Forensic accounting has evolved from inquiries into insolvency cases to investigating fraud and financial irregularities conducted to identify various malpractices, including the so-called “cooking the books”, inflating companies’ revenues, and falsifying profits by misusing accounting methodology.
Nowadays forensic accounting also covers litigation support services in the event of disputes among company shareholders, according to Keith Lee, associate director, forensic accounting, at Deloitte China. “We carry out analyses to help companies assess losses, quantify the quantum and advise on other related matters.”
A growing number of CPAs, who excel in leveraging their professional accounting knowledge, coupled with higher-order analysis skills and critical thinking, have diversified into forensic accounting. Their expertise is in strong demand. “Many corporations, such as banks, have adopted a proactive approach to addressing issues such as money laundering,” Lee says.
“They seek assistance from forensic accountants in looking at their existing policies in such areas as internal compliance to identify loopholes and formulate remedies. Rapid technological developments have also prompted companies to actively conduct research and seek advice from forensic accountants. For instance, companies will enlist our help in looking at any deficiency in their control environments, identify the potential risks and implement risk-mitigating procedures.”
With a detective’s mind required, individuals who are inquisitive, curious and sceptical are likely to perform well in forensic accounting.
“They also should have good common sense and an attention to detail because we always examine in depth transactions under investigation and sometimes the small details, like dates and rounded off figures, are actually the keys to cracking a case,” he adds.
The best way for CPAs to successfully diversify into forensic accounting is through case practice, Lee believes. “Each individual case is unique and forensic accounting features up to six broad categories. Young CPAs can get involved in cases in each of these categories to familiarise themselves with them and accumulate the relevant experience. Meanwhile, specialised targeted continuing professional education is also essential in sharpening and enriching one’s skill sets.”