Fraud Investigation & Forensic Accounting
What is forensic accounting?
Forensic accounting is the practice of employing accounting, auditing, and investigative skills to assist in legal matters. This type of accounting covers two main areas - litigation support and fraud investigation both geared toward dispute resolution. Litigation support corresponds to the factual review of economic issues related to existing or pending litigation. In this capacity, the forensic accounting professional quantifies damages sustained by parties involved in legal disputes and assists in resolving the disputes before they reach the courtroom. If a dispute reaches the courtroom, the forensic accountant may be called upon to testify as an expert witness.Fraud investigation is the determination of whether criminal matters such as employee theft, securities fraud (including falsification of financial statements), insurance fraud and identity theft have occurred. The forensic accountant may recommend actions designed to minimize future risk of loss. Investigative work may also be required in civil matters such as searching for hidden assets in divorce cases.
Forensic accounting is one of the most unique aspects of accounting. It involves looking beyond the numbers to grasp the substance of questionable situations. This work goes beyond simple accounting. It is more than just detective work. Rather iit is a combination of specific skills that are more and more in demand as business complexity expands.
Forensic accounting requires the most important quality an accountant can possess: the ability to think logically with an eye to detail.
Who uses forensic accountants?
Forensic accounting and financial investigative specialists work with financial information for the purpose of organizing complicated issues in a manner that others can easily understand. While some forensic accountants and fraud investigators are engaged in the public practice of forensic examination, others work in private industry for such entities as banks and insurance companies or governmental entities such as sheriff and police departments, the Federal Bureau of Investigation (FBI), and the Internal Revenue Service (IRS).Occupational fraud committed by employees usually involves the theft of assets. Embezzlement is the most often-committed fraud over the last 30 years. Employees could be involved in kickback schemes, identity theft, or conversion of corporate assets for personal use. The forensic accountant uses observation of the suspected employees as well as physical examination of assets, inspection of documents, and interviews with those involved. Experience of this nature enables the forensic accountant to recommend internal controls that owners can implement to reduce the likelihood of fraud in the future.
The forensic accountant is often hired by attorneys to investigate the financial trail of persons suspected of engaging in criminal activity. Information provided by the forensic accountant may be the resource that brings about convictions. The forensic accountant can also be hired by the bankruptcy court when submitted financial information is suspect or if employees (including managers) are suspected of improperly removing assets.
There are seeminigly endless opportunities for qualified forensic accounting professionals to assist investigations in private companies. CEOs are now required to certify that their financial statements are faithful representations of the financial position and results of operations of their companies. As a result, these to corporate officers must rely more heavily on internal controls to detect any misstatement that may be contained in these financials.
Finally, in addition to these activities, forensic accountants may be asked to establish the amount of the loss sustained by a victim, testify in court as an expert witness and assist in the preparation of visual aids and written materials for use in court.