What is Forensic Accounting?

Forensic accounting is accounting that is used in the court of law.  Forensic accountants work to provide account information that will stand up in litigation, and as such their work is held to an incredibly high standard.

Forensic accounting involves a variety of techniques that are used to try and prove or disprove the occurrence of a financial crime. Forensic accountants must have an extensive knowledge of business structure in order to pinpoint where illegal or unethical business tactics may or may not have occurred.

Also important in forensic accounting is knowledge of the financial reporting systems.  Forensic accountants must understand how these systems work in order to understand how criminals manipulate the systems. By knowing how most criminals cheat on their financial reports, forensic accountants can find weaknesses in their records that indicate that a crime has been committed or they can show that no such crime has occurred.

Forensic accounting also relies heavily on an extensive knowledge of auditing standards and accounting procedures. Just as important as an understanding of the inner workings of a business and of the financial reporting systems is and understanding of how to properly perform audits, both as a precautionary procedure and as a tool to help pinpoint fraud.

Forensic accounting is an important part of the courtroom; without the work of forensic accountants, financial crimes would go largely undetected. While forensic accountants generally do not offer their own testimony or opinion in court, they reveal the truth through the findings of their work. This is crucial when in court, because without solid evidence a crime cannot be proved or disproved. While the court determines whether or not a crime has been committed, forensic accounting provides the information upon which the court bases its decision.

Just as important as catching criminals in the act is preventing the crime from ever happening, and   forensic accountants work in both capacities. By working with companies to develop and implement preventative procedures, forensic accountants help reduce the risk of financial crimes from being committed.

Forensic accountants are known by many names, including: Chartered Accountants, ACCA’s, Certified Forensic Accounting Professionals, Certified Public Accountants, and Certified Fraud Examiners. Forensic accounting is useful in many different situations, from professional claims of negligence, where the accountants examine the work of others and determine whether or not it is legal, to marital and family law, where accountants help determine what each party needs, for instance how much is required for child support or alimony.