Why Forensic Accounting is Important in the Interconnected World
Accountants are able to get an intimate look at a company's books. When an accountant is tasked with auditing the books or doing a company's taxes, the accountant is often able to uncover accounting fraud.
But the field has since moved in a new direction.
There was a time when an external audit was a specialized area of the field, where evidence was gathered and an assessment of financial statements were made. The widespread corporations of today require a lot more diligence than corporations in the past.
Worldwide corporations today sell items in every country.
The world is connected, meaning different accounting approaches need to be implemented across a corporation. It's a tedious task for accountants, and it allows for fraud to occur. Complexity grows as a business grows, and financial crimes may even go undetected in many circumstances.
What is Forensic Accounting?
Forensic accounting's demand is higher than ever before. Fraudulent activities are on the rise, and the complexity behind the fraud requires a specialized skillset to unravel. White-collar crimes have spurred a demand in forensic accounting.
These accountants are hired by financial institutes, credit card companies and large corporations.
Forensic accountants are also seen in the public sector, working with law enforcement agencies to help detect financial crimes.
The difference between a mainstream accountant and one that focuses on forensic accounting is that the forensic accountant:
- Analyzes financial information
- Evaluates financial information
- Develops intelligence
These accountants are involved in cases that involve:
- Money laundering
- Illegal activity
A forensic accountant will help resolve court disputes by analyzing and extracting information from a company's accounting records and books. The role of a forensic accountant also involves their ability to clearly communicate financial information to their superiors and judges when involved in a trial.
These professionals may also be hired by corporations that want a trained professional to control their finances and ensure that no crime has occurred in the organization. Large corporations will have accountants on staff to help detect:
- Money laundering
- Misappropriation of funds
A growing problem includes the funding of terrorism through fund misappropriation and money laundering.
Interconnectivity in today's business world requires these highly skilled professionals to provide investigations across borders and increases the time it takes for investigations to be completed. Cultural difficulties and regulatory differences within countries requires the forensic accountant to communicate differences, address cultural concerns and even linguistic concerns.
Rapid changes and expansion of businesses have led to the necessity of accountants having to be digitally savvy.
These professionals will need to interpret large data sets in the big data world. Data analysis is becoming a fast requirement due to the vast volume of data available. Tech savvy criminals are, more than ever before, turning to technology to help cover up their fraudulent activities.
Singapore's White-Collar Crimes and Forensic Accounting
Singapore, a global financial center, remains vigilant against crime, and has introduced the world's first financial forensic accounting qualification in Southeast Asia. The Institute of Singapore Chartered Accountants announced in September 2017 the ISCA Financial Forensic Accounting Qualification (FFA).
The application for the qualification is available from March 2018 onward.
The ISCA states that Singapore has 1,000 forensic professionals working across a variety of sectors, including:
- Law enforcement
- Public and private sectors
- Monetary Authority of Singapore
ISCA's qualification for forensic accounting professionals focuses on four main areas:
- Accounting methodology and investigation approaches
- Digital forensics
- Financial crime compliance and investigation
- Practical workshops
Response to white-collar crimes as well as data analytic and cyber response will also be part of the certification. Banking and financial center investigation will be a part of the certification, too.
Singapore has a statutory requirement that extends to all professional accountants. Accountants are required to report any suspicious transactions to the Suspicious Transaction Reporting Office (STRO).
The STRO is part of the Commercial Affairs Department of the Singapore Police Force.
Accountants in Singapore face the serious threat of criminal liability for not complying with reporting requirements. The STRO is crucial of accountants that know or suspect money laundering or potential terrorist financing and do not report the incident.
Fines and jail sentences are possible when non-compliance is proven.
Accountants may also be removed from the professional registrar if it's found that they failed to report to the STRO.
Forensic accountants are, now more than even before, an important part of keeping Singapore safe from terrorism. The country is facing an extreme threat of terrorism, which remains at its highest level in recent years.
Singapore has been targeted in the past, with accountants contributing to the safety of the country by uncovering money laundering and the funding of terrorism.
A report from 2016, titled "Mutual Evaluation Report," was issued by the FATF. The report recommended the strengthening of many service-related businesses through the use of accounting. A focus was put on legal firms, corporate service providers and accounting firms, which are often involved in money laundering as outlets that help form shell companies.
The report claims that accountants working for these service providers need to take the appropriate measures and due diligence to curb fraud.
The International Federation of Accountants (IFAC) also released a report in February 2017 that linked professional accountant roles to combating corruption. The report found that accountants, working alongside stakeholders and other professionals, helped produce favorable scores for the global measure of corruption.
Singapore remains one of the world's lowest countries for corruption. The Transparency International report, released in 2016, ranked Singapore as the 7th-lowest country in terms of corruption.
Professional accountants are cited as a main reason for the country's low corruption figures, with ISCA members rising by 7,000 since 2012 from 25,000 to 30,000+.
Forensic accounting's popularity and necessity is expected to continue to rise as white-collar crimes become more sophisticated and common. Accountants will also look to deepen their skillset and become certified in forensic accounting to better help their careers and lower the risk of fraud within their employers.
The reputation of Singapore as a country that aims to lower corruption depends on the country's accountants to detect and combat fraud within multi-national countries.