Forensic accounting is the examination of financial records that will lead to or result from litigation. The results of a forensic accounting investigation can be used as evidence in court, and so are usually heavily documented.
There are a number of areas in which a person can use forensic accounting skills, including the following:
- Calculation of economic damages
- Calculation of the value of a business
- Detection of fraud
- Insolvency legal support
- Investigation of computerized accounting records (known as forensic analytics)
- Professional negligence claims
- Reconstruction of accounting records (usually for insurance claims)
A person engaged in forensic accounting should have a considerable knowledge of accounting and auditing, which is used to dig through or reconstruct the accounting records of an organization. Special skills required for a forensic accountant include the following:
- Ability to speak in court as an expert witness
- Knowledge of all types of asset misappropriation fraud
- Knowledge of rules of evidence
- Knowledge of auditing techniques, both for corporate and government institutions
- Ability to search through accounting records
Certifications are available for forensic accountants. These certifications are typically in addition to the CPA certification.
Larger auditing firms usually employ forensic accountants, as do insurance companies, banks, and government agencies. These individuals may be dispatched on projects worldwide. Given their travel arrangements, these accountants are more similar to consultants than auditors, who are less likely to travel on a regular basis.
A forensic accountant is also known as an investigative auditor.