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What is Forensic Accounting and How Do I Know if I Need It?

1.27.16

What is Forensic Accounting and How Do I Know if I Need It?

By Jimmy Fisher, Associate – Audit & Assurance Jimmy Fisher head shot

Now that we have learned some of the motivations behind committing fraud, as well as the various different types of fraud and ways to prevent them, let’s look at the area of accounting specifically designed to detect fraudulent behavior.

Forensic accounting is a specialized area of accounting that utilizes accounting skills to investigate suspected fraudulent behavior and analyze financial information for use in legal proceedings. It is an area that integrates accounting, auditing, and investigative skills to detect fraud.

Forensic analysis goes beyond the financial numbers of a company and requires a person to understand the human element of business to determine which specific areas could be at risk of fraudulent behavior.

Skills of a Forensic Accountant

Forensic accountants must possess unique skills that are not required of a typical professional in the accounting field.  These skills include but are not limited to:

  • Investigating and analyzing financial evidence
  • Conducting investigative interviews
  • Developing various applications to assist in the analysis and presentation of financial evidence
  • Communicating 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 trial evidence

Forensic accounting and fraud prevention services from Apple Growth.

Types of Forensic Engagements

As a result of their unique skill set, forensic accountants may become involved in a wide range of investigations or engagements that span a number of different industries. Some engagements which may require the use of a forensic accountant may include:

  • Divorce
  • Shareholders’ and partnership disputes
  • Bankruptcy
  • Economic damages
  • Business/employee fraud investigations

Fraud can, and most likely will, occur in just about every business at some point for various reasons mentioned in our previous blogs.

Warning Signs of Fraudulent Behavior

There are a number of warning signs of fraud that businesses should be aware of.

Some of the warning signs forensic accountants look for are:

  • Unexplained variances between budgets and actual balances
  • Significant internal control issues reported by external auditors
  • Appearance of employees and personnel living beyond their means
  • Unusual write-offs or unordinary transactions
  • Abnormal changes in account balances
  • Infrequent or late financial reports

These are just a few of the signs that could potentially mean that fraud has occurred. It is the responsibility of each business to be vigilant and aware of these signs or any other unusual or abnormal behavior or activities.

Once fraud is suspected, a forensic accountant can help detect the specific incidents of fraud occurring within the business. Once identified, forensic accountants gather, compile, organize, and report the evidence and findings to the client. Depending on the case, litigation may follow to resolve the issue.

If you suspect fraud may be occurring in your business, or want to learn ways to help prevent it, please contact the Fraud & Forensic Accounting specialists at Apple Growth Partners at 330.867.7350