Forensic accountant

Financial statements are very important to forensic accountants because they must analyze the information given on the statements and compare that information to other sources. The balance sheet, income statement, statement of owner's equity, and statement of cash flows are the four most important financial statements that forensic accountants look at; however, they also look at business plans and disclosures in footnotes.

The balance sheet shows the financial position of a company at a given point in time. It lists the company's assets, liabilities, and owner's equity while showing the resources of the company. The income statement shows the results of the company's operations during a period of time, revenues minus expenses for a given time period ending at a specified date. The statement of owner's equity, also known as the statement of retained earnings or the equity statement, reconciles the beginning and ending retained earnings for the period, using information such as net income from the other financial statements.[6] The statement of cash flows lists the sources and uses of cash and divides them into operating, investing, and financing activities. They evaluate the company's ability to pay its bills while indicating if there is enough cash for routine operations. Some other financial documents that need to be examined include the general journal, general ledger, sales journal, purchases journal, cash receipts journal and cash disbursements journal.

Even though forensic accountants need to analyze and compare financial statements most cases of fraudulent activity will not be in plain sight. Most fraudulent activity will be hidden and manipulated to the point that forensic accountants must dig deep into the company.

Bank statements are also needed in order to investigate a company. The owner's personal bank statements are needed as well as the company's bank statements. If the company is the one who wanted the investigation to be conducted then they most likely suspect an employee. Therefore, bank statements would be needed from the individual being investigated. They will show how much cash is coming into and out of the company. They will also show where the money is going and where it is coming from, who are the clients, and if any money has been transferred to foreign accountants.

Once again, if the owner of the company was performing fraudulent activities then the discrepancies would not be in plain sight; the owner would most likely have foreign accountants with no trace to them. If evidence of a foreign account can be found then there may also be evidence on what the individual has been purchasing with that account, when it was opened, how much has been deposited, and if there is a valid reason for the individual to have a foreign account open. If the company is based overseas, then that alone is reason enough to have a foreign account. However, if it is an individual's personal account and they put the account under a different name (mother's maiden name who died 10 years ago) then there is enough reason to believe the individual is trying to hide something.

Credit statements can show evidence that bank statements may not, but once again, the evidence will not be in plain sight. Forensic accountants must look to see if there were any big purchases that do not match the individual's income, for instance, a new vehicle. Credit statements may also reveal that the individual has been taking several exotic vacations over the past few years that are outside of their means.

Forensic rating models are financial models used to represent the information known about a business and to derive an overall score, indicating a risk of financial fraud. Financial ratios are calculated from published figures, then techniques to judge the stability of a company by looking at particular ratios have been used since the 1930s.[7] An improved technique is based on discriminant analysis,[7] where these ratios are weighted by coefficients to give an overall value or Z-score.[7][8] The coefficients are chosen based on research by forensic accountants across good and bad business practices, and may vary for particular market sectors or for different models. Since Altman's 1968 publication[7] and later work such as Taffler's in 1983,[9] these Z-score models have been widely used.

In India, such models were developed in response to the Satyam scandal of 2008.[8] Models such as J-score were developed,[10] from the work of CA Mayur Joshi and published in 2011.[11] J-score is built on the presumption that it is more difficult to manipulate the cash flows than to present an inflated value for an asset, and so emphasises these.[8]

The Certified Forensic Investigation Professional program for potential investigators' knowledge and competence in professional forensic investigation skills in various subjects include:

1. Criminology & Psychology
2. Principles and Practice of Accounting
3. Computer and digital forensics
4. Fraud Auditing and Forensic Accounting
5. Criminal Investigations
6. Studies on Fraud and Corruption
7. Investigation Law
8. Investigative accounting

Certified Forensic Investigation Professionals have the following skills sets:

1. Fraud Prevention and Detection
2. Forensic Investigation
3. Criminal Investigation
4. Design and Implementation of Preventive Controls
5. Digital forensics
6. Forensic Accounting
7. Assets tracing in Divorce, Bankruptcy and Money Laundering Cases and
8. Expert witnessing

Basic Entry qualifications:

1. A bachelor's degree plus
2. 3 years experience in finance, auditing, investigation, accounting, security and law enforcement, digital forensics or cyber security or
3. High school diploma with over 5 years experience in finance, auditing, investigation, accounting, security and law enforcement, digital forensics or cyber security. Those with certifications like CPA, ACCA, CA, CFE, or equivalent professional qualification with over 8 years’ experience in auditing or investigation may become fully certified via the grandfathering process.

The CFIP credential was first put into use in 2012.

The Certified Forensic Accountant credentialing process offered by the American Board of Forensic Accounting is used to assess the knowledge and competence of Certified Public Accountants (CPAs) in professional forensic accounting services in a multitude of areas.[13]

Forensic accountants may be involved in both litigation support (providing assistance on a given case, primarily related to the calculation or estimation of economic damages and related issues) and investigative accounting (looking into illegal activities).

The CRFAC covers the broad base of forensic accounting knowledge.[14] The CRFAC credential was first put into use in 1993.[15] The American Board of Forensic Accounting offers many programs.[16] For effective learning, professionals will need expert training in the practices of forensic accounting. The American Board of Forensic Accounting offers the "Forensic Accounting Review".[17]

The Association of Certified Fraud Examiners offers the Certified Fraud Examiner (CFE) credential to members involved in fraud prevention, deterrence, detection and investigation. Candidate eligibility is based on a point system (representing a combination of formal education, professional certifications and relevant work experience) and a minimum of two years of anti-fraud professional experience. To earn the CFE credential, candidates must pass a four-part examination and abide by a code of professional ethics.

The terms forensic accounting and fraud examination are often used interchangeably, however they are not the same discipline. Forensic accounting focuses on litigation support and covers both fraud and non-fraud situations (e.g. economic damages, personal injury, family law, etc.). Fraud examination concerns itself exclusively with fraud-related matters and encompasses the prevention, deterrence, detection and investigation of fraud.

The CFE credential is recognized by partner organizations leading the global fight against fraud and including, among others, the Federal Bureau of Investigation, the Securities and Exchange Commission, the Internal Revenue Service, the Ontario Provincial Police, the City of London Police and the City of Toronto Auditor General's Office.

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The American Institute of Certified Public Accountants has a subject matter expertise credential for forensic accountants. The credential is Certified in Financial Forensics ("CFF"). "The CFF credential is granted exclusively to CPAs who demonstrate considerable expertise in forensic accounting through their knowledge, skills, and experience. The CFF encompasses fundamental and specialized forensic accounting skills that CPA practitioners apply in a variety of service areas, including: bankruptcy and insolvency; computer forensic analysis; family law; valuations; fraud prevention, detection, and response; financial statement misrepresentation; and economic damages calculations."[19]

The average salary for a forensic accountant in the US is around $74,000.00. A forensic accountant in New York could make up to $102,655.00 while a forensic accountant in Orlando usually only makes $56,071.00.[20]

Forensic accountants must be able to work independently and be able to travel at least 10-15% of the time. Some forensic accountants acting as consultants are not paid on salary and are rather contracted to do a specific task for a company. A decision is made between the organization and the accountant on what is to be paid if the job is done in a specific amount of time and the accountant is paid upon completion. These contracts can range from a few thousand to several million depending on the time taken and the specialized skills, if any, that are needed.

A Certified Valuation Analyst (CVA) is a designation issued by the National Association of Certified Valuation Analysts (NACVA) to accounting professionals who have knowledge and expertise of business valuation standards. Requirements for the CVA designation include holding an active, valid, and unrevoked CPA license or holding a business degree (i.e., in management, economics, finance, marketing, accounting, or another business field) and/or an MBA (master of business administration) or higher business degree from an accredited college or university and two years or more of full-time or equivalent experience in business valuation and related disciplines for non-CPAs. In addition to these requirements, CVA applicants must complete and pass specified training courses and exams and complete a case study or submit an actual and sanitized fair market value report, prepared during the last 12 months, for peer review.[21]

NACVA's recertification process is designed to ensure that credential holders keep up with changes in the constantly evolving valuation field and that they continue to adhere to the industry's high standards. Recertification is required every three years.[22]

CVAs are used to perform business valuations in a wide variety of instances. These can include matters related to mergers and acquisitions, buy/sell agreements, determination of damages in third-party liability matters, dissenting shareholder actions, business disputes, divorce settlements, estate and succession/exit planning, initial public offerings, partner disputes, public domain matters and fraud and arson defences that involve insurance values.

The Chartered Certified Forensic Accountant, CCFA designation is a global forensic accounting designation awarded by the International Institute of Certified Forensic Accountants, Inc. (IICFA). To be awarded with the CCFA designation, one must pass all three (3) levels of the CCFA qualifying exams and must obtain two years post qualification or professional experience with a reputable forensic accounting firm.

CCFA candidates must hold a bachelor's degree and pass all 15 papers of the CCFA Exam with an 80% pass Mark.

1.1 Principles of Forensic Accounting

1.2 Principles of Fraud Examination

1.3 Forensic Criminology & Legal Studies

1.4 Financial Crime Investigation

2.1 Computer & Digital Forensics

2.2 Criminal Investigation

2.3 Corporate Fraud & Internal Audit

2.4 Corruption & Public Sector Fraud

2.5 International Financial Reporting

2.6 Money Laundering & Terrorist Financing

3.1 Advanced Forensic Accounting

3.2 Compliance, Ethics & Governance

3.3 Ethics & Financial Forensics

3.4 International Criminal Law

3.5 Fraud Audit & Assurance

The CCFA exam is rigorous, tough and credible. It will take consistent determination to earn the CCFA credential. The CCFA credential is the global certification for truly qualified forensic accountants. CCFA's are saving government and corporations millions of dollars every day through the dint of the CCFA's skills and competence.

CCFAs are required to comply with CPE provisions of the Institute. To maintain the CCFA designation and be in good standing, 30 CPE hours per year are mandatory.[23]