Introduction to How Forensic Accounting Works
Thanks to the popularity of some criminal dramas, the word "forensic" might cause you to think about the process of working a crime scene. These investigators track down criminals using DNA samples, fingerprints, bloodstains, photos and other clues. So at first, you may wonder how the word "forensic" could ever be joined with the word "accounting." It's not as if you've seen accountants working with the other investigators at a crime scene. However, it really depends on the type of crime.
Forensic just means "relating to the application of scientific knowledge to a legal problem" or "usable in a court of law." Most of the crimes, such as homicides, investigated on a show like "CSI" are known as "crimes against the person." Forensic accounting is simply a specialty field within the broader arena of accounting. To learn more about accounting and frequently used terminology, read How Business Accounting Works.
The types of crimes forensic accountants investigate are classified as "crimes against property." They investigate crimes such as fraud and give expert testimony in court trials. They also perform work related to civil disputes. Forensic accountants are also known as fraud investigators, investigative accountants, forensic auditors or fraud auditors.
Although forensic accounting may not sound as glamorous as its other investigative counterparts, the field has received more attention in recent years. This is due in part to the high-profile, financial white-collar crimes involving large corporations, such as the Enron and Adelphia Communications scandals of 2001 and 2002. The federal government employed impartial forensic accountants to uncover the extent of the fraud and other accounting irregularities practiced by executives and the accounting firms associated with them.
So will your favorite criminal dramas feature investigators packing calculators instead of heat? Probably not. But, let's examine exactly what type of work forensic accountants actually do.