Definition of Forensic Accounting
Forensic accounting is a specialty practice area where accounting, auditing and investigative skills are used to analyze information that is suitable for use in a court of law.
Forensic accountants are often engaged to quantify damages in instances related to fraud and embezzlement as well as on matters involving insurance, personal injury, business disputes, business interruption, divorce and marital disputes, construction, environmental damages, cyber-crime, products liability, business valuation and more.
What is a Forensic Accountant and what do Forensic Accountants do?
Forensic accounting professionals are skilled at quantifying damages and determining the full extent of a loss. They are involved in four basic areas of forensic analytics: data collection, data preparation, data analysis and reporting. Specifically, forensic accountants perform tasks that include examining business records, analyzing historical statements, looking for irregularities in business practices, reviewing journal entries, analyzing trends, tracing the flow of funds, interviewing relevant parties, analyzing electronic data and performing an overall evaluation of the situation in question. Beyond this, they can serve as consultants or expert witnesses. When required, they also collaborate with other experts.
Forensic accountants are sometimes relied on to train internal auditors and investigators. They can also help gauge an organization’s vulnerability to issues such as fraud. Plus, they can help companies implement controls that will reduce their exposure to criminal and civil wrongdoing as well as irreparable damage to their reputation.
Forensic accountants are regularly called on to provide evidence and expert witness testimony in courts, arbitrations and mediations. This evidence may be used to help an attorney establish their case or reinforce the merits of their argument. In other instances, the evidence may be utilized to refute the conclusions that are being proposed by opposing counsel. When serving as expert witnesses in court proceedings, forensic accountants give testimony that is based upon sufficient facts or data that is the product of reliable and accepted principles and methods.
What qualifications do Forensic Accountants hold?
Most forensic accountants have a Bachelor’s degree in Accounting or a related field. They generally have at least one of the following designations: Certified Forensic Accountant (CFA), Chartered Accountant (CA), Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Fraud Examiner (CFE), Certified Valuation Analyst (CVA), Certified in Financial Forensics (CFF) and Investigative & Forensic Accountant (IFA).
Who uses Forensic Accountants?
Forensic accountants are used around the world by insurance companies, independent adjustment firms, lawyers, government and law enforcement agencies as well as by businesses of all sizes – from multi-national corporations to small businesses.
Large accounting firms quite often have a forensic accounting department, however, there are also firms such as MDD Forensic Accountants that are dedicated to providing economic damage quantification and litigation support solely for forensic accounting matters.
Sills Required
In addition to strong accounting skills and legal knowledge, forensic accountants must have the following:
Remarkable curiosity.
Attention to detail.
Persistence.
The ability to think creatively.
Communicate effectively.
Analytical and research skills.
Scope
The scope of forensic accounting is to:
1. Look for evidence of unusual development in the accounting and financial
systems.
2. Design accounting processes for verifying important premises and data. A
forensic accounting orientation also calls for skills in identifying possible fraud.
3. Perform audit type processes on a routine schedule in order to reduce transaction processing risks.
4. Cover a broad range of businesses and locations that require customary or continuous surveillance of all transaction processing systems.
Relevance of forensic accounting in an organisation
Assessing working transactions for compliance with basic operating processes and agreement.
Performing thorough scrutiny and examination of financial payment dealings in the accounting system to decide if they are standard or beyond company policy.
Assessing standard ledger and financial reporting system transactions for likely unlawful tampering or falsification of information or accounts and its consequences on the ensuing financial accounts.
Analysing warranty requests or returns for practices of fraudulence or misuse.
Assisting in estimating the economic damages and the ensuing insurance demands that arise from catastrophes such as fires or other natural setbacks.
Assessing or affirming business rating in consolidations and accomplishments.
Forensic Accountants: Functions
Although the focus is fundamentally on accounting concerns, the function of a forensic accountant may also cover a more generic investigation including collection of evidence.
Almost every accounting firm in the country today has forensic accounting sections. Within these sections, there may be sub-differentiations; for instance, some forensic accounting experts may specialise in insurance applications, personal injury declarations, fraudulence, construction or royalty audits.
Forensic accountants may also offer their services in retrieving profits from crime and in relation to appropriation proceedings relevant to definite or assumed proceeds of crime or dubious transfer of funds. Unique only to India, there is a specific species of forensic accountants known as Certified Forensic Accounting Professionals.
Forensic Accounting in India
Given the nature and types of fraud in India, the Reserve Bank of India (RBI) has compulsorily made forensic accounting audit mandatory for all banks within the country. The establishment of Serious Fraud Investigation Office (SFIO) in India has become the turning point for forensic accountants in the country.
The indications of the growing demand for the field are:
The growing list of online criminal offences
Breakdown of regulators to trace and detect cyber-security frauds
The long chain of co-operative banks going bust
Who can be a Forensic Accountant?
As forensic duties are concerned with judiciary or semi-judiciary dispute resolutions, forensic investigators must also have a thorough understanding of the relevant legal and jurisprudence and laws.
Commerce graduates who wish to take forensic accounting as a career need to qualify as a chartered accountant and then differentiate in forensic accounting.
The experience in audit and accounting as a chartered accountant further boosts prospects of forensic accounting. However, to be a proficient forensic accountant it is important to work with an experienced and well-qualified forensic accountant to learn the ropes of the trade. A number of well-established organizations offer instructional coaching, guidance, training and certification for forensic accountants. Every organization calls for its members to have varying degrees of education and knowledge, while additional exams must be attempted and succeeded. These certificates reveal that a forensic accountant has acquired the requisite instruction and training beyond that of an average accountant.
Salary
A mid-career Forensic Accountant with 5-9 years of experience earns an average total compensation of ₹1,175,000 based on 6 salaries.
Common FAQs
1) How do I become a forensic accountant in India?
To be a Certified Forensic Accountant, you need to pursue a certificate course in Forensic Accounting professional (CFAP) and undergo CFAP examination. The basic eligibility criteria for this course is to have a minimum of a bachelor’s degree along with three years of experience in the similar field.
2) How do you become a forensic accountant?
Steps for Becoming a Forensic Accountant:
Attend a degree program and/or gain experience in a related field. ...
Take and pass the Uniform Certified Public Accountant (CPA) Examination. ...
Apply for an open position as a forensic accountant.
Complete an interview.
Get hired as a forensic accountant.
3) What skills do you need to be a forensic accountant?
In addition to strong accounting skills and legal knowledge, forensic accountants must have the following:
Remarkable curiosity.
Attention to detail.
Persistence.
The ability to think creatively.
Communicate effectively.
Analytical and research skills.
4) Can forensic accountants specialize in a particular area?
Yes. They can and often do specialize in such areas as computer forensics, bankruptcy fraud, insurance claims, and personal injury.
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