Forensic accounting may be a type of accounting not well known by many people.
Long time Jackson forensic accountant Glover (Russ) Russell explains, “Generally forensic accountants go into applying accounting and financial concepts, rules and certain techniques to determine and verify alleged allegations or improprieties.”
Clients can be any number of individuals and businesses, which may be banks, government entities and just about any business that has cash or assets passing through and has a reason to believe there's some impropriety.
“The difference in this type of accounting and an audit is that it's not the primary objective of an audit to detect fraud, but an auditor will disclose it if he finds it,” Russell says. “It's common in divorces to hire forensic accountants — I do a lot of them, and now estates, trusts and abuses in powers of attorney. Someone is trying to determine where the assets or revenue has gone.”
Russell, who has a law degree and a master's in tax law in addition to an accounting degree, observes that the use of forensic accounting has increased in the past 10 years.
“I think it's because people want money and are more materialistic; money means more to people now and a lot get into financial binds,” he said. “It may start small or maybe they think it's something they're entitled to, but it catches up.
“There have always been abuses in businesses, but now we're seeing more in the probate area and power of attorney.”
Today's technology is making forensic accounting more difficult, he says.
“In addition to just financial statements, now there's all the digitization,” he said. “The flexibility of the internet has aided someone who wants to engage in wrongdoing, and tracing it is harder. There are so many categories of transactions; it can be 50 pages.”
Because he sees the use of forensic accounting growing along with the use of technology, Russell says the field is an excellent one for young people.
“With all that's coming about, young people are more adept in technology and I don't see this field going away. It's a good area of accounting; there's plenty of opportunity. It's a broad area, that's why it's so interesting,” he said. “Whatever someone's imagination comes up with regarding money, they'll try it. For us, finding the fraud is a challenge, sort of like putting a puzzle together.”
There are continuing professional education courses available to accountants interested in forensics.
“There are options for additional training. Then an accountant can get certified through the American Institute for CPAs,” Russell said. “In 2020, the AICPA came out with the first standards of forensic accounting. Through this national regulatory agency, an accountant can get certified and evaluated.”
Forensic accountants sometimes testify in court.
“Sometimes we're called by a lawyer or a company's accountant if it looks like a case will go to litigation,” Russell said. “We come in and get financial statements to track and trace the area where they think there may be an issue, generally it's specific. We take the findings to the clients and can serve as an expert witness in court.”
This forensic accountant says the practice is very methodical and the practitioner needs that mindset to work through the process.