The concept of forensic accounting involves using accounting expertise and scrupulous auditing techniques to analyze complex financial assets and business accounts. This is to uncover any irregularities or discrepancies that may indicate fraudulent activity is taking place.
The skills of forensic accountants are invaluable in many cases, so much so that they are often used as expert witnesses in court, and their findings are used as evidence in the case.
If you’re new to forensic accounting and you’re unsure about how it can be used, look no further. In this post we’ll go over some of the main role and objectives of forensic accounting, so you can see how it can come in handy.
What are the main objectives of forensic accounting?
As mentioned above, forensic accountants use their expertise to investigate complex financial assets in order to uncover deceptive financial activity.
The main objective of forensic accounting is to find useful financial information and trends that could indicate criminal or fraudulent activity. Forensic accountants can use their skills to find:
- Hidden assets such as houses, cars or cash
- The true value of a person’s estate or assets
- Accounting irregularities in business
The information that is found is usually used in court cases that are investigating fraud, and even in divorce proceedings. Below are some more scenarios where a forensic accountant is used.
Forensic accounting examples
There’s no limit to the situations where a forensic accountant can be used. Read on to discover some of the types of forensic accounting that you may be unaware of.
Negligence and personal injury claims
Forensic accountants are used in personal injury claims so that they can quantify the economic losses or damage resulting from motor accidents.
In some cases, people will exaggerate their losses in order to try and claim more money. Forensic accountants can provide a more accurate picture of the damages involved so that a more fair settlement is reached.
Forensic accountants as mediators or arbitrators
Taking someone to court is an often lengthy and costly process, that’s why many people try to resolve their dispute in other ways before resorting to litigation.
Many forensic accountants also double up as mediators or arbitrators due to their familiarity with the legal system. Their expertise, in conjunction with additional training, can help businesses and individuals resolve their disputes without going to court and minimising the time and resources wasted.
Business and employee fraud investigations
If business owners suspect fraudulent activities, they can enlist the help of a forensic accountant to delve deeper into the organisation’s finances to see if their suspicions are correct.
Some of the activities that accountants will carry out in this case include:
- Asset identification
- Due diligence reviews
- Tracing funds
Famous forensic accounting cases
One of the main reasons why forensic accounting has become more popular in recent years, is due to the increase in high-profile accounting cases in the media.
Al Capone, the infamous leader of the Chicago mafia, was brought down by forensic accountant Frank Wilson and his team when they reviewed millions of documents to find that Al Capone was not paying tax on his various earnings.
Forensic accounting was also used in the OJ Simpson trial to determine his net worth. He tried to conceal his wealth during the trial and pleaded poverty, however, the forensic accountants were able to uncover that his net worth was actually $33m.
Contact Alexander and Co’s forensic accounting team today
If you think your case could use the expertise of a forensic accountant, get in touch today via the website to speak to a member of our team and work towards a suitable solution.