CONCEPTUAL ISSUES IN FORENSIC ACCOUNTING

Forensic accounting has exited for many years with the growing complexity of business environment and the growing number of business related investigations. forensic accounting professionals are increasingly asked to assist in the investigation of financial and business related issues. The integration of accounting, auditing and investigative skills yields the specialty known as forensic accounting. Forensic accountants are trained to look beyond the numbers and deal with the business reality of the situation.

“Forensic” according to the Webster’s Dictionary means belonging to used in or suitable for courts of judicator or to public discussion and debate. Flowing from this, forensic accounting is seen as providing an accounting analysis that is suitable for the court and which will from the basis for discussion Debate and ultimately dispute resolution. It is actually the integration of accounting, auditing and investigative skills to assist in legal matters. Forensic accounting encompasses litigation support, investigation and dispute resolution and there is the intersection between accounting investigation and the law.

WHAT DOES FORENSIC ACCOUNTANT DO
A forensic accountant is often retained to analyze, interpret, summaries and present complex financial and business’ related issues in a manner which is both understandable and properly supported. Forensic accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organizations.   
A forensic accountant is often involved in the following:-
·     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 court as an expert witness and preparing visual aids to support trail evidence.
In order to properly perform these services, a forensic account must be familiar with legal concepts and procedures. In addition a forensic accountant must be able to identify substance over form when dealing with an issue.

DEFINITION OF THE TERMS
Forensic Accounting can be defined as accounting analysis that is suitable for the court and which will form the basis for discussion, debate and ultimately dispute resolution. It is accounting which involves the use of accounting, auditing and investigative skills to assist in legal matters. According to the definition developed by the America institute of certified public accountant (AICPAS) forensic and litigation services committee, forensic accounting may involve the application of special skills in accounting, auditing, finance quantitative methods, the law and research. Forensic accounting also involves fraud examination. Fraud examination is a methodology for resolving fraud allegations from inception to disposition including obtaining evidence, interviewing, writing reports and testifying. This is regarded as experts witnessing.

HOW CAN A FORENSIC ACCOUNTANT BE OF ASSISTANCE
The two major ways in which a forensic accountant can be of a great assistance includes:-
(i)                Litigation support
(ii)             Investigative accounting
By litigation support          
1.      Assistance obtaining documentation necessary to support or refute a claim.
2.      Review of the relevant documentation to form an initial assessment of the case and identify areas of loss.
3.      Assistance with examination for discovery including the formulation of questions to be asked regarding the financial evidence.
4.      Attendance at the examination for discovery to review the testimony, assist with understanding the financial issues and to formulate additional questions to be asked.
5.      Review of the opposing experts damages report and reporting on both the strengths and weaknesses of the positions taken
6.      Assistance with settlement discussions and negotiations
7.      Attendance at trial to near the testimony of the opposing expert and to provide assistance with cross examination.

By Investigative support     
1.      Review of the factual situation and provision of suggestions regarding possible courses of action.
2.      Assistance with the protection and recovery of assets
3.      Co-ordination of other experts like
(a) Private investigators
(b) Forensic document examiners
(c) Consulting engineers
4.      Assistance with the recovery of assets by way of civil action or criminal prosecution

THE ASSIGNMENT OF A FORENSIC ACCOUNTANT PERFORMS
Forensic accountants become involved in a wide of investigation spanning many different industries. The practical and in-depth analysis trends that bring to light the relevant issues.   
Below are various areas in which a forensic accountant will often become involved:-
·     Criminal Investigation:- Forensic investigation often relate to criminal investigations on behalf of the police forces.
·     Shareholders and Partnership Disputes:- These assignment often involves a detailed analysis of numerous years accounting records to quantify the issues in dispute
·     Personal Injury Claims/Motor Vehicle Accidents:-  He is often asked to quantify the economic losses resulting from a motor vehicle accident. He need to be familiar with the legislation in place which pertains to motor vehicle accidents. Case of medical malpractice and wrongful dismissal often involve similar issues in calculating the resulting economic damage
·     Business Interruption/other Types of Insurance Claims:- Insurance policies differ significantly as to their terms and conditions. According, these assignments involve a detailed review of the policy to investigate coverage issues and the appropriate method of calculating the loss. He is often asked to assist from either an insured or insurers perspective in the settlement of a case. Example of this assignment includes property losses and employee dishonestly claims, business interruptions.
·     Business/Employee fraud investigations:- Business investigations involve funds tracing, asset identification and recovery, forensic intelligence gathering and due diligence reviews.

By employee fraud investigations it involves procedures to determine the existence, nature and extent of fraud and may concern the identification of a perpetrator. These investigations often entail interviews of personnel who had access to the funds and a detailed review of the documentary evidence. Others are,
·     Matrimonial disputes
·     Business economic losses
·     Professional negligence
·     Mediation and arbitration

TYPICAL APPROACH TO FORENSIC ACCOUNTING ASSIGNMENT
Typical approaches to a forensic accounting assignments includes the following as listed below:
(i)                Meeting with the client
(ii)             Performing a conflict check
(iii)           Performing an initial (interim) investigation
(iv)           Developing an action plan
(v)              Obtaining the relevant evidences
(vi)           Performing an actual analysis which will be dependent on the nature of the assignment and may involve
-           Utilizing charts and graphics to explain the analysis
-           Calculating economic damages
-           Utilizing a computerized application such as a spread sheet, date based or computer model
-           Summarizing a large number of transactions
-           Performing a tracing of assets
-           Performing a regression or sensitively analysis
-           Performing present value calculations utilizing appropriate discount rates.
(vii)         Preparation of report            

WHO RETAINS A FORENSIC ACCOUNTANT?
Forensic accountant are often retained by the following groups
·        Lawyers
·        Police forces
·        insurance companies
·        Government regulatory bodies and agencies
·        Banks 
·        Courts
·        business Community

CHARACTERISTICS OF A FORENSIC ACCOUNTANT
·        Curiosity
·        Persistence
·        Creativity  
·        Discretion
·        Organization
·        Confidence
·        sound professional judgment
·        Analytical
·        Detailed oriented
·        Ethical
·        Intuitive
·        Insightful
·        Evaluative
·        Function well under pressure
·        Skepticism
·        Responsive
·        Inquisitive
·        Generate new ideas and scenarios
·        Team player
·        makes people feel at ease

A forensic accountant must be open to consider all alternatives, scrutinize the fine details and at the same time see the big picture. In addition, a forensic account must be able to listen effectively and communicate clearly and concisely.

REASONS FOR FORENSIC ACCOUNTANTS INEFFECTIVENESS
·        Lack of inability to identify they issues
·        Lack of investigative intuitiveness
·        inability to simplify the information
·        ineffective oral communication
·        inability to understand the goals of a case
·        ineffective written communication
·        inability to synthesize
·        inability to synthesize
·        Inflexible/close minded

FUNDAMENTAL FORENSIC KNOWLEDGE
·           Professional responsibilities and practice management
·           Laws, courts and dispute resolution
·           Planning and preparation
·           Discovery
·           Reporting, experts and testimony
·           Information gathering and preservation (documents, interviews,     interrogations, electronic data)  
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