A lot of people do not really know what forensic accounting is about. Forensics accounting is actually the practice of utilizing accounting, auditing, and investigative skills to conduct examination into a company’s financial statements in legal matters.
Forensics Accounting consists of three main areas, for example, litigation support, investigation and dispute resolution. Litigation support involves the factual presentation of financial issues related to existing or pending litigation. In such circumstances, the forensic accounting professionals are normally responsible to quantify the damages sustained by the parties involved in legal disputes before these cases are brought to the court.
Investigation comes in when criminal matters have occurred, such as falsification of financial statements, internal theft, securities fraud, insurance fraud, bribery, and so on and so forth. Further actions are taken after detailed investigation is conducted.
On the other hand, when a dispute has been brought to the court, the forensic accountant may act as an expert witness for the related matter. They will also be responsible for preparing necessary evidence. Forensic accountants are specialized accountants. They can also be called forensic auditors or investigative auditors.
They are specialized in investigating and interpreting white collar crimes which always relate to criminal financial transactions in the company, i.e. money laundering. Most of the time, they also get involved in investigating securities fraud, contract disputes and other illegal business activities such as bribery and embezzlement.
Forensic accountants utilize their knowledge in accounting and finance as well as company law and commercial law in their daily routine. They are also well equipped with all the updated business information, government legislation, financial reporting systems, accounting and auditing standards, and litigation processes and procedures when they are carrying out their task.
Furthermore, besides the required knowledge, it is essential for them to have two important skills, for example, investigative techniques as well as evidence gathering skills in performing their task.
Forensic accountants have played an important role in assisting the government as well as the public to detect accounting scandals and financial crimes caused by individuals, companies and organized crime networks. Unlike accountants and auditors, when forensic accountants conduct audits, they are actively looking for signs of fraud and they use their investigative skills to determine whether a business activity or a financial transaction is illegal.
Forensic accountants are part of the extension of the legal team and they are responsible for preparing and reviewing financial evidence. Their responsibilities are as follows:
Investigating and analyzing financial evidence, especially in complex or potential criminal financial transactions
Developing computerized applications to analyze, compare and interpret financial facts and figures
Transforming their findings into reports to the related people for their financial decision
Assisting in legal proceedings, including preparing supporting documents and acting as expert witnesses during trials