Forensic accounting is the application of accounting and auditing to aid legal investigations. Forensic accounting, which provides an accounting analysis appropriate for court, includes both litigation support and investigative accounting. A forensic accountant is often used to analyse, interpret, summarize and present financial and business issues in a manner suitable for court. They are often employed by the police force, government agencies, banks, insurance companies, and other similar organizations.

Forensic Auditing

Forensic auditing is the examination of evidence regarding a claim to determine its correspondence to established criteria, carried out in a manner that would be suitable for court. Internal auditing is an audit performed by an employee who examines operational evidence to determine whether set operating procedures have been followed. And external auditing would be performed by an auditor engaged in public practice. This would give a professional opinion, which adds credibility to the allegation under examination.

Litigation Support

Litigation support provides support of an accounting nature in matters involving pending or existing litigation. This mainly deals with issues relating to the quantification of economic damages. For example, calculating economic loss as a result of a breach of contract.

Investigative Accounting

Investigative accounting is usually associated with the investigations of criminal matters. Examples of investigative accounting would be an investigation of employee theft, insurance fraud, securities fraud, and similar.

Situations In Which A Forensic Accountant May Be Involved

The forensic accountant will often be called in on criminal investigations, usually brought in by the police force or the government. Afterwards, they may be required to give evidence in court, and to provide a clear report on their findings. Shareholders� and partnership disputes often require the aid of a forensic accountant, who will often be required to examine certain accounting records to calculate the issues in dispute. Another common situation in which the forensic accountant is involved is personal injury claims and motor vehicle accidents. They will be asked to calculate economic loses resulting from motor vehicle accidents or even in cases of medical malpractice. They are also asked to deal with cases involving business interruptions, property losses, and dishonest employee fidelity claims. In cases of business and employee fraud investigations, the forensic accountant will play a vital role. Common tasks are funds tracing, asset identification and recovery, forensic intelligence gathering, and interviewing personnel involved. Occasionally a forensic accountant is needed in cases of matrimonial dispute, in which assets are needed to be traced, located and evaluated. Business economic losses are also very common for the forensic accountant, and these include contract disputes, construction claims, expropriations, product liability claims, trademark and patent infringements and losses branching from a breach of contract.

Forensic Accounting Assignments

Though each separate assignment will be completely unique, there are certain steps that will usually always be included in each case. The first step is always to meet with the client, in order to understand the facts and issues at hand. Once the relevant parties are established, a conflict check should then be carried out. A preliminary investigation is usually carried out before a plan of action is decided. It is then vital to set out the objectives to be achieved and the tactics. Once all of the preliminary work is complete, the relevant evidence must then be collected, whether this be locating documents, economic information, assets, a company or person, or proof of the occurrence of an event. Depending on the nature of the assignment, the analysis will usually differ. Some tasks in the analysis may be calculating economic damages, summarizing a number of transactions, tracing assets, or carrying out certain calculations. Afterwards, a clear report must be prepared in a manner suitable for court.

Characteristics Of A Forensic Accountant