How to Hire the Right Forensic Accountant

A forensic accountant is a financial professional with accounting, auditing, and investigative skills who analyzes financial information for legal proceedings. Unlike traditional accountants, whose primary focus is on financial statement preparation and regulatory compliance, forensic accountants examine financial data for irregularities, discrepancies, and evidence of misconduct. Their expertise is valuable in financial disputes, suspected fraud, or complex financial analysis for legal matters.

Identifying Your Specific Needs

To determine if a forensic accountant is right for your situation, first understand the nature of your financial issue.

Suspected Fraud

Forensic accountants are often engaged in cases of suspected fraud, such as embezzlement or asset misappropriation. They analyze financial records to identify illicit activities, trace funds, and uncover hidden transactions.

Family Law

In family law, especially divorce proceedings, forensic accountants assist with asset tracing and valuation. They identify hidden assets, undisclosed income, and assess the true value of businesses or properties to ensure equitable division of marital assets and fair support calculations.

Business Disputes and Insurance Claims

For business disputes, including shareholder disagreements or breach of contract claims, forensic accountants calculate economic damages or assess financial losses. They analyze records to quantify the dispute’s impact. In insurance claims, they evaluate financial records to determine the legitimacy and extent of losses, ensuring claims are accurate.

Litigation Support

Forensic accountants also provide litigation support, acting as expert witnesses to present complex financial information to judges and juries. They assist with pre-case analysis, evidence collection, and developing litigation strategies by interpreting financial data.

Key Qualifications and Expertise

When selecting a forensic accountant, consider their qualifications and expertise.

Credentials

A Certified Public Accountant (CPA) license is a foundational credential, indicating a comprehensive understanding of accounting principles. Many forensic accountants also hold specialized certifications:
The Certified Fraud Examiner (CFE) designation, awarded by the Association of Certified Fraud Examiners (ACFE), indicates proficiency in fraud prevention, detection, and investigation.
Accredited in Business Valuation (ABV) is useful when the case involves valuing businesses.
The Certified in Financial Forensics (CFF) credential, offered by the American Institute of Certified Public Accountants (AICPA), highlights expertise in applying accounting principles to legal matters, covering areas like financial statement misrepresentation, dispute resolution, damages calculations, and bankruptcy.

Experience and Skills

Experience in a specific industry can provide a deeper understanding of industry-specific financial practices. Legal experience, particularly in providing expert witness testimony or litigation support, is also valuable, demonstrating the accountant’s ability to present findings effectively in court. Beyond credentials, a strong analytical mindset, meticulous attention to detail, and excellent communication skills are essential for a forensic accountant to convey their findings clearly.

The Search and Selection Process

To find a qualified forensic accountant, explore several avenues.

Finding Candidates

Seek referrals from attorneys, other financial professionals, or trusted business advisors. Professional organizations are also valuable resources.
The American Institute of Certified Public Accountants (AICPA) offers a Forensic and Valuation Services Center with a directory of professionals holding certifications like the CFF.
The Association of Certified Fraud Examiners (ACFE) maintains a directory of Certified Fraud Examiners (CFEs).
Online directories and professional networking sites may also list forensic accountants.

Initial Consultations

Prepare a brief overview of your situation for initial inquiries. During consultations, ask specific questions to assess their experience, approach, and fee structure. Inquire about:
Their experience with similar cases.
Their investigative methodology.
How they plan to address your financial concerns.

Fees and References

Discuss their fee structure, which may include hourly rates (typically $300 to $600), fixed fees, or retainers. Clarify what is included and any potential additional costs, such as expert testimony. Check references from past clients or legal counsel to gain insight into their professionalism and effectiveness.

Engaging Their Services

After selecting a forensic accountant, formalize the engagement with a comprehensive engagement letter.

Engagement Letter

This letter serves as a contract outlining the terms and conditions, ensuring both parties understand the scope of work. It should detail the investigation’s objectives, services to be performed, and any limitations. The letter specifies the agreed-upon fee structure (hourly, fixed, or retainer) and payment terms. It also includes confidentiality clauses to protect sensitive financial information and outlines deliverables.

Providing Documents

To begin the investigation, provide the forensic accountant with financial and non-financial documents. These include financial statements, bank records, credit card statements, tax returns, contracts, and communication records. The accountant relies on the accuracy and completeness of this information.

Communication

Establish clear communication channels from the outset. Set expectations for progress updates and how findings will be communicated. The forensic accountant will analyze collected data to identify patterns or anomalies and prepare detailed reports.