An Understanding of Forensic Accounting Methods
In comparison to general accounting methods, the forensic accounting methods are different or in other words, they are more technical. In fact, forensic accountants are considered as representatives of both – an auditor and private investigator. Even their job demands special skills and knowledge such as research, investigation skills, law, quantitative methods, auditing, finance, accounting, and law enforcement officer insights. In addition, they also need to know the applied psychology knowledge and skills to understand the issues better.
Generally, forensic accountants work as financial intermediaries for government firms, divorce attorneys, bank and insurance organizations. Their chief work is to testify civil and criminal court hearings by presenting evidences; hence, they serve as expert witnesses. Forensic accountants have various organizations that support their work.
The method used by the forensic accountants includes litigation services pertaining to business transactions, property damage, lost profits due to embezzlement, evaluation of divorce assets, and some other illegal acts such as money laundering schemes and tax evasion.
By understanding the current situations, forensic accountants are the only people who can apply the proper methods to investigate the fraud and other illegal activities occurred in the business. A fraud can be exposed through various methods as for example - by the regular activities of the internal audit team. However, it is applicable only to the small businesses; for big companies, corporate frauds need to be investigated only by a forensic accountant. A forensic accountant not only finds the fraudulent employee but also find out how the fraud happened in the first place as well as to prevent further losses impacting(use a better word) the organization. He/she also makes it possible to recover the potential losses that have taken place by tracing them from the company to its destination.
Since, all sorts of fraud are different from each other identified by the various distinguishing characteristics e.g. mortgage fraud, bank fraud, and insurance fraud; therefore, the methods used by the forensic accountants are also designed very skillfully so that they can successfully unearth the frauds accordingly. The reason is – it is possible that the fraudulent may be very smart in finding out new and different weaknesses in the business.
Moreover, by following the actual methods of investigation, the forensic accountants primarily trace the embezzled money. For them, tracing of the money is the first objective because it not only ensures a chance of getting the money back, but also endows with the evidence of why and how the fraud has taken place. Hence, the forensic accountant presents a better result plan and discusses the outcome of the issue with the company and then develops an investigation strategy based upon any contingency policy.