logo

Forensic Accounting

Knowledge Center

Summary, forum, best practices, expert tips and information sources.

Contributed by: Hira Aziz

10 items • 4.123 visits

EnglishEnglishTranslate


Summary

What is Forensic? Meaning.

Forensic (~judicial, judiciary, juridical) is an adjective relating to or denoting the application of scientific methods and techniques to the detection, investigation and reporting of alleged (supposed) crimes for the benefit of courts of law.


What is Forensic Accounting? Meaning.

Forensic Accounting is the special discipline of accounting that:

  • Conducts a thorough investigation and detailed analysis of financial manipulation and fraudulent activities.
  • Explains and discovers the nature of financial crimes of the business entity in court.
  • Combines forensic audit and forensic investigation.

It can be described as "The special type of financial knowledge that aims to prevent and detect fraud" or more comprehensively as: "The act of identifying, settling, sorting, extracting, recording, reporting and verifying financial data in question, as well as clearly organizing and analyzing to make proper conclusions about the state of financial matters that have fallen under criminal observation."

Because financial transactions are nowadays largely performed by automated systems, leaving digital traces, the use of information technology has become a major part of forensic accounting.


Usage of Forensic Accounting. Application Areas

Investigating fraud, money laundering, white-collar crime
  • Fraud and white-collar crime investigations and prevention
  • Preparation of expert reports, reviews and evidence
  • Civil and criminal actions regarding fraud and financial irregularities
  • Breaches of contract
  • Breaches of warranty, particularly following company acquisitions
  • Insurance claims
  • Giving oral evidence in court
  • Insolvency and liquidation support investigation
  • Fraud prevention, Fraud Risk Management
  • Corruption Compliance & investigations
  • Money Laundering
  • Regulatory enquiries
  • Tax fraud
  • Computer fraud

Forensic Accounting Key Areas

  • Fraud Investigation. Investigates the criminal intention behind any activity. Forensic accountants detect: What went wrong? Who did it? How they did it? How much money has been stolen?
  • Resolving Commercial Disputes. Investigates the criminal intention behind any activity. These activities include: Identity theft, employee theft, falsification of financial statement information, infringement of patent and trademarks or insurance frauds.
  • Resolving Civil Issues. For instance, revealing the hidden assets behind: Divorce cases (family law), breach of warranty or contract, disputes on business valuation, claims on construction, etc.
  • Insurance Claims. Used to quantify the economic damages against insurance claims such as accident of a vehicle or manipulation in medical practices.
  • Valuations. Valuing a company for a sale (in part or in whole), company valuations for bank purposes to borrow funds, valuing the shares (or share options) in a company for potential sale or purchase.
  • Business Intelligence. Providing (to management): Insight into how the business is running, help them to focus on where to best deploy resources, provide forensic technology services, support in anti-money laundering.
  • Data Recovery & Conversion: Used to recover the quantitative and qualitative data of the suspicious, convert the recovered data into investigative report that serves as evidence and witness during litigation, help in the recovery of loss.

History of Forensic Accounting

In 1931, Frank Willson, a CPA of the Internal Revenue Service, gave birth to Forensic Accounting during Capone. Forensic accounting remained undefined for years. The term "forensic accounting" was first introduced by Maurice Peloubet (a New York CPA) in 1946.


Typical Steps in Forensic Accounting. Process

Forensic Accounting
  1. Problem recognition
  2. Forensic investigation
  3. Evidence collection (physical evidence, testimonial evidence, documentary evidence, personal observation)
  4. Report preparation and submission
  5. Litigation (participates in the incident's court proceedings, present findings in understandable manner, explaining and interpreting financial documents)

Famous Forensic Accounting Cases

  • Enron
  • Bernie Madoff Investment Securities
  • WorldCom
  • Adelphia
  • Xerox

Sources:
George A. Manning, Ph.D, CFE, EA (2011), "Financial Investigation and Forensic Accounting", Third Edition.
Joshua Onome Imoniana, Maria Thereza Pompa Antunes, Henrique Formigoni (2013), "Forensic Accounting and Corporate Fraud", article.
PwC (2020), "Financial Investigation and Forensic Accounting".


Special Interest Group

Forensic Accounting Special Interest Group.


Special Interest Group
Special Interest Group (4 members)

Forum

Forum about Forensic Accounting. Below you can ask a question about this topic, share your experiences, report a new development, or explain something.


🔥 Forensic Accounting Jobs and Careers
The forensic accounting field has vast opportunities in today's economic world in which various economic crimes are on the rise globally. According to the PwC's Global Economic Crime and Fraud Survey ...
Rating3
 
topic Forensic Accounting Audit Procedure
A forensic accounting audit is different from a financial statement audit because it requires an in-depth analysis of complex financial matters, proper interpretation, and careful preparation for coll...
Rating2
 

Start a new topic

Start a new topic about Forensic Accounting

Best Practices

The best, top-rated topics about Forensic Accounting. Here you will find the most valuable ideas and practical suggestions.


Expert Tips

Advanced insights about Forensic Accounting. Here you will find professional advices by experts.


Information Sources

Various sources of information regarding Forensic Accounting. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.


Presentation

What is Forensic Accounting?

Forensic accounting is used in the investigation of financial crimes and helps in resolving disputes.
This presentation is a comprehensive guide about "Forensic Accounting". It covers the following areas: - What is foren...

Research Links

Jump to further research sources regarding Forensic Accounting.


NWS

News

VID

Videos

PRS

Presentations

 
BKS

Books

ACA

Academic

WIK

More

Compare with: Earnings Management  |  White Collar Crime  |  Corporate Finance

Special Interest Group

Special Interest Group

Do you know a lot about Forensic Accounting? Become our SIG Leader and gain worldwide recognition as an expert.

Return to Management Hub: Decision-making & Valuation  |  Ethics & Responsibility  |  Finance & Investing  |  Knowledge & Intangibles


More on Management  |  Return to Management Dictionary  |  Books about Forensic Accounting


This ends our Forensic Accounting summary and forum.



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2023 12manage - The Executive Fast Track. V16.3 - Last updated: 1-10-2023. All names of their owners.




12manage is looking for BA/MBA students. More info.