Forensic Accounting: The World of Financial Detectives

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Episode 144: Dive into the fascinating world of financial detective work as we explore the specialized field of forensic accounting. Ever wondered who tracks down financial criminals or how complex fraud schemes are uncovered? This episode pulls back the curtain on a career path that combines investigative prowess with accounting expertise.

We examine how forensic accountants serve as financial sleuths, tracing illicit transactions and identifying misappropriated assets for government agencies, insurance companies, and legal firms. Unlike traditional auditors who verify financial health, these specialists specifically search for irregularities with the presumption that misconduct may be present. Their work requires not just accounting knowledge, but also investigative techniques, legal understanding, and meticulous documentation skills.

Could this be your next career move? If you enjoy analyzing data, identifying patterns, and solving complex financial puzzles, don't overlook this rewarding specialization.

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Episode outline:

1. What is the purpose of forensic accounting,
2. The process of detecting fraud, and 
3. Career opportunities for forensic accountants.

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Episode Transcript

Stephen McLain (00:05):
Forensic accounting is a specialized
branch of accounting with theduty of detecting irregularities
and financial discrepancies.
They are often employed bygovernment agencies, insurance
companies, public accountingfirms and legal and consulting
firms to investigate and uncoverfinancial misconduct. Forensic
accountants combine accountingauditing and investigative

(00:28):
skills to trace illicittransactions, identify
misappropriated assets andassess the financial impact of
unlawful activities, if youlike, to find patterns and
perform deep investigativeanalysis. This might be the
career for you. Please enjoy theepisode. Welcome to the finance
leader podcast where leadershipis bigger than the numbers. I am

(00:51):
your host. Stephen McLain, thisis the podcast for developing
leaders in finance andaccounting. Please consider
following me on Twitter,Facebook, Instagram and
LinkedIn. My usernames and thelinks are in this episode's show
notes. You can also followfinance leader Academy on
LinkedIn. Thank you. This isepisode number 144, and I'll be

(01:12):
talking about the role offorensic accounting, and I will
highlight the following topics.
Number one, what is the purposeof forensic accounting? Number
two, the process of detectingfraud. And three, career
opportunities for forensicaccountants. Academic Charles

(01:33):
Scott said, creativity is great,but not in accounting. We
wrapped up the formal part ofthe summer audit series last
week. I wanted to further thediscussion this week by one more
step by talking about forensicaccounting, which is a very
specialized branch where itfocuses intensely on finding

(01:55):
financial wrongdoing. Yourinternal auditing process was
focused on validating thefinancial health of the
organization by testing controlsfor weaknesses and transactions
for accuracy. The forensicaccountant will be tasked with
finding financial anomalies todetect specific wrongdoing,

(02:16):
because often their employer isan insurance company, a
government agency or a legal oraccounting firm charged with
specifically looking forfinancial fraud or misconduct
because it may be alreadysuspected. Now, last week, did
you listen to episode 143,developing an effective audit

(02:37):
strategy to support businessobjectives? This episode
unveiled a nine step frameworkfor creating audit plans that
deliver genuine value, fromunderstanding your business
environment and conductingthorough risk assessments to
defining clear audit scopes andestablishing communication
protocols, each element workstogether to create a process

(03:01):
that leadership can trust tobecome certified as a forensic
accountant, you typically need acombination of formal education,
professional experience andspecialized certification. Most
professionals start with abachelor's degree in accounting
finance or related field,followed by earning a recognized
accounting credential, such asthe Certified Public Accountant

(03:23):
license from there pursuing aspecialized designation such as
the Certified Fraud Examinerfrom the Association of
Certified Fraud Examiners, orthe certified in financial
forensics credential from TheAmerican Institute of Certified
Public Accountants, requiresmeeting eligibility criteria

(03:43):
that include relevant workexperience in forensic
accounting or fraud examination,passing examination and
committing to continuingprofessional education. Many
employers also value additionaltraining in areas like
investigative techniques, dataanalysis and legal principles to
strengthen your expertise andcredibility in the field, a key

(04:08):
responsibility of forensicaccountants is the detection of
irregularities, to find fraudand financial discrepancies. I
think this is fascinating. Ilove to look for patterns and
special insights to help seniorleaders to make better
decisions. We just finished upfour episodes talking about the
auditing function, but this roleintrigues me. The forensic

(04:30):
accountant will be testing forirregular movements and
transactions, specifically formisconduct activity designed to
evade government oversight oroversight by any stakeholder
that has an interest in thatorganization's financial
history, like an investor, oreven how employees designed a

(04:51):
complex system of theft. This isalso why forensic accountants
are hired for litigationsupport, whether it is for.
Enforcement of contract terms orfor business partners to
determine actions taken by thebusiness leaders, or many other
scenarios. The skill set of aforensic accountant include
analytical thinking, attentionto detail, having an

(05:14):
investigative mindset,accounting and auditing
expertise, legal and regulatoryknowledge, communication and
reporting and also a high levelof ethics. Did you know that at
finance leader Academy, I offera course called advance your
finance and accounting career,developing a promotion strategy
that sets you apart. This is anon demand, self paced course

(05:37):
designed for finance andaccounting professionals, aiming
to elevate their careers towardssenior leadership roles like CFO
or even CEO. The curriculumspans six modules and 17
lessons, helping learners builda professional Foundation,
sharpen leadership potential,develop executive presence and

(05:57):
craft a concrete promotionstrategy. This course is
currently at a low price. I willbe refreshing this course in the
near future, so those of you whoalready have it, you will
already have access to the newmaterial purchase the course
now, while it is at its currentlow price, I had considered a
role in forensic accounting whenI was in the process of retiring

(06:20):
from the US Army. I was inWashington, DC at the time, and
the roles I saw were mostly inthe DC area, with the FBI, but I
was moving to Tennessee, so itwould not work out for me. I was
fascinated with the role,because I love to dig into the
data, to find patterns and tofind useful insights. I was
naturally attracted to a role inforensic accounting, but

(06:43):
unfortunately, it didn't workout with the plans that I had at
the time. Now let's talk aboutthe role of forensic accounting.
Number one, what is the purposeof forensic accounting? The
purpose is to investigate,analyze and interpret financial
information to uncover fraud,misconduct or other

(07:04):
irregularities and to provideevidence that can be used in
legal proceedings or disputeresolution. Forensic accountants
combine accounting auditing andinvestigative skills to trace
illicit transactions, identifymisappropriated assets and
assess the financial impact ofunlawful activities. Their work

(07:27):
supports litigation, regulatoryinquiries and corporate
investigations by deliveringclear, well documented findings
that stand up to legal scrutiny,ultimately helping organizations
safeguard assets, ensurecompliance and maintain trust
with stakeholders. Number two,the process of detecting fraud,

(07:51):
forensic accountants investigatefraud by applying a blend of
accounting expertise,investigative and techniques and
legal knowledge to uncoverfinancial wrongdoing. Their work
often includes the first step isreviewing financial records.
They examine accounting books,bank statements, invoices,
contracts and other financialdocuments to identify

(08:15):
irregularities, unusualtransactions or patterns that
suggest manipulation orconcealment. Next is that they
are doing tracing transactionsusing data analysis tools.
Forensic accountants follow thetrail of money through bank
accounts, shell companies andother entities to locate the
source and destination of funds.
Next is that they conductinterviews. They interview

(08:39):
employees, management and thirdparties to gather explanations
for suspicious activity, confirmdetails or identify individuals
with knowledge of fraudulentacts. Next is performing data
analytics, advanced analyticaltechniques, including trend
analysis, ratio analysis anddigital forensics help detect

(09:01):
anomalies in large volumes offinancial data. Next is
gathering and preserving of theevidence. They document their
findings meticulously tomaintain a clear audit trail and
ensure that evidence isadmissible in court or
regulatory proceedings.

(09:23):
Next is that they collaboratewith legal teams and law
enforcement forensic accountantsoften work closely with
attorneys, investigators and lawenforcement agencies to support
litigation, prepare experttestimony and assist in case
strategy, and finally, theyprepare reports and they also
testify. They produce clear,concise reports that explain

(09:45):
their investigative process,findings and conclusions, and
they may serve as expertwitnesses and trials or
arbitration hearings. Numberthree career opportunities for
forensic accountants, forensicaccountants. Accounting offers
diverse and rewarding careeropportunities across both the
public and private sectors, withdemand driven by the need to

(10:08):
combat financial crime, ensureregulatory compliance and
resolve complex disputes.
Forensic accountants can workfor public accounting firms
specializing in litigationsupport, fraud investigations
and business valuations. Theycan also work within government
agencies such as the FBI IRS orSecurities and Exchange
Commission, or in corporateroles within compliance,

(10:31):
internal audit and riskmanagement departments. Many
also serve as independentconsultants, providing expert
witness testimony, fraud riskassessments and investigative
services to law firms, insurancecompanies and nonprofit
organizations. The Field offersstrong growth potential as
financial crimes becomeincreasingly sophisticated and

(10:54):
global, making skilled forensicaccounts essential for
protecting assets, maintainingpublic trust and upholding
financial integrity. Now foraction today, have you
considered a role in forensicaccounting review your goals to
see if such a role could fitinto your long term plan? This

(11:15):
role would definitely help yourskills development and serve to
help you grow in your financeleader journey. Don't overlook
it. For sure, today I talkedabout the role of forensic
accounting, and I highlightedthe following points. Number
one, what is the purpose offorensic accounting? Number two,
the process of detecting fraud.

(11:38):
And three, career opportunitiesfor forensic accounts. Forensic
Accounting seems like such a funrole, if you like to dig into
transactions to specificallylook for patterns, for possible
criminality. It will be likepiecing together a complex
puzzle. If you love details, andpiecing together transactions

(11:58):
that seek to hide from detectionor seem odd that would lead to
financial misconduct. Look intoit. I find the role fascinating
and fun because I love data andalso I love to find a story.
This role involves both. Overthe next few weeks, I will be
sharing some bonus content hereon the podcast while I prepare

(12:20):
for the next season, which willbegin on September 16, I'm going
to talk about topics related tofinancial planning and analysis
and accounting team challenges.
Never forget that we are financeleaders. So we apply leadership
to problem solving. When we cometo an obstacle, we apply a
leadership solution to solve it.

(12:40):
I love finance leaders who candevelop a problem solving
solution calmly in the middle ofa storm. That's true. Finance
leadership. I hope you enjoyedthe finance leader podcast. You
can find this episode whereveryou listen to podcasts. If this
episode helped you today, pleaseshare with a colleague until
next time, you can check outmore resources at finance,

(13:03):
leader academy.com, and sign upfor my weekly updates so you
don't miss an episode of thepodcast, and now go lead your
team and I'll see you next time.
Thank you.