Forensic accounting is the process used to examine or investigate the financial activities of a business or an individual. It provides an analysis that you could use for legal proceedings.
Also called forensic audit or financial forensics, this procedure requires experienced accountants who specialise in investigating fraud, embezzlement, and other disputes concerning money.
Here are some things you need to know about forensic accounting.
How does it work?
Forensic accountants examine data and relevant financial documents to find out where the missing money has gone. They also determine the best way to recover the money for you.
During the investigation process, forensic accountants collect evidence based on fraud suspicions. Apart from looking into your books, and taking notes of red flags and discrepancies, they may also interview members of the organisation to understand how the business operates.
Forensic accountants would determine how the fraud happened and which individuals participated in the fraud. They will provide the company with recommendations on how to handle the situation. Furthermore, forensic accountants would suggest steps to help the business secure their internal processes, reducing any risks that fraud would occur again in the future.
Litigation is the last step in forensic accounting. Once the investigation is complete, your forensic accountants will compile their findings in a comprehensive report and present them to court as evidence. Consequently, they may testify as witnesses, too. They are expected to present their report and testify against those responsible for the fraud. Additionally, forensic accountants could be asked to interpret financial documents and explain how they came up with their conclusions.
When do you need it?
You can use forensic accounting in various situations. But mostly, they are used for the following:
- Family and marital disputes — A family member stealing funds or hiding money could be the source of stress and problems for the rest of the family. Forensic accounting could help iron out issues among family members.
- Insurance claims — Forensic accountants verify the accuracy of the claims to help businesses avoid fake claims.
- Misappropriated assets — Did you know that misappropriated assets could be categorised as property theft, embezzlement, or even payroll fraud? Forensic accountants could help you pinpoint discrepancies in your books.
- Bankruptcy claims —Before filing for bankruptcy, consider hiring forensic accountants to help you determine if there is any foul play involved in your financial situation. They could also help you regain your financial footing by analysing what has gone wrong in your business.
Do you want learn more about forensic accounting? Kidmans Partners is ready to assist you. Call us at (+613) 9836 2900 or fill out our contact form for more information on our forensic accounting service.