Forensic Accounting And Fraud Detection

Forensic Accounting has picked up its pace in recent times because of the depth in investigation that it brings to the table. It is a process of accounting wherein the professional forensic accountants use their investigation acumen to look into possible fraud or other such criminal activity. The data is used in the legal proceedings to help assist in concluding an ongoing dispute. It is pretty clear that forensic accountants must possess the virtue, excellent analytical, perceptive, and deductive skills in order to extrapolate information from complicated financial and business data and put it into a concise, well-documented presentation.

The accountant must also be knowledgeable in legal jargon and procedures like:

  • Examination of financial evidence.
  • Conducting of forensic research to trace funds and identify assets for recovery.
  • They must also be well versed with the use of customized software to extract and format the software’s findings.
  • Preparation of forensic final reports based on the data collected post investigation.
  • Familiarization in accounting and auditing standards and protocols is called for.
  • If needed they must also offer their support as an expert witness, (as and when required) backing their statements with graphical representations to support their evidence.

The forensic accountants are assigned for a host of tasks. Forensic accounting is not only about hiring an number crunching accountant. These accountants ought to have additional skills as well. These skills are obviously in relation to their technical knowhow in using a variety of computer programs and communicate well. There are forensic accountants who are specifically skillful in detecting the fraud in industries that are susceptible to fraud, such as insurance or banking, and learn the business practices associated with those fields.

Since a lot at stake in terms of reputation and image of both company and the individual,  the forensic accountants must exercise discretion when conducting their investigations. As such they have to be independent and impartial at the time of investigation and must also take into account both the financial records and the conduct of employees. Besides examining financial statements to determine whether they are accurate and complete, they may seek out internal databases and court records. The forensic accountants must also keep in mind that there could be an attempt to hide the evidence of crimes by fraudster. Hence, that should look beyond the numbers and anticipate criminal actions.

There is a uniform process in place for conducting investigations regardless of whether it is civil or criminal.

The process starts with the forensic accountant meeting a government representative, attorney or other client to learn the specifics of the alleged fraud. Then they get on with their initial research and plan the logistics of the investigation. In the subsequent step, they look for the records — bank statements, credit statements, journals, ledgers, databases, e-mails and memos; basically anything which could provide them lead in unraveling the bigger picture.

After gathering the records, the forensic accountants often conduct interrogative interviews with the person under suspicion and other involved parties to get individual stories about the irregularities. Given the nature of the complexities, the forensic accountants should be instinctive enough to pick up subtle hints or suspicious clues that may eventually lead them to the perpetrator.

There is a question as to how far the forensic accountants go to obtain information. To answer the question, it depends totally on the nature of the case. Once the information of relevance is gathered, a forensic accountant commences the analysis. They may also look for the trail of assets of the company, calculate the total loss and exactly how it occurred, and summarize various transactions. The forensic accountant would also prepare a report detailing the plan of action and what the investigation uncovered. The report may contain the graphs, charts, spreadsheets and other methods of explaining the case.

Apart from investigating, forensic accountants may provide litigation support. Attorneys render the service of the forensic accountants to review existing documentation and testimony. A forensic accountant can also have his say to explain the attorney about the additional information which may be needed to prove the case and what questions to ask of witnesses. The forensic accountant could also be assigned for the task of reviewing damage reports and state whether the report was put together accurately and supports the case.

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

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