Forensic Accounting is the use of investigative techniques, integrated with accounting and business skills to give valuable feedback to a particular person.
As this definition is very broad and lacks detail, an example of where forensic accounting may be used is a good starting point.
Recent publicity related to a fraud perpetrated on a Western Australian transport company by its Chief Financial Officer. Although the company’s financial report was audited by one of the world’s largest auditing firms, the auditors failed to detect that nearly 20% of the company’s assets has been misappropriated.
Audits are conducted to determine whether the company’s financial report provides a “true and fair” view of the company’s financial performance and position. Although sampling is undertaken, auditors may not be breaching their obligations if it is reasonable to rely on information provided by executives.
Although the “man in the street” may believe that auditors are engaged to detect fraud, their role is not to detect fraud.
Forensic Accountants fill the “expectation gap” by undertaking investigations to determine whether fraud has been perpetrated.
This example is just an example and forensic accounting covers various other areas such as:
- Illegal conversions
- Employee irregularities
- Records reconstruction
- Litigation support
For information of the Forensic Accounting service that we offer, contact us at any time.