What can forensic accounting discover?

Forensic accounting is a lesser-known branch of accounting services, which investigates potential fraud and produces analysis and evidence that can be used in legal proceedings.

If you’re unsure if you need a forensic accounting service, read on to find out more about what forensic accounting is and how it can be used by your business.

 

What is forensic accounting

Forensic accounting is a specialist area of accounting services, where investigative skills alongside accounting techniques are used to analyse financial information and prepare this for use in court. Forensic accountants are often required to look beyond the simple facts and figures and provide analysis and opinion in layman’s terms to judges and juries.

 

When is forensic accounting used?

Forensic accounting skills are used in a wide range of business situations. These may include:

  • Business and company valuations
  • Loss of profit claims
  • Negligence
  • Fraud
  • Shareholder disputes

To find out more about the situations where forensic accounting is used, take a look at our forensic accounting guide.

 

What does forensic accounting involve?

Forensic accounting is a very broad area involving many steps and processes to ensure that each case reaches the correct resolution for the client. The objectives of forensic accounting can also vary from case to case. For example, the desired outcome for a business interruption case will be different to that of a fraud investigation.

The forensic accounting process generally includes:

  • Carrying out an initial investigation to assess the extent of the issue.
  • Outline possible courses of action after reviewing the financial evidence, and engaging other necessary experts.
  • Preparing documents, analysis and reports for use as evidence in court.
  • Acting as a specialist witness in court.
  • Assisting with settlement negotiations.

 

Types of forensic accounting

Although a forensic accounting investigation may take many months or even years to reach a conclusion, the forensic accounting process can be separated into two main areas. The investigation process occurs first and is then followed by the litigation stage.

 

Investigation

The initial investigative stage of forensic accounting can be a difficult and lengthy process. The forensic accountant will review company finances and conduct audits to identify areas of loss. Interviews will be conducted with those involved, and attempts will be made to trace missing funds or assets. The forensic accountant will begin to prepare reports and analysis on the situation to document their findings.

 

Litigation

The litigation part of forensic accounting involves work within, and to support, court proceedings. A forensic accountant will prepare documents and reports to be used as evidence; review and refute evidence from the opposing client; act as a specialist witness during the trial and assist with settlement negotiations.

 

What does a forensic accountant look for

Forensic accounting roles require an accountant to not only look at numbers. Forensic accountants must also have an understanding of the law and how it applies, how to interview people and how to spot criminal activity. Some of the things a forensic accountant may look for are:

  • Discrepancies in financial records or statements, such as missing sums of money.
  • Activity by an individual that breaks a law or goes against standard business practices in the industry.
  • Conflicting statements or stories in interviews with those involved.
  • Suspicious behaviour from those involved, such as an unexpected windfall of money or a sudden change in financial circumstances.

These factors may point towards fraud or illegal activity, helping to track down and recover missing funds and bring the accused individual or individuals to justice.

 

When should I involve a forensic accountant

Forensic accountants are used in a wide range of situations, from wrongful dismissal compensation claims to fraud or embezzlement investigations or even when calculating a business valuation.

At Alexander & Co., our specialist accountants are experienced in all aspects of forensic accounting and can provide advice and support throughout the process. With a member of the Academy of Experts on the team too, we are able to provide the highest level of service both in the investigation and litigation stages of the forensic accounting process.

To find out more about we can assist you and your business, contact us for further information and guidance.