Forensic accounting firms exist in order to help identify, settle, sort, extract, record, report, and verify financial data that is in question. However, it wasn’t always this way. There was a time where forensic accounting firms did not exist. As business evolved from the beginning of time the need for financial investigations grew into what we now know to be forensic accounting. Maurice Peloubet was a New York CPA who first coined the term “forensic accounting.” Despite Peloubet coining the term, the birth of forensic accounting is credited to Frank Wilson.
Frank Wilson was a CPA for the Internal Revenue Service in the 1930’s and was asked to investigate the Al Capone case. Capone was known for a series of illegal activities and violent crimes. Despite his many crimes it was his failure to report his income tax that took him down. Capone was locked up for owing the government $251,080 from illegal profits. Capone was sentenced to 10 years in federal prison. It wasn’t up until the point in history that forensic accounting was recognized as a significant need. Forensic accounting now takes part in many criminal investigations including insurance fraud, bank fraud, embezzlement, health care fraud, money laundering, mortgage fraud, tax evasion and much more.
Forensic accountants are used in situations outside of criminal investigations as well. For example, if there are disputes between shareholders and partners over financial documents a forensic accountant can help settle the dispute. Arbitration and mediation investigations also benefit from a forensic accountant as well. Essentially, any internal investigation over finances can benefit from the assistance of a forensic accountant.