Forensic Accounting
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FORENSIC ACCOUNTING
Alicia Johnson
ACCT 310 – Intermediate Accounting II
Professor McNeal
Fall 2004
Forensic Accounting is a fast growing field in the “World of Accounting”. Its creation dates back to the early 1800s in Glasgow, Scotland. Although it has been around for a long time, it has become increasingly popular in the past few years as there have been a number of corporate scandals, stricter reporting, and internal control regulations involving public awareness and importance in the business world.
Forensic Accounting is accounting with specific emphasis in conducting financial investigations for law enforcement and civil court cases. A Forensic Accountant has to do a lot of interviewing. Although every case is unique, a typical case for a Forensic Accountant would include the following steps: (1) meet with the client (this is done to get the clearest understanding of the facts, parties involved and known issues); (2) complete a conflict check; (3) begin the initial investigation (it is best to do an investigation before you set your course of action); (4) create a course of action (by completing the above steps, they will help to set the goals to be accomplished and the steps needed to reach these goals); (5) collect evidence which may include locating documents, economic information, assets, a person or company, and proof of the occurrence of an event; (6) perform the analysis ( this involves: calculating damages, summarizing a large number of transactions, performing a tracing of assets, performing present value calculations utilizing appropriate discount rates, performing a regression or sensitivity analysis, utilizing a computerized application such as a spread sheet, database or computer model, and utilizing charts and graphics to explain the analysis); and lastly, (7) prepare the report.
A lot of what a Forensic Accountant does is similar to that of an auditor, but there are many differences. Some of the key differences include:
A Forensic Accountant employs a much higher degree of professional skepticism when conducting his work. He is not likely to accept an explanatory not on documents for what they say.
A Forensic Accountant digs much deeper into the facts and issues than a traditional auditor.
A Forensic Accountant is more familiar with how employees can abuse and misuse controls and processes and with the various types of fraud.
A Forensic Accountant is more experienced about where to look, the types of evidence to look for, how to obtain the information as relevant