Understanding the Components of Forensic Accounting

School: Colorado State University, Global Campus - Course: ACT 465 - Subject: Accounting

Components of Forensic Accounting Student Colorado State University Global ACT465:Forensic Accounting and Business Valuation Professor January 22, 20231

2 Components of Forensic Accounting At one time, from an accounting perspective, forensic accounting was not seen as a separate role from auditing. The evolution of forensic accounting developed over decades as the function of auditing and fraud detection began to separate into two distinct practices. From this separation, forensic accounting was formed, as the expertise needed to combat fraud became investigative in nature and combined with much-needed litigation services. Forensic accountants offer a broad scope of services and must have the necessary skills to develop data and viewpoints for presentation to the courts. The Three Layers According to Crumbley et al. (2017), the qualifications needed for a forensic accountant should support each other and work together, similar to the design of a three-layer wedding cake. At the bottom, which is the largest and strongest layer, is a background in accounting knowledge and procedures.The middle layer, still strong but slightly smaller, represents the knowledge that a forensic accountant needs to have in the areas of risk assessment and control, auditing, and fraud detection. The smallest layer, at the highest level of the cake, symbolizes the grasp of basic knowledge that a forensic accountant should have in a legal environment. According to Crumbley & Apostolou (2002), forensic accountants are frequently used by prosecutors, by defense lawyers for civil and criminal cases, and as expert witnesses. As such, they must be familiar with the legal framework of businesses. Like most cakes, there is also a layer of icing. This represents the oral and written communication skills, inquisitive mind, and attention to detail that are crucial to the forensic accounting field at every layer of the cake. Education

3 The knowledge base for forensic accounting is not limited to the accounting field. A forensic accountant must have knowledge of accounting, law, investigative auditing techniques, and criminology (Crumbley et al., 2017). The understanding of these areas is overlaid by the need for computer knowledge. Professional organizations and universities have formally incorporated certification and training programs that are recognized for both forensic and fraud accountants. There is an ever-growing need for the services of forensic accountants in the business setting today and this has highlighted the need for the development and expansion of education (Alshurafat et al., 2020).Max Lourie suggested the inclusion of forensic accounting courses in universities as early as 1953 (Crumbley et al., 2017). He also noted that programs should be developed in combination with law schools where viable. The growth of forensic curriculum and courses and programs offered by universities has grown over the years, due in big part to highly publicized scandals, such as Enron.