If you turn on the news today, you will likely see a story related to fraudulent activity. As criminals and scammers adapt to a world that revolves around the internet, committing fraud has become far easier. According to the Global Fraud and Identity Report, 33% of businesses experienced more fraud losses than they did in the prior year.
Forensic accounting is a specialized area of accounting — and a challenging one. A forensic accountant investigates incidents of fraud, bribery, money laundering and embezzlement by analyzing financial records and transactions, tracing assets, and more. Securities fraud, asset misappropriation, identify theft, compensation disputes, and trademark and patent infringements are just some areas of focus for forensic accountants.
Law enforcement agencies, including the FBI and IRS, along with fraud investigation units of major corporations and financial institutions, often turn to these highly skilled professionals for help in uncovering and analyzing evidence used for solving and prosecuting financial crimes. Legal teams also ask forensic accountants to serve as expert witnesses for their cases. Corporations are increasingly seeking forensic accountants in their internal audit, finance, compliance and global investigation departments.
Although the definition was not set in stone until years later, the birth of Forensic Accounting is credited to Frank Wilson, who in 1930, while working as a CPA for the Internal Revenue Service, was placed on a task force to investigate the secret dealings of Al Capone, one of America’s most infamous gangsters. Capone was well-known for a series of illegal activities, many of them violent crimes, but it was his failure to report Federal Income Tax that was his undoing, and all at the hands of Forensic Accountants. In 1931, thanks to Wilson’s diligent analysis of Capone’s financial records, the notorious Al Capone was indicted for Federal Income tax evasion, owing the government $215,080.48 from illegal gambling profits. Capone was found guilty and sentenced to 10 years in Federal Prison. The importance of Forensic Accounting was cemented.
The Role of the Forensic Accountant
Forensic accountants examine data to determine where missing money has gone and how to recover it. They may also present reports of their financial findings as evidence during hearings, where they often testify as expert witnesses. This work serves an important purpose at public accounting and consulting firms, law firms, law enforcement agencies, and insurance companies.
The role a forensic accountant plays in each of these settings varies. Each firm deals with money in different ways, and scammers target organizations based on their duties. Some accountants work on a broader fraud cases, such as those working at law enforcement agencies or law firms. Accountants working in more specific fields, such as public accounting or insurance, typically focus on specific types of fraud, such as insurance fraud. Forensic accountants working at some agencies are more likely to testify in court.
Over the years, Forensic Accountants have taken part in a variety of different types of criminal financial investigations. These include:
- Bank Fraud
- Health Care Fraud
- Insurance Fraud
- Money Laundering
- Mortgage Fraud
- Organized Crime Business Enterprises
- Ponzi Schemes
- Securities & Commodities Fraud
- Tax Evasion
- Terrorist Financials
The value of the Forensic Accountant is clear, and while their presence is reputable within their partnership with law enforcement, many other needs exist for their work, such as:
- Shareholders and partnership disputes
- Personal injury claims, such as those resulting from motor vehicle accidents
- Business interruption or other insurance claims
- Internal fraud investigations, businesses or corporations
- Business economic loss
- Professional negligence
- Disputes recognized in divorce proceedings
- Arbitration and mediation
Forensic Accountants are responsible for investigating and analyzing financial evidence, creating and implementing computerized applications to aid in the presentation and analysis of evidence, reporting findings through either standardized reports or collection of legal evidentiary documents, and appearing in court to provide testimony as an expert witness. Their services are typically retained by lawyers, law enforcement organizations, insurance companies, government agencies (such as the FBI or SEC), courts, businesses, and banks.
The types of information and documents Forensic Accountants are charged with reviewing and analyzing include:
- Real Estate Possession
- Automobile Registrations
- Professional Licenses
- Business Rights and Ownership
- Investments (stocks/bonds)
- Filings of Bankruptcy
- Retirement Funds
- Government Benefits
- Litigation Settlements
- Safe Deposit Boxes
- Boat / Aircraft Ownership
- Insurance Policy Ownership
- Gambling / Lottery / Powerball Winnings
- Foreign Bank Accounts
- Credit Reports
- Insurance Payments
- Domestic Bank Accounts
- Employment History
- Tax Liens
The financial systems of the United States are complex and ever-changing. Because greed for money will always cause financial crime, and because personal and business affairs will always require specialized analysis, the need for Forensic Accountants will continue to grow. Many of these positions require a Certified Public Accountant degree, and some will require other certifications and focused knowledge, such as the Certified Forensic Accountant program, the Certified in Financial Forensics credential, or the Certified Fraud Examiner designation.
Nazaire & Co.
When you partner with Nazaire & Co, you can put your trust in our team of certified forensic accountants. With over 25 years of experience working with clients in many different situations, we are skilled and ready to take on any problem that you may have. With a team of professional investigators, forensic specialists, computer certified public accountants, and fraud examiners, we ensure that no stone is left unturned anytime there is a wrongdoing.
Long Island accounting firm Nazaire & Co. was founded in 1997 – first opening its doors in Brooklyn, New York.