The Role and Importance of Forensic Accounting Assistance

Forensic accounting is an investigative field that uses technical tools, knowledge, and expertise to establish evidence in a transaction that is under investigation. This specialized form of accounting plays a critical role in various industries, particularly in cases of financial fraud, disputes, and tax audits.

What is Forensic Accounting?

Forensic accounting is the combining of accounting, auditing, finance, and legal skills to conduct fraud investigations. These investigations aim to uncover financial discrepancies, provide expert testimony in court, and assist organizations in preventing financial fraud. A forensic accountant can help gather evidence, analyze financial records, and provide a clear picture of financial transactions, making it essential for businesses and individuals facing financial disputes and suspicious activities.

How to Provide Assistance to a Forensic Accountant

When working with a forensic accountant, it's important to provide them with detailed and organized financial data. This can include:

Gathering bank statements Downloading or inputting financial transactions into a spreadsheet Providing relevant documents such as contracts, correspondence, and other financial records

These activities are crucial in supporting legal proceedings and ensuring that the forensic accountant has all the necessary information to conduct a thorough investigation.

When to Hire a Forensic Accountant

There are several specific circumstances in which individuals and organizations should consider hiring a forensic accountant:

Signs You Should Hire a Forensic Accountant

1. Are You Involved in a Shareholder or Partner Dispute?

Disputes between partners or shareholders can quickly turn into legal battles if not managed properly. A forensic accountant can help determine the fair compensation or benefits owed to each party, ensuring a fair and unbiased resolution. This is particularly important when the disagreement becomes contentious and requires a professional assessment to maintain harmony.

2. Are You Suffering Commercial Damages?

Commercial damages can stem from various sources, including breach of contract, intellectual property infringement, fraud, construction claims, and product liability. A forensic accountant can provide expert testimony in court, helping to explore the complexities of the case and present the facts to support your claims.

3. Have You Identified Employee Theft?

Employee fraud can seriously impact an organization’s financial health. A forensic accountant can investigate the theft, identify the total sum of damages, and recommend measures to reclaim the lost assets and prevent future theft. Through forensic intelligence gathering, suspect interviews, tracing of funds, and other necessary measures, a trained professional can uncover and rectify the total damages in court.

4. Are You Suspicious of Your Business Manager?

Not every manager is trustworthy, and suspicions of fraudulent activities can lead to financial theft. A forensic accountant can perform a fraud risk assessment to identify potential vulnerabilities and prevent further financial harm. By reviewing the standard procedures and identifying any gaps in internal control structure, the accountant can provide actionable steps to reduce fraud risk.

5. Is Your Commercial Insurance Failing to Follow Through?

If insurance claims are not being properly addressed, a forensic accountant can examine coverage issues and calculate the total losses. This ensures that your organization is receiving the correct amount of compensation for any damages or losses suffered.

6. Do You Question the Accuracy of Your Bookkeeping Records?

Accounting malpractice can occur, even in organizations that consider themselves reputable. A forensic accountant can help examine records, uncover the exact actions of the bookkeeper under suspicion, and provide a thorough analysis of the financial statements.

7. Are You About to Sell Your Business?

Selling a business involves a comprehensive evaluation of its value. A forensic accountant can help determine an accurate company value, ensuring that the business is sold at the best possible price. Even if you plan to sell in the future, knowing the value of your business at any given time can help you stay relevant and competitive.

8. Are You Interested in a General Fraud Risk Assessment?

A fraud risk assessment or internal controls review can help businesses address and overcome financial risk. A professional forensic accountant can review the standard procedures that govern a company’s transaction cycles, identify any gaps, and provide practical steps to reduce fraud vulnerability.

Why Should You Hire a Forensic Accountant?

A forensic accountant is a professional trained to identify and rectify cases of fraud or financial instability. They are Certified Public Accountants (CPAs) who further pursue education, rigorous training, and a complex examination. When dealing with cases of fraud, a forensic accountant will abide by two legal principles: Proximate Cause and Reasonable Certainty.

Proximate Cause: Recovery of lost profits and damages is subject to the general principle that damages derive from the illegal incident. The proximate cause oversees the recovery of compensatory damages.

Reasonable Certainty: Damages for lost profits must be proven with reasonable certainty. This means that damages must be capable of measurement based on reliable factors, not speculation.

Forensic accountants bring attention to detail, effective communication, and professional skepticism to every fraudulent investigation, making them a valuable asset for individuals and organizations facing financial disputes and suspicious activities.

Professional Forensic Accounting Services at DHJJ

At DHJJ, we understand that theft and fraud can seriously threaten your business. When fraudulent activity strikes, we provide experienced professional forensic accounting services to help you piece together what occurred.

You can count on us for reliable and experienced forensic accounting services. If you suspect fraudulent activities, please do not hesitate to contact our team at 630.420.1360.

I hope this information helps you make an informed decision about the importance of forensic accounting assistance.

Editor: Mark Mooney

Date: 04.17.2020