Forensic accountants are in high demand today because of the complex world of corporate budgets. They investigate financial crimes in a dynamic environment following the completion of a Master of Science degree in accounting. Most work in the areas of government, insurance, or law enforcement, though some corporate entities hire them as well.
There are several reasons why forensic accountants are necessary in the world of business and finance today. Up to 5% of revenues earned are lost because of fraud in the average year for each organization. Financial statement fraud cases make up 10% of all issues that forensic accountants find during the year. The median loss comes to a total of almost $1 million.
95% of the cases which are discovered by forensic accountants involve a perpetrator who was trying to conceal their actions.
One of the largest scandals to ever involve the forensic accounting industry involved the discovery of inappropriate financial use through Enron. Their executives were indicted on several charges, with some sentenced to prison for their conduct. Arthur Andersen was found guilty of illegally destroying documents during an SEC investigation, which voided his license to audit public companies.
These are the important statistics from the forensic accounting industry to review as you get to know this professional a little closer.
Essential Forensic Accounting Industry Statistics
#1. When an accountant earns their Certified Fraud Examiner designation, then they can earn up to $155,000 per year. Even without it, the least amount this job earns as a salary in the United states is $71,000 per year. (Maryville University)
#2. The growth of the forensic accounting industry reached $16.3 billion in 2018, reflecting a 6-year pattern of growth that averaged a 7.8% CAGR. (Maryville University)
#3. Companies which reported losses to the Association of Certified Fraud Examiners found that their average loss due to fraud was $150,000, but 23% of the cases involved a loss of at least $1 million. Over $6.3 billion in losses were reported in a 2016 survey to CFE. (Maryville University)
#4. The most common detection method used by forensic accountants to find perpetrators was through the use of tips. The most common way to disguise accounting fraud was to create, then alter physical documents that were misleading. (Maryville University)
#5. Companies which use a tip hotline to report accounting fraud are more likely to receive information that leads the forensic accountants to the perpetrators. 47% of companies with hotlines received tips that led to a successful intervention, compared to just 28% of those without. (Maryville University)
#6. 40% of the cases discovered through forensic accounting were never reported to law enforcement because there was a fear of the bad publicity that would happen when the news became public. (Maryville University)
#7. 27% of executives say that real-time insights into the accounting areas of heightened risk and internal controls are one of the most critical benefits that are available because of forensics. (KPMG)
#8. The number of businesses providing forensic accounting services in the United States has grown by 1% between 2013-2018, with employment opportunities growing by 3% over that same time. (IBIS World)
#9. The total revenues earned by the forensic accounting industry per year total $4 billion in the United States. There are currently about 20,000 people employed by this sector with about 3,500 active firms. (IBIS World)
#10. 85% of respondents to a survey on forensic accounting said that they believe this job requires a specialized set of knowledge and skills to identity fraud that traditional accountants would typically miss. (Kessler International)
#11. 75% of survey respondents say that the fast-growing nature of the forensic accounting industry makes it possible for traditional accountants to pass themselves off as a seasoned industry professional because of the overall shortages that are in place. (Kessler International)
#12. Occupational fraud can sometimes happen for several years before it is discovered, even with forensic accountants on the cast. The most common issue involved in these long-term episodes is corruption, which accounted for 27% of the total cases. Fraudulent billings account for another 24% of concerns. (Giffin Koerth)
#13. 47% of industry professionals said that the demand levels for their services increased over the past 12 months, compared to only 14% who said that they saw less work over the same period. The areas with the highest levels of growth involved shareholder disputes, family law, and contractual disputes. (AICPA)
#14. 25% of businesses across all industries report that they are hiring more CPAs and forensic accountants in the next 12 months as a way to counter potential losses to internal fraud. (AICPA)
#15. 54% of companies say that they would increase their use of outside consultants instead of using personnel in-house over the next 2-5 years as a way to counter their concerns with accounting fraud. (AICPA)
#16. Accounting fraud climbed 47% in securities class-action lawsuits in 2014 compared to the year before. There were 69 new cases filed that year, while 70% of settlements involved these cases as well. (Accounting Web)
#17. Over 25% of accounting case filings were referred to an SEC inquiry or action in 2014, which was the highest level ever tracked. (Accounting Web)
Forensic Accounting Industry Trends and Analysis
Forensic accounting is an industry which is a top candidate for the implementation of artificial intelligence. The technical side of this work allows for investigations to occur automatically instead of being done be hand – often by several hundred accountants at once. The paper trails left behind by perpetrators are now electronic as well, which means AI can shift through thousands of emails faster than humans ever could.
As the technologies behind this work continue to grow, there will be an increase in demand for the services of this industry. Preparation matters more than ever before with the forensic accounting industry, with organizations now creating mission-critical teams that can intervene quickly whenever red flags are raised by the system.
The issue with forensic accounting is that it is always a reactive industry. It must first discover the fraudulent activities which take place, then respond to them in an appropriate manner. The goal is to ensure that zero fraud takes place, of course, but those who work for this industry must always work from the assumption that someone is not behaving in an ethical, moral, or legal way.
Although AI may interfere with future job growth in some areas of this industry, there is the potential for more opportunities from a technical standpoint. Instead of finding the data to interpret, the forensic accounting industry is spending more time analyzing information that can lead to more money being saved in future years.
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