Forensic accounting is a rapidly growing branch of accountancy that combines financial handling with civil and criminal investigations.
'Accounting' is the handling of finances.
'Forensic' describes evidence that is suitable for presentation within a court of law.
Forensic accounting is therefore the gathering of financial records for use as evidence in legal disputes over money.
Forensic accountants provide two main services:
- Litigation support - This involves prepping a team of lawyers with sufficient information and evidence to help them argue a case in court.
- Investigative accounting - This involves investigating financial accounts of suspected criminals operating fraudulent activities.
The origins of forensic accounting
The demand for a forensic accounting service has grown steadily over the years, along with the increase of fraud and damages claims.
The profession famously hit the media spotlight in 1931 when Chicago mafia mob boss Al Capone (Scarface), was finally caught by accountant Agent Frank J. Wilson, leading to the phrase "only an accountant could catch Al Capone".
Although Wilson did the job forensic accountants do today, the actual term 'forensic accountant' wasn't coined until over a decade later, in a 1946 issue of the Journal of Accountancy.
Why would I need to hire a forensic accountant?
Fraud - You suspect an individual or organisation of intentionally trying to make a gain at the expense of another individual or organisation. Forensic accountants have the technical knowledge solicitors may lack to sufficiently investigate fraud claims.
Personal injury claims - You have suffered from an injury that happened as a result of another individual's or organisation's negligence and need financial expertise to calculate the damages owed.
Alternative dispute resolution - You need a financial expert to act as an objective middleman to settle a dispute you do not want to take to court.
Medical negligence - You have sustained a loss as the result of a health professional's negligence and you need someone to calculate the damages.
Commercial disputes - You believe you have sustained a loss as a result of a business disagreement and as such deserve compensation.
How do I hire a forensic accountant?
Forensic accountant are more commonly hired on a case-by-case basis, although some larger accounting firms do employ in-house forensic accounting teams.
Different forensic accountants have expertise in different fields. It is therefore worth contacting a number of forensic accountants before deciding who to hire. Browse through our forensic accounting subpages to learn more about the services forensic accountants offer.
How do forensic accountants work?
The following information should be taken as an example only.
The methods forensic accountants use and the steps they take to conduct financial investigations can differ from person to person but it is likely to involve the following:
- Meeting - The first step for a forensic accountant is to meet with the client or the client's representative. Here they will learn the specifics of the case at hand and discuss a plan of action.
- Plan of action - With the client's approval, a forensic accountant will then begin preliminary research. This research will be used to develop a plan of action.
- Investigation - Once the plans are in place, the investigation can commence. The investigation may involve interviews, analysis of financial paperwork, (such as bank statements) and the examination of records (including emails, journals or any other source of information).
- Conclusion - Based on the information obtained, the forensic accountant will then reach a conclusion and advise the client on the next stage of action.
- Litigation support - The financial accountant may wish to meet with solicitors and even appear in court to provide evidence as an expert witness.
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