A Forensic accountant assists an organization in unraveling issues surrounding financial problems. Mostly, his/her role involves analyzing financial information with the aim of unearthing fraud.
After analyzing financial information, a forensic accountant is required to summarise and give a detailed report of his/her findings to the responsible party for implementation.
Moreover, a forensic accountant keeps records of all the evidence gathered during his/her forensic investigation. This enables a party in a dispute to review and make decisions.
Furthermore, the report lays the ground for in-court settlement if the parties fail to arbitrate among them. Thus, a forensic accountant helps organizations to avert fraudulent financial activities and institute appropriate controls aimed at preventing future frauds.
Important skills for a Forensic Accountant
A person seeking to be a forensic accountant should possess some essential skills to enable him/her to carry the job more efficiently. Analytical skills are one of the key skills demanded in this job.
Carlino (2010) points out that analytical skills involve having the capacity to tie data and knowledge gathered from different areas together to come up with a clear interpretation.
This plays a key role in enhancing the accuracy of financial information gathered and simplifies decision making during the judgment process.
Moreover, Carlino (2010) cites that analytical skills help an individual to identify strengths, opportunities, weaknesses and articulate principles strategically as they relate to financial matters.
Also, a forensic accountant should be a person possessing persistence skills. Investigations involving financial statements take many hours or days to study and analyze to detect if the questionable adjustment has been made. Having persistence skills helps an individual to spot other details which might have been skipped during the investigation.
Davis et al. (2010) explain that a forensic accountant, after carrying out investigations, he/she writes reports and acts as a witness in the court. Thus, he/she has to possess effective communication skills to articulate what is contained in the report.
Furthermore, accounting involves analyzing complex financial transactions, statements, and account details; after analyzing, an individual has to submit the findings either orally or in a written report.
Thus, effective communication skills are important in presenting a clear report to enable people with no or limited accounting knowledge to understand.
A forensic accountant should be a conscious stickler to detail. This skill is important when the accountant is sifting through massive financial information (Kay and Gierlasinski, 2001).
Being conscious of details provides an individual with new insight and can lead to uncovering new evidence that might lead to a sustained prosecution in the court.
Davis et al. (2010) point out that a strong background in accounting is important in pursuing a career in forensic accounting. A bachelor’s degree in accounting or related discipline is a requisite.
Also, membership to a certified professional body and experience are mandatory. However, individuals may gain forensic accounting skills on the job.
Forensic Accountant and the Courtroom Environment
When an organization suspects financial misappropriation in the organization, it deploys forensic investigators to begin determining the magnitude, and the nature of the fraud. The forensic role, in this case, is to come up with findings to enable the court to take further actions against the culprits.
In the courts, a forensic accountant unravels the evidence linked to financial fraud by testifying. Thus, as mentioned earlier, testifying needs efficient skills in communication because the forensic accountant has to cross-examine the parties involved in the fraud.
A forensic accountant acts as a detective in the court environment. For instance, he/she has to interview the people involved in the fraud and extract more information necessary to sustain a case.
Legal Responsibility of a Forensic accountant in the Business
In most cases, a forensic accountant is hired by organizations and law professionals among others to help unravel financial crimes and offer litigation support services.
According to Kay and Gierlasinski (2001), the society bestows a big responsibility to a forensic accountant; he/she has to detect, prevent, investigate high profiled white collar frauds; computer scams, terrorist funding and, among others, forms of financial crimes.
In his/her line of duty, a forensic accountant helps to protect the economic security of the business by working hand in hand with the law enforcers.
How does a forensic accountant achieve this in practice? Dark and Leauanae (2004) explain that a forensic accountant detects the organization financial losses in advance; this practice has made many organizations save money which would have been otherwise embezzled.
The timely prevention of fraud has built the trust of investors as it motivates them to continue investing their funds in the business.
Also, Kay and Gierlasinski (2001) show that the field of forensic accounting provides job security for many forensic accountants. Many organizations are springing up and coupled with rising financial frauds; the need for financial accountants is increasing.
Dark and Leauanae (2004) indicate that in the U.S., the field of forensic accounting has fixed thousands of jobs that were not feasible before. This has secured the economy because more people can earn a living by being forensic accountants.
A forensic accountant analyses financial statements and evidence used in legal matters. Thus, the evidence uncovered is used to identify fraudulent activities such as insurance fraud, money laundering, tax evasion and other embezzlements in organizations.
Besides, the forensic services are significant in uncovering the activities of drug trafficking and hidden assets of couples entangled in divorce matters.
A forensic accountant gathers and analyses financial data using mathematical and investigative skills. The findings arrived are used as evidence in a court of law to apprehend the culprits.
Moreover, a forensic accountant has to support the evidence produced in the court. This is to enable the court to make a concise legal decision against a financial criminal.
Cases of Forensic Accounting
Case 1: A shareholder’s dilemma
A 73-year-old father had just made a comeback to his construction company after the board handed him the presidency (Barrett, 2013). Barely two years in the office, he realized that the former president, his 42-year-old son, had devised various schemes to defraud the company.
Nevertheless, to say, the son had already misappropriated a sum of $11 million of his father’s 55% shares of the company while he was in the office.
Moreover, he had allocated about $6 million a year (for his father’s retirement) and a further $6,500 monthly stipend to the ex-wife of the father (Barrett, 2013).
Role of Forensic Accountant
The forensic investigators were invited to carry out a thorough forensic audit on the deposed son.
The forensic audit was divided into two parts: to validate the assertions of misfeasance by the father, prior and after his return, and to demonstrate that during the son’s tenure, there was no misappropriation of funds the father had purported in the lawsuit.
Besides, the forensic accountants were also mandated to carry out the valuation of the business to certify the son had not run the company into bankruptcy.
The evidence gathered by the forensic accountants was presented to the legal consultants of the father and was admitted without argument. The evidence laid a basis for the legal proceedings and as a review for tightening the internal controls of the company.
Case 2: The Smoking Gun (Internal Coup)
A medical company was preparing to make an initial public offer (IPO), and the prerequisites such as the patient appointments had gone well with doctors in several Southeastern states in the U.S. Besides, the products on offer had been tasted and ascertained to be of high quality and ready for the IPO unveiling (Barrett, 2013).
However, to sabotage the process, two corporate officers and deep-pocket investors had devised a strategy to remove the financial and operating staff and replace them with others who could easily be compromised.
Moreover, to complicate the process, the deep-pocket investors suppressed the release of funds unless the officers were sacked or replaced (Barrett, 2013). The attorney of the Chief Executive Officer had no substantial evidence on the conspiracy among the three; hence, a forensic audit was needed.
Role of Financial Accountant
The financial accountants were invited to ascertain whether there was a conspiracy between the three groups mentioned. They were tasked with analyzing the company’s hard drive and the laptops used by the two doctors under investigation.
After conducting a thorough forensic examination in the victims’ offices and the company’s server, there was no evidence linking the three to conspiracy.
However, further investigation revealed that the three indeed communicated through personal emails hosted by Hotmail and Yahoo, but not the company’s official emails, running through the company’s server.
Barrett, W. C. (2013). My Life in Crime: Chronicles of a Forensic Accountant. Web.
Carlino, B. (2010). Forensic Skills in High Demand. Web.
Davis, C., Ogilby, S., & Farrell, R. (2010). Survival of the Analytically Fit: The DNA of an Effective Forensic Accountant. Web.
Derk, G. R. & Leauanae J. L. (2004). “Expert witness qualifications and selection”, Journal of Financial Crime, 12 (2), 165 – 171.
Kay, C.C. & Gierlasinski, N. J. (2001). “Forensic accounting skills: will supply finally catch up to demand?”, Managerial Auditing Journal, 16(6), 378 – 382.