What is Forensic Accounting?
Forensic accounting is a specialty area where accounting, auditing, common sense investigative skills are used to analyse information that is suitable for use in a court of law.
What is a Forensic Accountant and what do Forensic Accountants do?
Forensic accounting professionals are skilled at quantifying damages and determining the full extent of a loss. They are involved in four basic areas of forensic analytics: data collection, data preparation, data analysis and reporting.
Specifically, forensic accountants perform tasks that include examining business records, analysing historical statements, looking for irregularities in business practices, reviewing journal entries, analysing trends, tracing the flow of funds, interviewing relevant parties, analysing electronic data and performing an overall evaluation of the situation in question and liaising with auditors and accounting staff. Beyond this, they can serve as consultants or expert witnesses. When required, they also collaborate with other experts.
Forensic accountants are sometimes relied on to train internal auditors and investigators. They can also help gauge an organization’s vulnerability to issues such as fraud. Plus, they can help companies implement controls that will reduce their exposure to criminal and civil wrongdoing as well as irreparable damage to their reputation.
Forensic accountants are regularly called on to provide evidence and expert witness testimony in courts, arbitrations and mediations. This evidence may be used to help an attorney establish their case or reinforce the merits of their argument. In other instances, the evidence may be utilized to refute the conclusions that are being proposed by opposing counsel. When serving as expert witnesses in court proceedings, forensic accountants give testimony that is based upon enough facts or data that is the product of reliable and accepted principles and methods.
Who uses Forensic Accountants?
Forensic accountants are used around the world by insurance companies, independent adjustment firms, lawyers, government and law enforcement agencies as well as by businesses of all sizes – from multi-national corporations to small businesses.
Here are a few areas:
- In ascertaining economic damages suffered by a company through contract breach
- When M&A go wrong, and expectations or warranties are not met
- Fraud, especially securities fraud and embezzlement
- Company valuations, perhaps in preparation for a public floatation or acquisition
- Computer forensics that can uncover hidden information believed lost or wiped either accidentally or maliciously.
- Professional negligence claims