Forensic accounting refers to the branch of accounting that supports the litigation process. If you’re interested in the intersection of numbers and crime, this might be your calling.
In order to learn more about graduate studies in forensic accounting, we spoke with George R. Young, Ph.D., CPA. Dr. Young is the Academic Director of the Masters of accounting program at Florida Atlantic University.
Forensic accounting is the application of investigative and analytical skills for the purpose of resolving financial issues in a manner that meets standards required by courts of law. Black’s Law Dictionary defines “forensic” as “used in or suitable to courts of law or public debate.” Forensic accounting, then, is litigation support that involves accounting. Although forensic accounting includes no explicit reference to fraud, fraud examination is often a part of forensic accounting. According to the Association of Certified Fraud Examiners, most fraud examinations can be considered forensic accounting but not all forensic accounting involves fraud examination. The forensic accounting area of valuation illustrates this fact quite well. For example, one of the first guest speakers in the forensic accounting program at FAU was David Ellrich, an accountant from the Palm Beach Gardens professional services firm Moore, Ellrich, & Neal, PA. David valued the racing team interest owned by well-known NASCAR driver Jeff Gordon when Jeff and his former wife divorced in 2003.
Skills that are important to a forensic accountant include the abilities to communicate orally and in writing, think critically, identify key issues, evaluate evidence, and understand human nature. As one of our instructors is fond of saying, “Know the person, know the fraud.” In other words, if the motivation and rationalization of the fraudster is known, collecting evidence and obtaining a confession is easier.
The typical forensic accounting student is analytical, detail-oriented, inquisitive and persistent. Being analytical involves the ability to use ratios and trends to determine fluctuations and relationships that are inconsistent with other relevant information or that deviate from amounts that are expected under the circumstances. These deviations are often referred to as “red flags” (actions, events, or records that are not normal) that could escape the eye of a person who is not as detail-oriented. In addition, an analytical mindset and attention to detail helps the forensic accountant to compute the value of assets when performing a business valuation. Being inquisitive represents the desire to seek answers to questions such as “Why would a person act in a particular manner?” when acting this way would not be expected under the circumstances. Being persistent pays off when the forensic accountant must be tenacious in his or her search for evidence, either in fraud examinations or business valuations engagements.
Persons holding a master’s in forensic accounting can work in the private as well as public sectors. In the private sector, opportunities include working as fraud examiners for CPA firms (e.g., in their litigation services practice areas), law firms, corporations (in, for example, internal audit departments), and consulting firms. In the public sector, these persons can work for the FBI (either as a special agent or financial analyst), the IRS (as a special agent), the U.S. Postal Service (as postal inspectors), state investigators (e.g., in Special Investigative Units), and local law enforcement agencies.
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