What Exactly Is Forensic Accounting?

Sometimes referred to as investigative auditing, forensic accounting involves conducting research on financial activities and preparing evidence for use in a court of law. This specialized area of accounting is an ideal career for someone interested in both finance and law, as it combines accounting principles and investigative skills. Crimes such as embezzlement, money laundering and securities fraud are among the types of cases encountered in this line of work. Individuals who hold a bachelor's in accounting and pass the CPA exam are eligible to work in forensic accounting.
Work often involves:

• Investigating financial records and transactions
• Using computer applications to search for and analyze evidence
• Compiling findings and preparing formal reports and exhibits
• Testifying in court as an expert witness and providing supporting evidence

Some work as corporate advisors, participating in audit committees to resolve shareholder disputes or reviewing financial data for mergers and acquisitions.
Forensic accounting activities generally fall into three major areas:

• Investigation - Investigative auditing is used to determine whether or not criminal activities have occurred, such as identity theft, property theft, securities fraud or insurance fraud. In addition to helping prosecute crimes, they may provide recommendations to reduce the potential for risk or loss in the future. While forensic accounting plays a key role in criminal law, it is also used in civil cases, such as locating hidden assets for divorce proceedings.
• Litigation Support - This "sub-area" of the field involves collecting and presenting evidence of financial issues related to existing or pending litigation. Investigative auditors engaged in this task are responsible for quantifying the damages that could be sustained by a party involved in a legal dispute. An example would be calculating the economic losses that result from a breach of contract.
• Dispute Resolution - Forensic accountants also assist in resolving legal disputes that occur during courtroom proceedings, and may be called to testify as witnesses. Some may pursue specialized training to work in alternative dispute resolution (ADR). These types of services include mediation and arbitration, and they enable individuals and organizations to settle disputes outside of court.

How Do You Become a Forensic Accountant?
The first step is to complete your bachelor's degree in accounting, which typically consists of a four-year program at a college or university. You may wish to pursue electives or a minor in criminal justice or law in preparation for this career.
Upon completion of your bachelor's degree, the next step is to become licensed as a Certified Public Accountant (CPA), which involves meeting all requirements established by your State Board of Accountancy and passing the four-part CPA exam. Many candidates opt to take a CPA review program to increase their chances of passing the CPA exam the first time, which can put them on the fast-track to a high-paying job.
Once you have become a licensed CPA, you may begin practicing as a forensic accountant. Many positions are open to CPAs with a bachelor's degree; however, some employers prefer to hire candidates with a master's degree for certain roles.
After acquiring practical work experience in the field, you can apply for certification as a Certified Fraud Examiner (CFE) or Certified Forensic Account (Cr.FA®). While certification is not mandatory, it can expand your career prospects and result in a higher salary.