What is Forensic Accounting?
The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting.
"Forensic Accounting", provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution.
As Forensic Accountants, we utilize accounting, auditing and investigative skills when conducting an investigation. Equally critical is our ability to respond immediately and to communicate financial information clearly and concisely in a courtroom setting.
Forensic Accountants are trained to look beyond the numbers and deal with the business reality of the situation.
What
does a Forensic Accountant do?
A Forensic Accountant is often retained to analyze, interpret, summarize and present complex financial and business related issues in a manner which is both understandable and properly supported.
Forensic Accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organizations.
A Forensic Accountant is often involved in the following:
Investigating and analyzing financial evidence;
Developing computerized applications to assist in the analysis and presentation of financial evidence;
Communicating their findings in the form of reports, exhibits and collections of documents; and
Assisting in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence.
In order to properly perform these services a Forensic Accountant must be familiar with legal concepts and procedures. In addition, a Forensic Accountant must be able to identify substance over form when dealing with an issue.
What
would be a typical approach to a Forensic Accounting assignment?
Each forensic accounting assignment is unique. Accordingly, the actual approach adopted and the procedures performed will be specific to it. However, in general, many Forensic Accounting assignments will include the steps detailed below.
- It is helpful to meet with the client to obtain an understanding of the important facts, players and issues at hand.
- A conflict check should be carried out as soon as the relevant parties are established.
- Perform an initial investigation
- It is often useful to carry out a preliminary investigation prior to the development of a detailed plan of action. This will allow subsequent planning to be based upon a more complete understanding of the issues.
- This plan will take into account the knowledge gained by meeting with the client and carrying out the initial investigation and will set out the objectives to be achieved and the methodology to be utilized to accomplish them.
- Obtain the relevant evidence
- Depending on the nature of the case this may involve locating documents, economic information, assets, a person or company, another expert or proof of the occurrence of an event.
The actual analysis performed will be dependent upon the nature of the assignment and may involve:
- calculating economic damages;
- summarizing a large number of transactions;
- performing a tracing of assets;
- performing present value calculations utilizing appropriate discount rates;
- performing a regression or sensitivity analysis;
- utilizing a computerized application such as a spread sheet, data base or computer model; and
- utilizing charts and graphics to explain the analysis.
- Prepare the report
Often a report will be prepared which may
include sections on the nature of the assignment, scope of the investigation,
approach utilized, limitations of scope and findings and/or
opinions. The report will include schedules and graphics necessary
to properly support and explain the findings.
