What is Forensic Accounting?

Forensic accounting is a specialty within the field of accounting that incorporates investigative skills, knowledge of technical accounting concepts, and the ability to apply both of these to real-world situations involving, theft, fraud, and legal disputes. A common term for a forensic accountant is also an "investigative accountant."

Some people use the term "fraud investigator" interchangeably with "forensic accountant," although that's not technically correct. A fraud investigator can come from a variety of backgrounds and educational specialties. Fraud investigators can be private detectives, forensic accountants, corporate security professionals, government regulators, auditors, attorneys, or any of a number of other professions.

The word "forensic" clearly implies an investigation of sorts, and that's exactly what a forensic accountant's job involves. The work of a forensic accountant can be split into two fields of work that often overlap. Fraud investigation services will involve examination allegations of fraud and misappropriation, digging through relevant documentation, and piecing together the facts to arrive at a conclusion about the alleged fraud, the people involved, the methods used, and the evidence in support of those conclusions.

Litigation support services deal more commonly with disputes between companies or individuals, often involving contracts and some breach of duty to one another. The forensic accountant is most commonly called in to give an opinion about the financial matters in the case, usually working on issues of lost revenues and/or profits and their cause, ownership and disposition of assets, reconstruction of accounting records, and the value of assets and lines of business.

Sometimes fraud investigation and litigation support services intersect in a case involving both a breach of contract or promise and allegations of fraud and deceit.

The results of work in either type of engagement have a high potential to end up in court, and the forensic accountant must be prepared to testify. In these situations, the forensic accountant will be referred to as an expert witness if the court deems the individual an expert and allows her or him to testify as such.