The Association of Certified Fraud Examiners (ACFE) described forensic accounting as “the application of accounting skills to provide quantitative financial information about matters before the courts.” One of the vital elements of forensic accounting is the pursuit to recreate or reestablish previous event or events, through financial information where remaking or reestablishing is expected to be utilized in certain judicial proceedings — deposition, arbitration, civil or criminal court, plea bargaining, etc.
Forensic accounting is frequently used on construction claims, financial contract disputes, environmental claims, government contract claims, and fraud investigations, among others. Professionals involved in this field are often engaged in examination and evaluation of financial evidence; the advancement and improvement of computer applications that will aid and support the forensic accountants in analyzing and presenting financial evidence; and in providing services and support in legal proceedings.
Access to Professionals
Through forensic accounting, companies will have access to professionals that have the skills, knowledge, and experience to detect, deter, and avert fraud. Since forensic accounting is a blend of accounting and investigation, your forensic accountant can both conduct an audit and analyze it in relation to the company’s specific needs (e.g. looking for any anomalies that may point to fraudulent activities).
In addition, professionals involved in forensic accounting can act as an expert witness if and when you find yourself in a courtroom. The forensic accountant knows and understands the ins and outs of your situation and can break down your financial records in a clear and concise manner.
Support in Litigation and Business Valuation
Apart from resolving negligence claims, accurately calculating economic damages, and substantiating insurance and personal injury claims, forensic accounting also provides support on litigation’s and business valuations.
Adding a forensic accountant to your litigation team at an early stage is ideal. He/She can use the results of his/her investigation to bring the parties involved to a resolution without heading to a costly court trial. Furthermore, your forensic accountant will help lawyers in either prosecuting or defending your lawsuit or proceedings before the court.
In addition, let’s say that two managing parties are looking to amicably dissolve a partnership. Forensic accountants provide business valuation services that will help both parties know their business’ worth, among other things. Remember that forensic accountants are investigators- they. They will look beyond your books and thoroughly examine your business.
Conciliation and Adjudication
Forensic accountants’ know-how and expertise on legal matters and proceedings let-allow them to settle and work out feuds and discords between individuals and businesses in a timely manner. For instance, a typical disagreement among stockholders is the compensation and/or benefits they receive. Forensic accounting will analyze the entity’s accounting records in order to assess this concern.
Regarding marital disputes, forensic accounting will track, locate, and evaluate assets. These can either be in the form of enterprises, properties, or other assets.
Personal injury claims such as those involving vehicular accidents often rely toon the forensic accountant in gauging or measuring the incurred economic losses due to these mishaps. For other forms and kinds of insurance claims, since insurance policies have varying guidelines and protocols, the forensic accountant will review these measures so that losses will be quantified and coverage issues will be probed and addressed.
Forensic accounting is often associated with criminal investigations. Their reports are drawn up in such a way that the evidence will be presented in a professional and terse manner.
When investigating frauds committed by employees or enterprises, the forensic accountant will track the funds, determine and recoup the lost assets, gather forensic intelligence, and perform due diligence reviews. Furthermore, professionals engaged in forensic accounting will identify the actuality, type or kind, and the scope and magnitude of the fraud.
Indeed, entities that employ services from forensic accounting professionals acquire certain merits. However, it is a must that business owners and the management understand when is the right time to consult for a forensic accounting expert the right time to consult for a forensic accounting expert is. This will translate to significant savings and lesser time expended.