To most people the term forensic accountant and an auditor are more likely used interchangeable or viewed as one without knowing that one is an extension of another. Forensic accountant is extension of an auditor, reason being that an auditor only verifies whether the financial statements show a true and fair view of the business while a forensic accountant investigates the truth of some records, or how they got the way they are –forensic accountant are mainly known for detecting and preventing fraud. Furthermore, below are the detailed differences between a forensic accountant and an auditor.
1.
Timing –forensic
accounting are only conducted with sufficient predication while an auditor is
conducted on a regular basis.
2.
Scope –forensic
accounting are conducted to resolve specific allegations while audits are
general examination of financial data.
3.
Objective
–forensic accounting is to determine whether fraud has/is occurring and to
determine who is responsible while audits are conducted to express an opinion
of the financial data.
4.
Relationship
–forensic accounting is adversarial as the forensic accountant efforts are to
affix blame while audit by nature is non adversarial.
5.
Methodology-forensic
accounting uses techniques to collect evidence, review outside data (ie public
records) and interviewing while audits examine financial data.
6.
Presumption
–forensic accounting approach the resolution of a fraud to establish sufficient
proof to support or refute an allegation of fraud while auditors are required
to approach. The audit with professional skepticism.
7.
Forensic
accountants need to possess skills and expertise in two fields namely private
investigation and accounting but no such sill is needed in auditing.
8.
Forensic
accounting is expected to recognize financial fraud and scrutinize on that because
of their quality of investigative intuition while an auditor only reviews transactions
which needs no special intuition before it is done.
9.
Forensic
accounting covers money laundering, property damage, business purchase, tax
avoidance, loss profits due to misuse and illegal activities and divorce asset
evaluation while auditors centres on error detection, rectifying those erros
and preventing such errors in future.
10.
Forensic
accounting produces an opinion used for legal purposes while an auditor produces
audit opinion or a review opinion not used in court of law.
11.
Forensic
accounting is the process of reconstruction. Often times it is necessary to
create or recreate a set of records from a variety of data, not necessarily
form the routine documents. Forensic accountants may need to employ many
detection techniques in order to rebuild the history using correlative analysis
because his far more skilled thand have a strong background in transactional
accounting as well. Their goal is to determine what happened, where the money
went, how much money was involved or a myriad of other unknowns while auditing
is the verification (attestation) that the transactions are valid and that the
underlying documentation and other sources of verification can support the reported
amounts. It is used to provide credibility to financial activities. Their goal
is to verify whether the financial statements show a true and fair view of the
business. There is no special techniques needed in auditing since their skills
is not up to the forensic accountants skills
12.
Forensic
accountants reports to a corporation’s general counsel while the auditor
reports to a corporation’s auditor committee.
13.
Forensic
accountants has background in accounting, criminology and law while an auditor
generally have backgrounds in accounting only.
14.
Forensic
accountants who is hired to review financial statements if there are concerns
about management fraud, may also targets a smaller fraud that is not material
to a company’s financial statement while an auditor are tasked with ensuring
that financial statements are free from material misstatement. To the extent
they are interested in any individual transaction, they want to know whether
that transactions and its treatment by a company conforms with generally accepted
accounting principles and how that transaction relates to the company’s
financial statements.
In
conclusion, forensic accounting could be defined as the application of auditing
and accounting skills to situation that have legal consequences, with evidence
usable in a court of law. It is using accounting skills to investigate and
analyze financial information for use in legal proceedings example fraud,
embezzlement, or other financial crimes while auditing is what is done by
auditors, which includes checking the work of the accounting department, but
usually involves much more than the accounting work, it also includes other
activities of an enterprise, whose actions are reflected in the accounting
records.