With the ever-changing business climate, we are seeing an evolving role for the forensic accountant. Going beyond investigative accounting, our role is expanding into a broader, multidisciplinary profession that surpasses a basic understanding of financial records and Generally Accepted Accounting Principles (GAAP).
According to Oxford Dictionaries Online, forensic accounting is: “the use of accounting skills to investigate fraud or embezzlement and to analyze financial information for use in legal proceedings.” Forensic accountants must investigate and analyze a situation and may even be called as an expert witness during a trial. In addition, we are seeing the need for proficiency in not only accounting and finance, but also expert valuation, statistics, computer technology and legal processes. The role of a forensic accountant can be crucial in helping to obtain a beneficial outcome in a settlement or in the courtroom.
A forensic accountant can provide valuable insights for many different scenarios such as financial reporting fraud, shareholder/partner disputes, intellectual property infringement, asset impairment, business valuation, dissolution of marriage and white-collar criminal investigations, among other instances where their expertise in assessing the financial situation can be useful. While the role of the forensic accountant varies greatly from case to case, there are four general areas to describe their role. A forensic accountant may:
- Form the foundation of the case. They will review documents in the discovery stages and help to form the framework of the case as well as determine what information is most relevant.
- Interview individuals pertinent to the case or do background research to help in gathering relevant data.
- Use their specialized skill set to gather and analyze the relevant materials to help support or dispute the information being presented.
- Develop a report based on all the information gathered in their investigation, and if needed, testify as an expert witness. There are also some instances where they may also evaluate and dispute a report presented by an opposing counsel’s expert witness.
Forensic accountants are not always brought on a case to find the suspected fraudulent activity, but can also be called in after the fraud has been detected to assess the magnitude of the fraudulent activity. BPW has assisted clients in tracking down and quantifying damages resulting from embezzlement of cash and other assets as well as misuse of investor’s funds. These types of engagements involve investigating paper trails, analyzing patterns and trends, tracing assets and reviewing accounting books and records in finite detail. The accountants involved in these engagements had to be able to effectively analyze and interpret financial statements and information to determine which avenues warranted further investigation.
There are also times when a forensic accountant is used for more personal matters, such as the dissolution of a marriage. In these instances, the accountant may review the financial situation of each person and their spending to help in the settlement process or to help in establishing accurate support figures for their attorneys to use in court. In performing these types of services for our clients, BPW has performed procedures to trace assets though multiple cash and investment accounts and helped to identify hidden income or assets. We have also prepared calculations pertaining to the equitable distribution of property and debt which sometimes includes interpretation of terms outlined in prenuptial documents. These calculations often can be complex when certain assets such as closely held business and real estate holdings are involved.
If you have any questions regarding a case or situation that may require the expertise of a forensic accountant, please feel free to contact me at (805) 963-7811 or firstname.lastname@example.org.