Forensic accounting

Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial. All of the larger accounting firms, as well as many medium-sized and boutique firms and various Police and Government agencies have specialist forensic accounting departments. Within these groups, there may be further sub-specializations: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims, fraud, Anti-Money Laundering, construction, or royalty audits.

Financial forensic engagements may fall into several categories. For example:

Forensic accountant

Forensic accountants are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activities from occurring. They also provide services in areas such as accounting, antitrust, damages, analysis, valuation, and general consulting. Forensic accountants have also been used in divorces, bankruptcy, insurance claims, personal injury claims, fraudulent claims, construction, royalty audits, and tracking terrorism by investigating financial records. Many forensic accountants work closely with law enforcement personnel and lawyers during investigations and often appear as expert witnesses during trials.

Tasks performed

Forensic accounting or forensic accountancy has been used since the time of the ancient Egyptians when Pharaoh had scribes account for his gold and other assets. These scribes worked in Pharaoh's courts and were charged with fraud prevention and detection. Their role stayed much the same until the turn of the 20th century. As an accountant they must have knowledge of the latest accounting standards and procedures, be proficient in many different Financial Reporting Systems being used, and be able to provide recommendations that will strengthen internal controls. They also need to have an understanding of the different monetary units used internationally due to the different types used in foreign accounts or companies. As an auditor they must perform regular financial audits to prevent possible situations that could lead to fraud. As an attorney they must know the current Federal and State laws and regulations, and should be able to approve or disprove suspicions of fraud. They may also be called to be an expert witness in a court trial so they must be able to communicate well and at a level that is understandable by individuals without accounting knowledge.

Forensic science

Forensic science is the application of science to criminal and civil laws. Forensic scientists collect, preserve, and analyse scientific evidence during the course of an investigation. While some forensic scientists travel to the scene to collect the evidence themselves, others occupy a purely laboratory role, performing analysis on objects brought to them by other individuals. In addition to their laboratory role, forensic scientists testify as expert witnesses in both criminal and civil cases and can work for either the prosecution or the defense. While any field could technically be forensic, certain sections have developed over time to encompass the majority of forensically related cases.

Etymology

The word forensic comes from the Latin term forēnsis, meaning "of or before the forum." The history of the term originates from Roman times, during which a criminal charge meant presenting the case before a group of public individuals in the forum. Both the person accused of the crime and the accuser would give speeches based on their sides of the story. The case would be decided in favor of the individual with the best argument and delivery. This origin is the source of the two modern usages of the word forensic – as a form of legal evidence and as a category of public presentation. In modern use, the term forensics in the place of forensic science can be considered correct, as the term forensic is effectively a synonym for legal or related to courts. However, the term is now so closely associated with the scientific field that many dictionaries include the meaning that equates the word forensics with forensic science.