Forensic Accounting in Criminal Court: What CPAs Need to Know

When financial crimes make their way into the courtroom, forensic accountants often take center stage. In criminal matters, a forensic accountant’s job is to explain the truth hidden in ledgers, bank statements and digital transactions. Understanding how forensic accounting operates in criminal court can open new career paths for CPAs and strengthen their advisory role.

The Role of Forensic Accountants in Criminal Cases

CPAs by default are considered to have expertise in reviewing and analyzing finan­cial records. Because of this skillset, they are often asked by attorneys to help their clients when there are allegations of fraud, embezzlement, tax evasion and money laundering. Unlike traditional accounting, which focuses on compliance and reporting, forensic work is investigative and adversarial. A good forensic accountant understands that an analysis of criminal activity is different than a civil proceeding.

CPAs acting as forensic accountants can be hired as litigation consultants or expert witnesses. Litigation consultants work as part of the defense team trying to weigh the government’s evidence and any possible defenses to the government’s assertions. An expert witness is an independent party who has an opinion on a set of facts. In this article, the assumption is that the CPA is hired by the defense team for litigation support.

When CPAs are hired to be part of the defense team to review financial records in criminal matters, there are four main areas that they must consider:                                         

• Burden of proof: In most consulting engagements, the CPA will be tasked with reviewing the government’s documents to ensure that the government has met their burden of proof, which is beyond a reasonable doubt. In most criminal cases, not every transaction will be scrutinized because there are more transactions than what the government is scrutinizing. Beyond a trial, at the sentencing phase (at least in federal court), the burden of proof becomes preponderance of the evidence, which is lower than reasonable doubt.
• Assumptions by the government: Because there is typically a multitude of transactions to review and analyze, the government will make assumptions in their analysis, including whether the transaction should be counted toward the case as part of the criminal intent. However, those assumptions must be consistent with case law. For example, can the government assume that all cash deposits into a checking account are from criminal proceeds? A good forensic accountant assisting their client in a criminal matter understands the underlying assumptions and any possible defenses. Accuracy is very important. Every calculation and conclusion must withstand scrutiny from opposing counsel, the judge and possibly the jury when the defense makes its argument. Clear workpapers and the ability to trace those transactions to source documents is vital.
• Different audience: While assisting in a criminal matter, the CPA must also understand his or her audience. There are three different audiences in a crimi­nal courtroom: the attorneys, the judge and the jury. A good forensic accountant understands each party’s role and can simplify their analysis for each party to understand. Hardly anyone in that courtroom will have a formal education in accounting, so the forensic accountant must be able to simplify how they are measuring, analyzing and summarizing financial transactions. All parties must be able to follow the CPA’s logic that the defense counsel will use in court.
• High-pressure stakes: When a CPA is part of the defense team, they may be asked to assist in providing expertise in negotiations with the prosecution. Many times, I am either creating a document that articulates my position, or I am directly speaking with the prosecution as part of the defense team’s negotiations. These negotiations are not for the faint of heart because it can be intense, with both sides having their own priorities. Many times, the CPA will be dealing with the prosecution team that will have unlimited resources to put investigators and attorneys on the case and in the room. CPAs must remain calm, objective and precise under pressure.

Forensic accounting in criminal court is where numbers meet the law. For CPAs, understanding this intersection not only broadens professional horizons but also reinforces the value they bring to clients and the justice system. For those who are ready for a challenge that combines techni­cal skill with investigative insight, forensic accounting may be the next step.