What is Financial Criminal Investigation in Accounting and How It Works

How Forensic Experts Find the Truth

If you’ve ever looked at a set of books and thought, “This doesn’t feel right,” you already understand the problem that financial criminal investigation accounting solves. It takes messy suspicions, scattered records, and half-answers, then turns them into a fact-based story that can stand up to scrutiny.

This work shows up when money is missing, records look altered, or payments don’t match what the business actually received. Business owners, attorneys, boards, regulators, and insurers rely on it because they need more than opinions. They need proof.

In this post, you’ll learn:

• What financial criminal investigation accounting is (in plain English)

• How investigators follow funds and document evidence

• What a real investigation process looks like from start to finish

• When it’s time to bring in a forensic accountant, and what to expect
  

What makes it “criminal” versus a civil dispute

The word “criminal” usually comes down to intent and deception.

A civil dispute often centers on disagreements, broken promises, or sloppy performance. A criminal matter typically involves willful conduct, concealment, falsified records, or misuse of authority. It’s the difference between an error and a plan.

Financial criminal investigation accounting doesn’t replace law enforcement. Accountants don’t arrest people, file charges, or decide guilt. Their role is to collect, analyze, and present financial evidence so decision-makers can determine next steps.

Many cases start as internal concerns. A late reconciliation, a vendor cost spike, or a missing deposit can look like a process issue. Once patterns show repeated concealment or personal gain, the matter can shift from internal discipline to a criminal referral.

Key skills and tools investigators use to follow the money

A strong investigation blends accounting discipline with investigative thinking. The work often looks simple from the outside, but it demands careful testing and clean documentation.

Core techniques include:

• Transaction testing: Sampling and testing payments, receipts, approvals, and supporting documents.

• General ledger tracing: Tying ledger entries back to source documents, then forward to bank activity.

• Bank deposit and cash analysis: Reconciling deposits, identifying missing receipts, reviewing cash withdrawals.

• Invoice and vendor review: Looking for duplicates, fake vendors, PO box addresses, or shared addresses.

• Lifestyle and spending red flags: Comparing known income to visible spending patterns (used carefully and ethically).

• Link analysis: Mapping connections between people, vendors, accounts, and approvals.

• Basic digital evidence handling: Preserving files, exports, and logs so they remain reliable later.

Investigators also interview witnesses, document statements, and keep a skeptical mindset. Skepticism here doesn’t mean distrust of everyone. It means verifying claims with records.

Main work products often include:

• Timelines of key events

• Flow-of-funds schedules (where money came from and where it went)

• Clear exhibits that tie conclusions to documents



• Plain-language summaries for non-accountants

How a financial criminal investigation accounting case works, step by step

A good process protects evidence and prevents rework. It also reduces the risk of tipping off the wrong person too early.

A typical case follows these steps:

• Intake and scoping (what’s alleged and what systems matter)

• Record preservation and secure collection

• Transaction analysis and tracing

• Interviews tied to key facts

• Loss measurement and control gap review

• Written reporting and support for next steps

Start with the allegation, the risk, and the key questions

The first job is to turn a concern into testable questions. “We think someone is stealing” is not a plan. “Which accounts, which period, and which access points?” is a plan.

Intake usually covers:

• What happened (as far as anyone knows today)

• When the issues first appeared

• Who had access and who approved activity

• Which systems were involved (banking, accounting, payroll, AP)

Scoping also matters because time and cost can expand fast if nobody draws boundaries. A simple way to think about it is materiality in plain terms: “How big could this be, and how much certainty do we need?”

A practical document checklist to start:

• Bank statements and deposit details

• Canceled checks and check images

• General ledger detail, trial balance

• AP and AR aging, customer refunds

• Payroll registers and employee lists

• Corporate card statements and receipts

• Vendor master file and vendor change history

• Relevant emails or messages (if available and preserved)

Collect and protect records so the story holds up later

Evidence that can’t be trusted is evidence that can’t help you. Even well-meaning staff can damage a case by editing files, forwarding emails, or “cleaning up” folders.

Strong evidence handling focuses on three things: keep originals, track sources, and document who touched what.



When needed, organizations coordinate with counsel and IT to preserve access logs, mailbox data, and accounting system exports. This is also where confidentiality planning matters, especially if litigation is possible.

Practical do’s and don’ts:

• Do limit access to financial systems on a need-to-know basis.

• Do export reports in a consistent format and save originals.

• Do keep a simple log of what was collected, by whom, and when.

• Don’t tip off a suspect before access and records are protected.

• Don’t “test” the suspect by making accusations without proof.

Don’t rely on screenshots when original records are available.

Analyze transactions and build a clear “what happened” narrative

Analysis is where investigators separate odd-looking activity from provable misconduct. The goal is not to find one strange payment. The goal is to show the pattern, the method, and the impact.



Common tests and flags include:

• Duplicate invoices or duplicate payment amounts

• Split purchases that stay under approval limits

• Round-dollar payments that repeat

• Weekend or after-hours activity that doesn’t fit operations

• New vendors with no business history

• Vendor addresses matching employees (or employee relatives)

• Missing approvals, missing receiving records, missing contracts

• Journal entries posted without explanation or support

Investigators trace transactions from source to finish. A simple example: invoice to approval to check run to bank clearance to vendor address and ownership. Each link either strengthens the story or exposes a gap that needs more work.

The analysis usually ends with two outputs:

• A loss estimate supported by records (and clearly labeled if it’s partial).

• A control review that explains how the scheme worked and how to reduce repeat risk.
  

Report results and support next steps (insurance, HR, legal, law enforcement)

A strong report reads like a clear case file. It states what was reviewed, what was done, what was found, and what limits exist. It also avoids speculation.

Most reports include:

• Scope and time period covered

• Records reviewed and methods used

• Findings with exhibits that tie back to documents

• Estimated losses and key assumptions

• Control weaknesses that allowed the activity

• Suggested remediation steps (practical, not theoretical)

Possible outcomes vary. Some matters end with internal discipline. Others move into civil recovery, insurance claims, or referrals to law enforcement. The accounting work supports those decisions by giving people something solid to stand on.

When to hire a financial criminal investigation accountant and what to expect

Hire help when the cost of being wrong is high. Also hire help when speed matters, because early action protects records and options.

Organizations often call in a specialist when:

• Leadership needs an independent answer for the board or owners

• The suspected conduct touches multiple accounts or locations

• An insurer requests documentation for a claim

• Counsel needs financial support for a dispute or referral

• The business must report to a regulator or grantor

If you want a clearer view of what a professional engagement covers, see Turning Numbers’ overview of fraud investigation services for businesses.

What affects timeline and cost (without getting into numbers) usually comes down to:

• Number of accounts and transactions involved

• Quality of records and how quickly they can be collected

• Whether third parties are involved (vendors, customers, banks)
• Need for interviews, expert support, or testimony

• How far back the review must go

Clients can reduce disruption by assigning one point of contact, gathering records in an organized way, and keeping communication controlled.

Red flags that often point to fraud or criminal activity

No single red flag proves fraud. Patterns matter. Still, certain signs show up often in criminal-style financial matters:

• Missing receipts, missing invoices, or “lost” backup

• Repeated “miscellaneous” or vague expense descriptions

• Vendor addresses or bank details that match employees

• Unusual refunds, credits, or write-offs with no explanation

• Cash withdrawals or checks to cash that don’t fit the business

• Frequent overrides of normal approvals

• An employee who blocks oversight or won’t take time off

• Customer complaints about invoices that don’t match service

• Inventory shortages that exceed normal shrink



• Reconciliations that are delayed, skipped, or always “in progress”

How to choose the right investigator (credentials, independence, courtroom readiness)

You’re not just buying analysis. You’re buying a work product that must hold up under pressure.

Look for:



• Proven forensic accounting experience, not just general accounting work

• Independence (no conflicts, no stake in internal politics)

• A clear approach to evidence handling and documentation

• Ability to explain findings in plain language to non-accountants

• Experience working with attorneys, insurers, and boards

• Readiness to support expert witness needs if the case escalates

Credentials can help, but they don’t replace real investigative experience. Ask how the investigator documents work, builds exhibits, and handles challenges to assumptions.

Example of fraud risk, a realistic scenario and how it starts small

Financial criminal investigation accounting is about finding facts, tracing funds, and documenting proof that decision-makers can trust. The earlier you act, the better your odds of preserving clean evidence and keeping options open. If something feels off, treat it like a time-sensitive problem, not a paperwork problem.

For confidential help, call or fill out the form to schedule a forensic consultation with Turning Numbers:

Quick next steps if you suspect fraud:

• Preserve records and limit access before confronting anyone

• Gather key financial reports and bank activity for the period

• Get an independent review so the findings are defensible

Financial criminal investigation accounting explained

Financial criminal investigation accounting is the accounting side of a criminal-style financial inquiry. The focus is on finding facts, tracing transactions, and documenting evidence tied to fraud, theft, or intentional misstatement.

Think of it like reconstructing a torn-up receipt book. A bookkeeper records activity as it comes in. An investigator asks, “Did this activity really happen, and who benefited?”

It differs from other financial work in a few key ways:

• Routine bookkeeping records transactions, it doesn’t test whether they’re legitimate.

• Financial statement audits look for material misstatements and assess risk, but audits aren’t designed to prove a fraud scheme or identify a perpetrator.

• Standard fraud checks (like quick variance reviews) can flag issues, but often stop short of building court-ready support.

The goal is strict: follow the money, document the trail, and explain it clearly so leadership, counsel, insurers, or law enforcement can act.

Common case types include:

• Employee theft and embezzlement

• Expense and corporate card abuse

• Vendor and billing schemes

• Kickbacks and conflicts of interest

• Payroll fraud (ghost employees, rate manipulation)



• Financial statement fraud (inflated revenue, hidden liabilities)