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Finance, Taxation and All Statutory Information For Everyone

Accounts Knowledge Hub

Finance, Taxation and All Statutory Information For Everyone

Accounts

What is Forensic Accounting?

Sunil Bhave
What is Forensic Accounting?
An orderly analysis, investigation, inquiry, test, inspection, or examination along a “paper trail” in the search for fraud, embezzlement, or hidden assets

Two parts:
Investigative accounting
Litigation support
Treats all figures as suspect until proven otherwise




The Fraud Triangle
Rationalization —– Motive —– Opportunity

The Need for Forensic Accountants

Fraud is something the internal or external auditors were supposed to guard against through their periodic audits. Now that auditors can only check  for the compliance of a company’s books to generally  accepted accounting principles, auditing standards, and company policies, a new category of accounting  was needed to detect the fraud in companies that suspected fraudulent transactions

The Services a Forensic Accountant Provides

  Investigating and analyzing financial evidence.
Developing computerized applications to assist in the analysis and presentation of financial evidence.
Communicating their findings in the form of reports, exhibits and collections of documents.
Assisting in legal proceedings, including testifying in courts, as an expert witness and preparing visual aids to support trial evidence.


Investigative Accounts

Often associated with investigations of criminal matters. For eg: A typical investigative accounting assignment  would be an investigation of employee theft. 


 Review of the factual situation and provision of  suggestions regarding possible courses of action.

 Assistance with the protection and recovery of assets.
 Co-ordination of other experts


Litigation Support

Provides assistance of an accounting nature in a matter involving existing or pending litigation.  It deals primarily with issues related to the quantification of economic damages. 


 Assistance in obtaining documentation necessary to support

 or refute a claim.
 Review of the relevant documentation to form an initial 
 assessment of the case and identify areas of loss.
 Assistance with settlement discussions and negotiations.



Functions Of Forensic Accountant
Criminal Investigations
 Shareholders’ and Partnership Disputes 
 Professional Negligence
 Business Economic Losses

Typical Approach To An Assignment
 Meet with the client
 Perform a conflict check
 Perform an initial investigation
 Develop an action plan
 Obtain the relevant evidence
 Perform the analysis
 Prepare the report

The need for niche consulting
Niche consulting refers to the need to specialize.
The need for niche consulting has become imperative because:
 Recent corporate accounting scandals
 Outcry for transparency and honesty in reporting 
 Fast based development in business 

Characteristics to be possessed by forensic accountant
Curiosity
 Persistence
 Creativity
 Discretion
 Confidence
 Sound professional judgment

Courses available in India
Post Graduate Diploma in Forensic Accounting
 Certificate Course in Forensic Accounting Profession
 Certified Anti-Money laundering Expert
 Certified Bank Forensic Accounting
 Certified Vigilance and Investigation Expert

Conclusion
Forensic accounting has come into the lime light due to following reasons:
— rapid increase in frauds and white collar crime
— belief that law enforcement agencies have insufficient                          expertise
Forensic accounting, in fact, integrates accounting, auditing, and investigative skills to conduct an examination into a company’s financial statements.

While the forensic accounting and auditing practice had commenced in the US as early as 1995, the seed of this specialization has yet to take off in India.