19 Oct Welcome to 21st Century Forensic Accounting
Forensic accountants are engaged for a wide variety of assignments, among them investigating fraud, auditing internal controls and quantifying damages associated with legal disputes. All of these require attention to detail and a diverse set of skills including mathematical, technological, legal, and investigative. But the accounting landscape and client needs are constantly changing. Here is how the profession has adapted to digitization in the 21st century and how it is applying the latest technological solutions.
Embracing the Digital Revolution
Technology has radically changed how forensic accountants do their jobs. Businesses used to be awash in paper. Today, most companies run digitally and discourage employees from printing to save money and reduce environmental damage. Consequently, forensic accountants must be able to gather, analyze, and make sense of vast amounts of electronic data.
In addition to processing company data to, for example, calculate financial ratios, build spreadsheets, and determine legal damages, many experts routinely attempt to recover data that perpetrators have deliberately deleted. During an investigation, a forensic accountant might:
- Search for and piece together deleted files
- Analyze suspicious user activity on company servers
- Identify relevant electronic files within a company’s network
- View suspected perpetrators’ social media accounts
Newer developments, such as cloud-based storage solutions and a shift from working in offices to working remotely, mean that forensic accountants now must look outside the traditional confines of a company’s information technology perimeter.
Glimpse of the Future
As for the future, artificial intelligence (AI) increasingly looks like it will play a significant role. Most forensic accountants must harness vast amounts of electronic data to do their jobs. Expenses associated with a forensic investigation can quickly add up.
AI and machine learning enable forensic accountants to continue to deliver cost-effective services. These tools allow experts to analyze large data sets faster and can even ‘make decisions’ such as determine what constitutes a suspicious invoice and flag those records. Or AI might review a set of contracts, seeking certain words or features that suggest higher risk. In general, the more records an AI system reviews over time, the more it ‘learns’ and the higher its accuracy rate.
Other technologies predicted to play a greater role in forensic accounting in the future include predictive analytics, blockchain, robotics, and bots. But whatever tools forensic accountants use, the underlying issues — fraud and legal disputes — remain basically the same. If you or your business is facing these issues, contact us.