just generally kicking butt in the 2016 film “The Accountant.”.
But What Is It Really?
Forensic accounting uses accounting, auditing, and investigation skills to detect financial crime in a business or individuals. A forensic accountant’s role varies widely and will include investigation of fraud, embezzlements, insurance claims, proceeds of crime, money laundering, valuations, and marital disputes.
Skills of a Forensic Accountant.
A forensic accountant must possess excellent communication skills, as they may be required to interview people, testify in court as an expert witness or prepare and present forensic reports. As technology plays an increasingly significant role in business, accountants need strong computer and technological skills. They must have a vast knowledge of accounting software (for example, Xero, SAP, MYOB) and the specialist software and technology used to help uncover crimes. A forensic accountant will need exceptional analytical skills to review financial documents and applying critical thinking skills to uncover discrepancies in financial data. They will need to approach their work with a sceptical mind with attention to detail while being objective and identifying facts rather than making assumptions.
The Evolution of Forensic Accounting
Forensic accounting has become popular in recent years. Its origins reach far back to ancient Egyptian times where scribes were responsible for preventing and detecting fraud as they kept records of items such as gold and grain. Fast forward several thousand years to the 1800s, the US saw a development in the role when an accountant became an expert witness in court proceedings. In the 1930s, accountant Frank Wilson investigated Al Capone’s business matters and successfully traced payments made to Al Capone, leading to a conviction for tax evasion.
In recent years, some high-profile fraud scandals, such as Enron and their auditors Arthur Anderson and WorldCom, resulted in increased pressure on the accounting industry worldwide to improve accounting standards, internal controls, and regulations. It also highlighted a gap between the auditing function, which checks for compliance with generally accepted accounting principles (GAAP) and policy, with procedures designed to prevent and detect fraud. The need to address the gap to detect, substantiate, and report fraudulent activity has created a new pathway for forensic accountants. The scandals also have resulted in growing public awareness and scrutiny of business dealings, leading to increased demand for forensic accounting services.
Today, financial crimes are increasing and becoming more complex; technological advancements such as the internet and mobile devices are enabling sophisticated financial crimes. There is now more reliance on forensic accountants than ever, who now play an integral part in fraud investigations.
Forensic Accounting has become a specialised field itself with many subsets. CPA Australia and Chartered Accountants Australia and New Zealand offer specialised courses in forensic accounting for members. International professional bodies also provide certification in forensic accounting. It is proving to be an exciting, rewarding career choice for accountants with many future opportunities.