Interested in Creative Accounting in a Fraudulent Way?
No, I’m not talking about COMMITTING fraud, but rather working on fraud matters as a forensic accountant. If you’re a student or experienced accountant interested in forensic accounting, keep reading! It’ll be worth it.
I come across students and experienced accountants all the time that “oooo” and “ahhh” when they hear about forensic accounting (as they should, because it’s awesome…and it’s not tax). Over the years I’ve provided mentorship to lots of folks who want to learn more about how to get into forensic accounting, which made me reflect on my own journey in becoming a forensic accountant.
Here’s my story…
I knew since my sophomore year in college that I wanted to be a forensic accountant when I first heard the guest speakers in my Accounting Information Systems class, two forensic accountants from KPMG, talking about their job. After hearing countless other presentations from various accounting professionals in other accounting fields, it reaffirmed my disdain for tax and fueled my motivation to become a forensic accountant.
The hard part was that no one was really looking to hire forensic accountants straight out of college in the early 2000’s, but I knew that KPMG had a forensic department, so I began my mission to schmooze (err, network) with everyone I could at KPMG (campus recruiters, plus any professionals who would come to campus for events) to let them know about my interest in forensic and eventually try to parlay that into a forensic job.
Then, the universe conspired to help me achieve my mission by coincidentally pairing me up with a forensic accounting mentor through my local CPA Society who also happened to work at KPMG in their forensic group. (PRO TIP: Network with CPAs from your local CPA Society – they want to help you!!)
I spoke with KPMG’s on campus recruiters and finally broke them down, but they couldn’t give me a forensic opportunity right away. They said that if I got an audit internship, then they would try to get me a rotation with the forensic group. I got an audit internship, hated the 5 weeks of auditing I did, loved the 2 weeks of forensic work, and ultimately got an offer letter. The funny thing was that my offer letter at the end of the internship was for a full-time audit position, so I had to go back to the recruiters and ask if they could give me a forensic offer. Well, it worked! And the rest is history…
Moral of the story
It’s hard to get a start in forensic accounting. There were numerous times during my journey where I could have just said “this is too hard, I’m going to just get an audit job and figure it out later”. But after five weeks of audit, I knew that wasn’t a desirable career path for me, and I’m glad I went all-in on forensic.
Will this approach work for everyone? Probably not, and the main reason is supply and demand:
Everyone wants to be a forensic accountant…or at least says they do, until they start doing it and either realize that 1) it’s hard, 2) it’s not always fraud-related, and 3) Ben Affleck oversold it just a little bit in The Accountant. So there is a huge supply of accountants who want to do forensic work, including people coming straight out of college, as well as experienced accountants and CPAs who want to transition from their existing roles into forensic accounting.
Unlike audit and tax work, there is no steady, consistent, or known supply of forensic work year over year, so the demand for constantly hiring forensic accountants isn’t there. Firms can hire new auditors and tax professionals annually because they can project how much work they’ll have and how much staff they’ll need to complete that work. In forensic accounting, you have to get new clients every year. And if you have clients who are repeatedly defrauded, well they’re probably not going to be in business very long…
How do you make yourself more desirable when inquiring about forensic accounting opportunities?
Do your homework. Don’t just say that fraud sounds interesting because guess what – not all forensic accounting jobs even deal with fraud! Here are some general buckets of forensic accounting as I like to describe them:
Proactive – preventing fraud from happening.
This can be like internal audit with a focus on fraud. Some firms call it “Fraud Risk Management” – you’re wanting to prevent fraud from happening in a situation where the possibility of fraud is likely or possible. A good example is situations when cities or states are affected by a natural disaster, or a pandemic like COVID-19, and receive a boatload of federal funds to help with the rebuilding or remediation process. Forensic accountants can help put in systems and processes to mitigate the risk of money going to unethical fraudsters.
Another example of proactive work done by forensic accountants relate to compliance issues. Early in my career, I did FCPA work (Foreign Corrupt Practices Act). In a nutshell, US companies operating overseas aren’t allowed to bribe foreign government officials, so forensic accountants can help set up processes or perform procedures to mitigate the risk of non-compliance with FCPA rules and regulations.
Reactive – an event has already occurred, and you need to respond to it.
The most popular scenario is some kind of massive fraud or embezzlement where an employee is stealing from a company. However, in my experience, this has been the kind of job that I work on the least.
The more common situation is “litigation support” or “dispute advisory”, where a fraud isn’t necessarily involved. It could just be that Company A is suing Company B because Company B didn’t hold up their end of their contract with Company A, causing harm to Company A. A forensic accountant would then determine the amount of economic damages incurred by Company A because of Company B’s actions. You would need to analyze the data, write a report, and eventually testify in court about your findings as an expert witness unless the parties come to a settlement beforehand. Companies suing each other is much more common than 1) a company identifying a fraud large enough to investigate and 2) the company choosing to investigate that fraud.
Forensic accountants can help with insurance claims, often referred to as “Business Interruption”. For instance, if a business was unable to operate because of some kind of event (i.e. a natural disaster, explosion at their facility, or cyber attack), a forensic accountant can help compute the amount a business was interrupted (hence “business interruption”), and claim that amount from their insurance company. A company can typically claim an amount to make them whole – if it weren’t for the event, how much more money would they have made during a specific time period?
Forensic accountants can help with family law matters, such as divorces. There may be concerns that a spouse is concealing funds, or diverting funds to other accounts. This comes up most often when at least one of the spouses has a business that they operate, and so a forensic accountant isn’t only sifting through personal expenditures, but also through business financials.
Some forensic accountants also obtain expertise in business valuation. Disputes can arise through M&A activity when a company is bought or sold. A forensic accountant could detect fraudulent activity occurring within a business that, for instance, could have inflated its valuation when the business was sold from Party A to Party B.
Do Your Homework!
So if you’re interested in forensic accounting, take some time to research various types of forensic work, as well as the firms who do that type of work. Think from a prospective employer’s perspective, and ask yourself which of these two candidates sounds more impressive:
Applicant 1: “OMG does your firm have forensic accounting? Cause I heard about it and fraud and stuff sounds cool.”
Applicant 2: “I’m interested in forensic accounting, and particularly interested in [pick one: litigation support, family law, business interruption…]. I saw on your website that you do that type of forensic work. Can you tell me about some of the recent projects in that area of forensic accounting that you’ve worked on?”
Don’t be Applicant 1. It’s an automatic turn-off.
What does the career progression of a forensic accountant look like?
If you go the “Proactive” route, you can either stay in public accounting, or eventually go in-house at a corporation in an internal audit role or some kind of risk and compliance role.
If you go the “Reactive” route, you typically have to stay in public accounting or consulting. Companies (hopefully) don’t deal with fraud or forensic matters often enough to need full-time “Reactive” forensic accountants. If a “Reactive” situation comes up within a company, they’ll either have their internal audit / Risk & Compliance team handle it, or they’ll outsource the work to an outside forensic accounting firm.
If these forensic accounting career progressions concern you, it can never hurt to start your career with 2 years of audit experience. It really gives you a lot of flexibility:
- You gain a wide breadth of accounting and financial knowledge across various industries and/or companies
- Having 2 years of audit experience is appealing to firms looking to hire forensic accountants
- If you hate the forensic work, it’s easy to jump back into audit (firms are always hiring audit Senior Associates)
- The audit background gives you more career progression flexibility, since you can either stay in auditing, move to industry, or try another advisory or consulting field.
What can you do right now to prepare yourself for a career in forensic accounting?
People always ask me this question, and in my opinion there are two primary traits that I looked for in hiring forensic accountants:
- Have a strong understanding of debits and credits. No, I’m not talking advanced accounting, just debits and credits. If you debit this, then you would expect to see a credit to that…so if you see a credit to something else, that should pique your interest. Whenever I see a general ledger line item that makes me wonder, my first question is “What’s the other side of the entry?”. So if you see a credit to cash with a memo/description of “Amazon.com”, you can’t automatically assume someone is running their Amazon purchases through the company. What’s the debit? Is the charge being booked as an expense to the company? Or as an employee/owner A/R that’s to be repaid to the company?
- Find some Excel trainings. There are lots of free Excel resources on YouTube, or other paid trainings on LinkedIn Learning or through other sources. Data is the great equalizer, so if you can show that you’re better than the average accountant in Excel, it gives you a leg up on your co-applicants for a job opening. In addition to Excel, college accounting students taking Data Analytics courses are learning database or programming languages like SQL or R. However, don’t feel like you need to go get a masters in data analytics just to learn these skills – the internet has an abundance of free trainings and case studies you can use to sharpen these data skills. Don’t just think employers will be impressed that you know SQL – you need to be able to explain how SQL can be used to make forensic accounting work more efficient and why your knowledge of it would be a valuable skillset for that accounting firm.
What professional certifications relate to forensic accounting?
When I first started getting designated as an expert witness on forensic accounting matters, I was usually much younger than the opposing expert and even the attorneys. And no matter how knowledgeable I was on that case, and how bulletproof my damage calculations were, I always got questioned for my age and experience. However, one thing I could always point to were my professional licenses – I’m a CPA, a Certified Fraud Examiner (CFE), and Certified in Financial Forensics (CFF). These were the same licenses that much older and more experienced counterparts had, so we were at least equal in that regard.
In my opinion, getting your CPA license is extremely valuable in a field like forensic accounting, especially if you’re wanting to work as an expert witness in litigation support matters. In this type of work, you’re pitted up against another forensic accountant, and if you’re outgunned on certifications, the court may be swayed to view your opponents opinions more highly because of their CPA status.
In addition to the CPA license, you can obtain a CFE license through the Association of Certified Fraud Examiners, and a CFF certification through the AICPA. If you work on business valuations matters, then the AICPA also offers an Accredited in Business Valuation (ABV) credential, or you can look at the various valuation credentials offered by the National Association of Certified Valuators and Analysts (NACVA).
For some folks, getting a CPA license isn’t a realistic goal because they have a non-accounting background and would need to take years of accounting coursework to become CPA eligible. In those situations, I have seen professionals pair certifications like the CFE and CVA with other certifications like the Master Analyst in Financial Forensics (MAFF), which is also offered by NACVA.
You don’t have to be a lawyer! Lawyers hire you to handle the accounting aspect of lawsuits. If you’re a lawyer, you can’t try the case and be the damages expert Sure, it can be helpful if you understand the legal process and legal aspects of the case, but you’ll learn enough of that while working on forensic accounting matters for a couple of years rather than having to go to and pay for a couple years of law school.
Forensic accounting has been a very rewarding career for me. If you’re interested in forensic accounting, network with other forensic accountants, find firms that offer forensic accounting, learn about the different types of forensic accounting, and hone your data/Excel skills. Feel free to connect with me on LinkedIn and message me with any questions about forensic accounting career opportunities!