Since 2001, forensic accounting has been a fast growing field. Its recent public attention and growth poses the question, “When did it start?” Despite the fact that its popularity and growth is only recent, this profession has long since played a vital role in society.
What Is Forensic Accounting?
Forensic accounting deals with financial records and evidence that is used for legal purposes. It is used to detect fraudulent activity such as embezzlement, money laundering, insurance fraud, and tax evasion. It has also been used to uncover hidden assets of couples undergoing divorce and pinpointing drug trafficking.
Forensic accountants use math and investigative skills to gather and analyze financial information. The findings are used to detect suspicious activity within businesses and among individuals. This evidence is often used in a court of law to prosecute offenders. They are often used as expert witnesses in legal proceedings to help the courts make a just legal decision against fraudulent and criminal offenders.
Although its popularity has only been within the last decade, forensic accounting has been around since the early 1900’s. In its early years, forensic accounting was used to detect tax evasion amongst businesses that attempted to hide earnings in bank accounts in multiple states.
Originally a part of the United States Department of Justice, this government agency eventually became known as the FBI. Over time, their scope of practice expanded, allowing them to prohibit the selling and trading of women and drug trafficking.
Although forensic accountants played a vital role in the financial security of our country, it was not until the Enron scandal that they gained their public exposure. In 2001, Enron was found to be nearly bankrupt. Recently considered one of the most prosperous companies in the United States, Enron had long been hiding debts and losses within their financial accounts. Thousands of investors lost shares. Many retired investors were left without retirement money.
This scandal opened the eyes of the business world. Hundreds of businesses went through audit processes similar to Enron. Many were found to be in the same situation. This created an economical crisis that led to the recent recession of the United States.
Since that time, the demand for forensic accountants has grown. Private companies utilize the resources of forensic accountants to detect cases of fraud early on, preventing serious financial loss, in many cases. However, the forensic accountant profession extends much beyond the auditing of private businesses.
Other Job Opportunities
A number of forensic accountants run their own accounting firms and are hired by private businesses. However, other accountants choose to work for government agencies like the IRS, the FBI, and the Bureau of Alcohol, Tobacco, and Firearms. Some are employed by police departments, lawyers, as well as civil and federal courts. Still others work specifically for private businesses.
Entry level forensic accountants average a salary earning of $40,000 per year. Seasoned forensic accountants have been noted to make salaries of $120,000 and up. Higher paid forensic accountants often work in metropolitan areas. However, earning potential for forensic accountants is still substantial, even in smaller cities.
Their Role in Society
Forensic accountants help to ensure economical security in two ways. First, they detect company losses and fraud early on. This alone has saved many companies large sums of money. By doing this, stock investors are able to feel more secure about the funds they are investing. The risk of a scandal, similar to those surrounded by the Enron era, is reduced.
Secondly, job security can easily be found within the career field of a forensic accountant . As long as there is money being handled, the need for forensic accountants will continue to grow. Its recent popularity has created thousands of jobs that were not present before. This, too, helps to secure the economy.
Qualifications and Skills
A forensic accountant must possess a number of skills to perform their job proficiently. Because much of their job is in relation to funds and figures, a forensic accountant must be good at figuring numbers. They must also be able to compile, research, organize, and analyze a large amount of data.
While processing this data, a forensic accountant must be able to quickly spot discrepancies that may indicate fraud. They must then be persistent enough to see the project through, digging into the evidence until the problem is found. They must also be excellent communicators to ensure that the information they have uncovered can be effectively relayed to individuals that have little to no knowledge of accounting.
Forensic accountants have played a vital role in society since the beginning. However, it has only been within the last decade that their importance was recognized. Today, it is one of the fastest growing careers in the United States, opening an exciting new career path for many.