Since the uncovering of the Enron scandal and the tracking of international terrorists, forensic accountants have gained a lot of public attention. This once barely known field is now considered to be one of the eight most secure career tracks in the US, according to AccountingWeb USA, is now one of the fastest growing professions in the country. But what is forensic accounting and what is its purpose?
Defining Forensic Accounting
Forensic accounting, in basic terms, is the recording, reporting, and analysis of financial transactions of business suitable for use in a court of law. Their profession requires them to put together financial jigsaw puzzles, making sense of financial records, and using this evidence to support or rule out fraudulent activity. This fraudulent activity can relate to embezzlement, tax evasion, drug trafficking, alimony evasion, money laundering, and falsifying financial documents.
Information gathered and analyzed by a forensic accountant is used in litigations against those that commit criminal acts of fraud. Often times, their findings are supplied to an attorney for legal proceedings. This information can include evidence as well as financial loss experienced by a company, the government, or an individual. Forensic accountants are often used as expert witnesses in these cases.
About the Job
A series of audits are performed by forensic accountants. Audits are done by referencing financial records such as receipts, bank ledgers, and other transactions. These records are carefully referenced and indication of fraud is investigated. If fraud is detected, the forensic accountant submits this information to the client.
Although fraud may not seem like a big deal to some, it plays a big role in the state of the economy. The proof of this rests in the Enron scandal. During the Enron scandal, many investors lost shares, leaving many of them penniless. Many retired shareholders were left without retirement funds.
According to financial records, Enron was one of the most successful companies in America. However, after a closer look, it was found that Enron had been hiding debts and financial losses within their financial records. In fact, Enron was found to be nearly bankrupt.
The processes following the Enron scandal resulted in hundreds of businesses being examined and audited. Many of these businesses were found to have the same type of fraudulent activities occurring within their companies. As a result, the economy spiraled into a recession. Shareholders no longer felt secure investing their money. The stock market crashed, leaving the country in financial turmoil.
As a result of the Enron scandals, many corporations began to see the importance of regular audits. They began to employ forensic accountants to ensure that fraudulent activities were not occurring within their company. According to the president and CEO of Kessler International, Michael Kessler, this practice can make the difference in whether a company reports a gain or a loss. Even with these preventative actions, it is estimated that over $600 billion dollars will be embezzled within large corporations, this year alone.
These preventative measures have saved numerous companies from experiencing serious financial loss. By doing this, our economic security as a country is protected. As a result, more and more positions are becoming available for those that wish to pursue a career in forensic accounting. In fact, many accounting companies report a dramatic increase of forensic accountants hired within their profession.
Homeland Security and Drug Trafficking
Following the 9/11 attacks, forensic accountants were employed by the Department of Homeland Security to track down financial records leading to the international terrorists. They continue to screen financial records that might indicate any future attacks on our country. They play a vital role in ensuring the safety of our country against terrorists.
Forensic accountants also have a special department in the FBI. This department is responsible for monitoring and tracking financial records between countries and individuals to detect drug trafficking. This department of the FBI was started in the 1980’s and continues to use their skills to guard our country against drug related crimes.
Forensic accountants possess a bachelor’s or master’s degree in accounting. They are also required to obtain state licensing as a Certified Public Accountant. Additional courses relating to forensic accounting must also be taken to help them learn how to detect fraud. These are often provided through the Association of Certified Fraud Examiners. To obtain certification, all requirements of the Association must be adhered to, including certification and active membership.
Forensic accountants have a very important role in our society. Their profession helps to protect our country from fraud, economic hardship, drug crimes, and national terrorists. It is also through this profession that a large number of jobs have been created, further increasing economical security. Add all of those benefits to the mystery and sleuth-like job description and it is no wonder why it is one of the fastest growing professions in America.