is Forensic Accounting?
The term “forensic” conjures images of pathologists,
crime scenes and the morgue. Forensic accountants and forensic
criminologists do, have a common denominator … the pursuit
of evidence that will stand the scrutiny that the rules of
evidence and procedure demand for admission as evidence before
a court. The forensic pathologist examines and probes and
reviews evidence to determine the cause of death and to answer
the question “What happened?” Similarly, a forensic
accountant digs through a financial problem to determine “What
happened to the money?”.
Forensic accounting can be broadly classified into two categories
encompassing investigative accounting and litigation.
Litigation support—Providing assistance in areas of
finance and accounting in a matter involving existing or pending
litigation, arbitration or mediation, with a primary focus
on issues relating to the quantification of economic losses
or damages in such areas as shareholder and marriage disputes,
personal injury or death, eminent domain, financial crimes;
claims for warranty, product liability, intellectual property
and insurance; insolvency litigation, missing assets and breach
The forensic accountant analyzes the transaction through such
services as accounting reconstruction, accounting analysis,
business valuation, share and option valuation, contract analysis,
revenue recognition, commercial damage calculations, economic
loss calculations, investigation of fraud, conversion, embezzlement,
fraudulent transfers, due diligence examinations, contractual
compliance assessment, royalty audits, and asset tracing.
Investigative accounting– Concern with transaction of
a criminal nature. These crimes might include employee theft,
securities fraud, insurance fraud, kickbacks, advance fee
frauds or even the hiding of assets by one spouse from the
other … often tracing cash transactions by transaction,
bank account by bank account and entities by entity.