Forensic accountancy is increasingly featured in the business press as organisations large and small use the skills of these expert auditors to investigate financial irregularities and crimes. Organisations from multinational banks to football clubs employ forensic accountants to investigate whether an individual or a group has perpetrated any illegal financial acts. Forensic accountants are employed by governmental organisations or work for private forensic accountancy and public accountancy firms. The field of forensic accountancy has developed over the years since the profession was first founded. Here we look at how long forensic accountancy has been in existence, and what the profession encompasses today.
Origins of Forensic Accountancy
In the US, forensic accountancy began to develop in the early 19th century as the US economy began to boom and US companies started to do business across the country in many different states, as opposed to keeping a local practice. In the UK, forensic accountancy developed a little later but was concerned with the same issues – as businesses expanded, they were able to hide details about their sales and incomes by using different accounts at banks and different locations for their banking. In the US, when companies started using banks in different states to hide assets the US Department of Justice designed a unit to specialize in these cross-state transactions that had an impact on the economy and other businesses.
Forensic Accountancy in the US
A forensic accountancy department was established in the FBI under J. Edgar Hoover, which was instrumental in investigating individuals that were suspected of taking part in illegal financial acts. In the 1950s and the 1960s, forensic accountants at the FBI focused on tax evasion that was costing the country millions of dollars in lost revenue. In the 1980s, the focus turned to white collar crime where executives were allegedly profiting from drugs and other illegal financial trades. Today, forensic accountancy in the US is often focused on the prevention of terrorism as forensic accountants investigate where terrorist organisations get the money they use to fund their illegal activities.
Business Issues Facing Forensic Accountants Today
We took a closer look at websites such as www.frenkels.com to find out about the issues facing forensic accountants today, both in the US and the UK. For a start, the increased use of electronic banking and techniques for moving money without having to have a paper trail makes it much more difficult for forensic accountants to get to the bottom of how a fraud was committed. Files are encrypted and easily destroyed, and forensic accountants must have the knowledge of a hacker or must be able to outsource work to such a “professional”. The challenges faced by forensic accountants today include the expectations of clients that a forensic accountant will be able to solve a white collar crime in an excessively short period of time – the reality is that a fraud case is complicated and it will always take a considerable amount of time to solve.