Forensic Accounting: Skills, Roles, and Courtroom Cases

Introduction to Forensic Accounting

Forensic accounting is a specialized subsection of accounting that goes beyond the typical job description of an accountant. Forensic accountants use their work in courtroom and other legal settings to provide support. Their primary roles are litigation support and investigative accounting (Zysman, 2012). To fulfill these roles, forensic accountants combine accounting, auditing, and investigative skills. However, conducting investigations is only one component of a forensic accountant's job description; they must also be capable of translating their findings into understandable evidence for the courtroom. In order to do this, forensic accountants are trained to look beyond the numbers and deal with the business reality of the situation (Zysman, 2012).

Forensic accountants may perform a variety of different functions, including forensic investigations, forensic audits, internal audits, and external audits. A forensic investigation is any investigation aimed at producing evidence for the courtroom. A forensic audit is an audit conducted specifically to provide evidence for the courtroom. An internal audit is an audit performed by an employee to determine whether a company is following its own operating procedures. An external audit is an audit performed by someone outside the company.

Forensic accountants have a wide range of job requirements and therefore need a broad set of skills. They must be able to analyze, interpret, and summarize financial information—information that is often not only complex, but may also have been altered or otherwise used to conceal illegal activity. In addition to understanding this complex financial information, forensic accountants must also be able to present it in an understandable manner. Depending on which aspect of the job a forensic accountant is performing at any given time, different skills may be required.

Five Critical Skills for Forensic Accountants

This leads to some disagreement about which skills are most critical for a forensic accountant. However, in 2009, Davis et al. conducted a survey of attorneys, accountants, and accounting/auditing professors and asked them to identify the skills they considered most critical for forensic accountants. Not surprisingly, each group named different skills as most important, but they agreed that certain skills—such as analytical ability—were critical to the job. The top five skills discussed in this paper have been drawn from the top picks of each professional group, with emphasis on those skills selected by multiple groups (Davis et al., 2009).

After reviewing the responses from the various professional groups and the reasons given for their answers, five skills emerge as most important for the forensic accountant: analytical ability, attention to detail, ethical conduct, oral communication ability, and the ability to identify key issues.

Analytical ability is paramount because, without it, the other characteristics of a forensic accountant cannot be effectively utilized. Forensic accountants must be able to examine evidence and make sound deductions based on that evidence. Attention to detail is equally essential; accounting work is almost useless if it does not contain all of the necessary information. Accountants must be able to pay close attention to detail and to recognize when details have been overlooked or omitted.

It may not seem obvious that ethics falls into the category of a skill, but professional ethics represent a competency that professionals must actively develop. Ethics are distinct from personal morality, and accountants, like other professionals, operate under an ethical code. Adhering to that code is a critical skill set. One of the most vital skills for forensic accountants is the ability to identify key issues—specifically, the capacity to see the larger picture within a mass of small numbers. This is particularly important in fraud cases, where the movement of money may occur in smaller amounts that are easy to overlook. The forensic accountant must be able to follow the money trail and identify the central issues in a case.

Finally, none of these skills are of any use if the forensic accountant cannot communicate results effectively to the lawyers with whom they work or to the courtroom itself, which is why strong oral communication skills are critical. Notably, accountants in the Davis et al. survey did not recognize the importance of oral communication skills, while both lawyers and professors believed that communication ability was even more important than auditing proficiency (Davis et al., 2009).

The Role of the Forensic Accountant in the Courtroom

A forensic accountant may appear in court for several different reasons. Forensic accountants can be called in almost any type of lawsuit, but they are most commonly used in matters involving: valuations; personal injury and wrongful death calculations; economic damage calculations; bankruptcy, insolvency, and reorganization; family law; financial statement misrepresentation; computer-forensic analysis; and fraud detection and analysis (Acuff et al., 2011).

In the courtroom, the forensic accountant serves as an expert witness. The analysis, auditing, accounting, and other practical work have all been carried out outside the courtroom. To understand what has happened and develop evidence, the forensic accountant approaches a financial situation much as a detective works to solve a mystery: looking for clues, interviewing witnesses, and obtaining and analyzing evidence. He or she combs through all available material, searching for anomalies and inconsistencies around a common thread that might explain the entire picture (Tucker, 2011).

Once in the courtroom, the forensic accountant's role is to act as a witness. The accountant answers questions posed by counsel, explains facts, and draws on background knowledge and familiarity with the evidence to respond to questions from opposing counsel. Sometimes a forensic accountant may be presented with a hypothetical scenario and asked to deliver an expert opinion. In such instances, the accountant must resist offering opinions on matters they have not had sufficient time to study, and must honestly reply that they would need time to review the information before forming an opinion. Finally, the forensic accountant must establish their credentials as an expert for the court, including not only educational background but also any relevant prior experience. If the forensic accountant cannot establish expert status, any evidence they present may be deemed inadmissible.

Conclusion

Indeed, the use of forensic accountants in complex litigation has expanded dramatically over the past two decades. In recognition of this growth, in 2008 the American Institute of Certified Public Accountants introduced a new credential that CPAs can earn: Certified in Financial Forensics (CFF). Already more than 4,300 individuals have qualified for the CFF credential (Tucker, 2011).