Forensic Accounting: Financial Fraud Investigation

Forensic accounting has become popular due to the increase in fraud and financial crime. It is used to identify and assess complex and high-profile financial crimes. Forensic accounting with the integration of specialized skills in investigation, accounting, auditing, etc investigates financial crimes of an individual and business organization. Forensic accountants with experience in the field provide a detailed analysis appropriate for use in a court, are also called “financial detectives”. Initially, forensic accounting was used by the insurance companies to quantify the damages arising from the accidents, medical insurance malpractice, etc. now it is used to identify and assess the frauds in construction claims, falsification of financial statements, hidden assets in divorce cases, breach of legal contracts, disagreements relating to company acquisitions, patent infringements, product liability claims, etc. From the year 2020 forensic accounting is one of the important fields in accounting with sub fields like tax and securities fraud identification, business valuation etc.

The most important work of a forensic accountant is to analyze the key accounting statements and data, summarizing and interpreting the data to provide as supporting proof for legal issues and to perform these tasks an accountant must have expertise in the legal procedures with the required qualification. Qualified forensic accountant will assist the police in identifying the financial crimes which includes both individuals and entities. The forensic accountant will use their investigative and creative accounting skills to analyse the key documentation and other evidence available to provide their expert opinion on the issues and also their services could also be used by public administrations, the Revenue Agency, the Fire Department, etc. for investigative purposes.

In India forensic accountants are qualified CPAs, but internationally, they are Certified Fraud Examiners (ACFE) or Certified in Financial Forensics (AICPA). As per 2018 report 48% of occupational fraud and crime cases were reported from the US followed by sub-Saharan Africa with 13% become second region and in the same report, it is also observed that 53% of respondents worked in-house, conducting fraud examinations on behalf of a single company or agency, while only 27% worked at professional services firms for client organizations. Although many U.S. CPA choose to specialize in legal accounts, non-CPAs work as internal auditors and other consultants.

Forensic accountants not only involved in financial fraud investigation but also work in fraud prevention. Training efforts can have significant effects, not just on a single company or agency, but on an entire economy. The United Nations, the Global Fund organizations, and the World Bank are increasingly adjusting their funding resources towards the objective of strengthening fraud investigators and to raise awareness of the dangers that fraud specifically has to develop economies.

With growing business and financial frauds, the importance for forensic accounting will also increase and with the required skills forensic accountants will become major assets to modern legal teams.

Prof. Ramya H P,
Assistant Professor


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