Should you hire a forensic accountant?
- Gabrielle Juba
- 6 hours ago
- 10 min read
Today we're going to talk about what is forensic accounting and at what point do you maybe need to hire a forensic accountant. So, I know my niche is all about divorces, but I will say there may be times outside of a divorce that you need a forensic accountant. So, we're just going to talk broadly what is forensic accounting? What do forensic accountants do and will you do you need one at some point in the future maybe now or later? So forensic accounting it is different than regular accounting. So I am a CPA which is a certified public accountant but I am also a CFE which is a certified forensic examiner. And what that means, those are two different distinctions. And the CFE piece of what I do really trained me to look and dig into various cases of finances and look at things that try to help other people find things that might be missing. So I'll give some examples.
When people hear accountants, a lot of them think of they do taxes or people think of audits, maybe you think of bookkeeping as well, you might even think of CFOs of a company as being accountants as well. Payroll maybe comes to mind for accounting. But typically forensic accounting, a lot of questions I get is people look at me and go, "What is that?" So forensic accountants are there to step in when something is off. Whether that's your books for your business or personal life if something just seems off and we'll give a few examples here. So forensic accounting kind of crosses over a little bit into the investigative realm but we're not private investigators. Some people are both a forensic accountant and a private investigator. In my case I am not both. I am just a forensic accountant but I can work with private investigators. I can work with law enforcement and with lawyers, whatever is needed.
What the forensic accountant specifically does is takes a look at those numbers to find anything that could be missing, hidden, whatever it might be, and they can quantify that for you. So, one example that I have is in a business, if someone is stealing money from your business, a forensic accountant should be able to step in and run a bunch of tests for you. So, I'm not going to bore you with what kind of tests they run and get too specific on the example here, but a forensic accountant should be able to step in and take a look at a mix of things. Most likely bank statements, tax returns, lots of different things. They'll be able to come in and take a look at your books as well that you keep your records for accounting and they'll be able to look at that and say is there something wrong? Is there not something wrong? If something is wrong, what is the total? Like what can we quantify as being wrong? What can we quantify as being unsure if it's wrong or not? And maybe some things are completely fine.
So now, why would you need a forensic accountant to look specifically into your business if you are having issues with cash flow? Maybe all of your financial statements look good, but you have no cash in the bank, but your financial statements say you've got a ton of money. Sometimes it doesn't add up. Sometimes it does. Sometimes there's perfectly logical reasons for that. But if let's say some of your financial statements are showing that you should have a lot of money and you don't have a lot of money, but your payroll person is driving a brand new Porsche and they only make $40,000 a year. That might be an answer as to what is happening. Not that they are definitely stealing money from you, but they might be. They could be if there's not good controls put into place. A lot of times the people that are could steal money from you and do steal money are the ones that are the closest to you. They're the ones that you trust the most. You wouldn't expect that of them. And it's because they've built that trust that they can do things that other employees maybe cannot do. And that trust can allow you to be a little blindsided as well.

So, the reason why you would want something quantified like that, part of it is if you choose to prosecute with law enforcement, that number does help with thresholds if it's a local law enforcement issue, if the maybe state or federal government has to get involved because of the sheer amount of money. That is one reason why you'd want that quantified. Another reason you'd want it quantified is if you have business insurance and can file a claim to get some of your money back. That's another reason why you would want it quantified. They will need to see some kind of report with a total dollar amount of what was stolen. So, that is specific to businesses, why a business might need to hire a forensic accountant, but there's so much more than just an employee stealing money because yes, an employee could be taking cash. An employee could be maybe they're not taking cash, but they're just covering a bunch of stuff up that's wrong with the business and didn't want to talk to you about it. There are so many nuances about what that can look like. So that is where a forensic accountant can step in, take a look at a few things. A forensic accountant can also come in and maybe help you determine if there are any weaknesses in your internal controls and help design those systems to prevent fraud in the future. So there's a definitely a few different things that a forensic accountant can come in and do for your business.
As far as an individual side of things can also look like a lot of different things. So, if you are going through a divorce and you know that your ex owns a business and you guys maybe have a new truck payment, you've got a nice house, direct TV, you've got all the things, you go on vacations, but your ex's W2 says that he makes $20,000 a year, and you don't have a job. Maybe you're a stay-at-home parent, whatever it might be. That's a red flag if you're especially if you're going through a divorce and your ex-spouse is trying to say, "Well, I don't have that much money to give you. I can only give you whatever it might be a year in child support and or alimony." But, you know, that's not true because you have a truck payment and you have all these other nice things. There could be something there. So, I mean, that's a that is a pretty specific example. Don't get me wrong. Things like that happen in divorce cases and that a forensic accountant will be able to step in and help determine what is happening, how is that occurring and help quantify what marital assets are there for you guys to split in the divorce. So that's a divorce specific case, but there are many other individual cases.
The first case that I ever worked on was an elderly woman with Alzheimer's and dementia. She had about $250,000 in her bank account and a year or two later she had $0 left in her bank account. You might be wondering, well, how did that even happen? That's what her family started to wonder. She needed to be put in a home and there was no money to put her in a home with. So they of course were very perplexed and sent the sent all of her information, bank statements, you name it, credit card statements to a CPA firm. Actually they went to law enforcement first and law enforcement let them know that they couldn't make heads or tails of it and they should probably just give it to a CPA. So they brought it to the CPA firm I was working at. I worked on the case. It turned out to be her daughter that had taken all of her money by forging her signature on checks, by making large cash withdrawals, by taking her friends out for extravagant lunches, going on shopping sprees, you name it. So, while she was not able to recover the money because the money was spent, what I was able to do was quantify the loss, law enforcement was able to get involved again and try to bring justice for this woman who lost all of her money.
So that is also a very very specific example, but that is an example of some of the things that we don't think about that you might need a forensic accountant for to be specific. So law enforcement can help. Law enforcement does have some training in various financial crimes, but I will say that's not everybody's cup of tea. So, just because someone is law enforcement or is a detective doesn't mean they're a numbers money person. Same thing what I found at the CPA firm I was working for. Just because we're all money people working at the CPA firm, we're a bunch of accountants and CPAs, that does not mean we all have the mind to do forensic accounting, which involves some of that investigative work. So, there is that bridge between the two. Accountants and or CPAs versus a forensic accountant are two different things.

What I would recommend to you if you think you have a case, if something seems weird or off, whether that's business, divorce, other personal cases, whatever it might be, if you have a gut feeling that something is wrong, try to find a forensic accountant. Maybe they'll offer a small consultation for you even if they don't take the full case on whatever it might be because they are different than regular accountants. Your regular accountants, some of them CPAs and accountants might be able to help you but most of them are going to have no idea what they're doing and they might miss something that a forensic accountant is trained to look for. So, I high I cannot recommend enough if you find yourself in one of these situations that I mentioned or something completely different that still might need a forensic accountant, please reach out to a forensic accountant and not just a generic CPA because the forensic accountants are trained to look for things. They're trained to look for patterns, trace assets, you name it. Write the right reports that you're going to need for lawyers and insurance and law enforcement. That is the training that a CFE goes through. That's the testing that a CFE goes through.
I wanted to really highlight there that there is a difference between an accountant and a CPA versus a forensic accountant. Same thing, a forensic accountant is not the same as a private investigator or law enforcement, detective, things like that. They're all different. They do different things and you might need a whole group of people to help support you in whatever it is that you're going through. So, the last bucket I have on here, we're going to keep it short this week, is should you hire a forensic accountant or can you figure it out yourself? Can you just go with a your CPA that does your taxes? I would say if you think something is wrong, whether you can prove it or not, maybe you can prove it and you could say, "Oh, I know that this employee stole $5,000." I would still bring that to a forensic accountant because even if you can prove that that employee stole $5,000 from you, there may be things that you have missed. There may be pieces of proof that you're missing that a forensic accountant will know to look for.
So, even if you think you've solved the case, please take it to a forensic accountant anyway and let them just double check behind you to make sure you did not miss something and they can add in any needed information that might be needed to your packet of whatever it is that you have. Same thing should you hire one, maybe you can't, maybe you just think something's wrong, but you can't actually prove it. I would talk to a forensic accountant as well in that situation because a forensic accountant can help you try to get to the bottom of is something wrong or is not or is there not anything wrong. They really can make a difference. Now, will you get your money back? Depends on the situation. Depends on who took the money, what they did with it. If they spent it on a bunch of vacations, you're not going to get that money back. But if they bought a bunch of assets or for some reason they took the money and just put it in a savings account, good chance if we can quantify your loss, then we can hopefully get your money back depending on where it went. But I will say that that is not the norm. Most of the time, people that are stealing money for whatever reason, they are just spending it. Lifestyle misalignment, they're just spending that money. Maybe they're into gambling, whatever it might be.
Just know you won't always get your money back, but a forensic accountant is worth the time, money, and effort to quantify that loss and help you prevent whatever it is that happened to you this time, prevent it from happening again next time to you. So, hopefully that maybe gave some clarification about what a forensic accountant is, what they do, some of the cases that they might work on, and if you should or should not hire a forensic accountant. For me, if I have an inkling of a feeling that something's wrong, I would talk to a forensic accountant is the line that I have in the sand. Not that you need to hire them and spend $50,000 with a forensic accountant. If you're only a little unsure if something's wrong, but you at least can talk to one and see what they say, see if it's worth the time, money, and effort. So, forensic accountants, I am one. We have a very specific job and a very specific niche and I highly recommend if you think you need one in the future, reach out to a forensic accountant. We can really help and maybe make a difference in whatever it is that you're going through. All right, so that's all I have for today. Stay tuned for next week.
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