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)