Forensic Accounting:
What is Forensic Accounting?
- Forensic accounting is an accounting field that specializes in investigations and auditing.
- provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution
- Forensic accountants are trained to look beyond the numbers and deal with the business reality of the situation.
- Litigation support: Assistance in obtaining documentation necessary to support or refute a claim, and check validity of evidence
- Investigative accounting: Review of company’s accounting to find appropriate course of action in various situations
What is Forensic Accounting Used For?
- -any type of situation where accounting is suitable for legal review
- -Purpose: establishing accountability and/or evaluation
- -Some situations include:
- Bankruptcy
- Divorce cases
- probate asset identification and evaluation (wills)
- -falsifications and manipulations of accounts or inventories
- statutory auditing
Forensic Audit- An examination of evidence regarding an assertion to determine its correspondence to established criteria carried out in a manner suitable to the court. An example would be a Forensic Audit of sales records to determine the quantum of rent owing under a lease agreement, which is the subject of litigation.
Internal Audit- An audit performed by an employee who examines operational evidence to determine whether prescribed operating procedures have been followed.
External Audit- An audit performed by an auditor engaged in public practice leading to the expression of a professional opinion which lends credibility to the assertion under examination.
Rise In Forensic Accounting:
- Financial Crisis 2007
- difficult economic climate
- forensic accounting: counter cyclical profession
- frauds and commercial disputes rise as pressure is put on individuals and corporations to stop falling revenues or incomes, and maintain profit levels
- no pressure or oversight on executives or financial
- controllers during the good financial times
Forensic Accountants Work Habits
- Each forensic assignment unique
Some tasks involved in the analyzation of evidence include:
- 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.
To Be A Forensic Accountant:
- Must be persistent, organized, confident, and have a good discretion
- Undergraduate degree
- Work experience
- CA•IFA (Certified Accountant Investigative and Forensic Accounting)
- DIFA (Diploma in Investigative and Forensic Accounting)
- CPFA (Certified Professional Forensic Accountant)
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