Forensic accounting refers to the branch of accounting that deals with integrates legal practice in investigations and auditing. The standards for forensic accounting are thus derived from the law and they give this practice its law definition. The major advantage of forensic accounting is in its role in detecting fraud (“Forensic Accounting” 1).
Differences between forensic and traditional accounting
Forensic accounting is very different from financial accounting. It is no wonder that the two branches of accounting are regulated by two different bodies; Forensic accounting by the law and financial accounting by the SEC (Securities and Exchange Commission). Most differences between forensic and financial accounting are brought about by the fact that financial accounting is only concerned with genuineness and accuracy of the numbers in records while forensic accounting is concerned with a critical analysis of records to see if there are any frauds concealed in them (Gray 8). This gives forensic accounting an upper hand in the identification of frauds.
Forensic accounting concepts
Forensic accounting involves the collection of forensic evidence, by sampling or otherwise, that is used to identify frauds. Sampling in this case refers to the probe done on selected pieces of evidence that are not equal to the whole population. This makes the forensic auditors and investigators criminalists (identifiers and analyzers) of criminal evidence that is normally in forensic evidence. Forensic evidence in this case consists of physical materials, testimonies, documents etcetera. Therefore forensic accounting is mainly concerned with solving problems of victims and witnesses etcetera, of forensic crime. Most of forensic accounting work is audit-related. After carrying out their audits, the forensic auditors prepare audit reports after their investigations that help in taking action against the culprits of frauds (Gray 6).
Competencies and opportunities of forensic accounting
Forensic accounting activities require a myriad of skills in an individual. This is due to its integration of numerous disciplines. To be a forensic accountant, one must have knowledge in law, financial accounting, research, quantitative analysis skills, auditing, investigation skills and finance. This helps the forensic accountant in attaining the ability to deal with various problems during his/her investigations. It is also necessary that the forensic auditor or forensic investigator has psychology knowledge and a substantial level of organizational behavior skills (Zysman 1). This branch of accounting has very many valuable opportunities. These opportunities are mainly in government agencies like the FBI (Federal Bureau of Investigations), the CIA (Central Intelligence Agency), the IRS (Internal Revenue Services), and the FTC (Federal Trade Commission) etcetera. In these government agencies, the forensic investigators and auditors are normally involved with the appraisal of operations to identify and also discourage white collar crime. Forensic accountants are also employed by in the private sector. In this sector, the major employers are companies in the financial sector such as banks and insurance companies. The forensic accountants are mostly held as witnesses in criminal and civil cases related to fraud (Gray 1).
Conclusion
While traditional auditors only look at the numbers in financial reports and other documents, forensic auditors and forensic investigators examine the documents to look for frauds revealed by numbers and those that are not revealed by numbers. This fact makes forensic accounting more valuable than traditional accounting. The value of forensic accounting is also evident in the fact that forensic accountants are employed by the most sensitive government agencies like the FBI, the CIA and the others.
References
Gray, Dahli. “Forensic Accounting and Auditing.” 2008. Web.
Kessler International. “Forensic Accounting” 2010. Web.
Zysman, Alan. “Forensic Accounting Demystified.” 2009. Web.