An Overview of Forensic Accounting

Introduction

The popularity of forensic accounting and the demand for forensic accountants has increased considerably in the past few years. This is due, in part, to the increase in corrupt business practices and crimes such as financial fraud. "A nationwide study conducted by Kessler International showed that 39 percent of organizations have considered the need for a forensic accountant" (Study Revealed that Forensic Accountants Needed) and U.S. News & World Report lists forensic accounting in its "20 Hot Job Tracks" of the future (U.S. News & World Report).

Forensic accounting is a form of investigative accounting and auditing that provides information to police and litigators on a variety of business crimes. It "provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution" (Forensic Accounting Demystified). Forensic accountants provide several services that help detect and report fraudulent financial activity. These services can be broken down into two distinct areas: investigative accounting and witness testimony.

Investigative Accounting

Forensic accountants provide a variety of investigative accounting services. Investigative services include, but are not limited to, fraud detection, investigation into accounting violations, theft audits, records tampering investigation, and exposing tax evasion.

Fraud detection provides analysis of debit and credit information to determine whether fraud is currently being or has been committed. This includes tracking and examining transactions for suspect activity. The forensic accountant will often be required to reconstruct historical transactions in order to detect fraud.