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
Terminology:
Forensic Investigation -The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law.  A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline.

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
Steps to Completing Forensic Accounting assignment:
1.) Meet with client
2.) Conflict Check
3.) Initial investigation
4.) Create Action Plan
5.) Obtain Relevant evidence
6.) Analyzation of evidence

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)
Citations:

“About Forensic Accounting.” The Institute of Certified Forensic Accountants :: Welcome Page. 2011. Web. 31 Mar. 2011. <http://www.forensicglobal.org/&gt;.

Edwards, R. T. “What Is Forensic Accounting?” R.T. Edwards, Inc. 2003. Web. 31 Mar. 2011. <http://www.rtedwards.com/journals/JFA/students.html&gt;.

Florida Atlantic University. “Forensic Accounting.” Forensic Accounting Information. Web. 31 Mar. 2011. <http://www.forensic-accounting-information.com/&gt;.

Pirraglia, William. “Definition of Forensic Accounting | EHow.com.” EHow. 2011. Web. 31 Mar. 2011. <http://www.ehow.com/about_4705508_definition-forensic-accounting.html&gt;.

“The Rise of Forensic Accounting.” Forensic Accounting. Corporate UK, 2009. Web. 31 Mar. 2011. <http://www.cvdfk.com/documents/Forensic_Accounting_Feb09.pdf&gt;.

“Vision and Mission | Chartered Accountants of Canada.” Home | Chartered Accountants of Canada. Web. 31 Mar. 2011. <http://www.cica.ca/about-the-profession/vision-and-mission/index.aspx&gt;.

Zysman, Alan. “Forensic Accounting.” Forensic Accounting Demystified. 2006. Web. 31 Mar. 2011. <http://www.forensicaccounting.com/home.html#fourteen&gt;.

 

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