Forensic Accounting in Practice

Forensic Accounting in Practice

Introduction

Today's rapidly advancing and globally competitive business environment, several businesses are using unethical or illegal business practices that make legal practices highly significant. Forensic accounting is one of the accounting practices associated with legal dispute related to accounting/finance, and thereby holds an immense significance. It generally refers to fraud, fraud investigation, and fraud prevention. Forensic accounting is mainly the application of investigation as well as analytical skills in order to resolve financial problems in a way that fulfills the requirement of standards of court of laws (Pedneault et al, 2012).

Figure 1: Focus of Forensic Accounting

(Source: Davis, Farrell, & Ogilby, 2013)

Therefore, a forensic accountant is the one who applies special skills in auditing, accounting, qualitative methods, finance, certain areas of law, research and investigation skills to gather, interpret, and assess evidential matter, and to communicate findings (Pedneault et al, 2012). Thus, forensic accounting is the application of financial standards and theories to the hypothesis or facts at issue in a legal dispute and provides two key functions: investigation services and litigation advisory services.

Five Most Significant Skills That a Forensic Accountant Needs To Possess

The cases that concern forensic accounting include wide range of business issues and disputes that require a forensic accountant to possess variety of skills such as interviewing or investigation skills. Five most significant skills that a forensic accountant needs to possess are stated and discussed below.

Investigation Skills

Investigation skills basically refer to researching, collecting, analyzing, and interpreting the information. In case of forensic accounting, investigation skills hold a vital place as investigation is the major part of this forensic accountant's job. Forensic accountant needs to have auditing and accounting skills, since these skills facilitate him in core investigation practices. Such key skills are complemented with financial matters' experiences like financial forecast of a company, budgeting, or working capital management. These investigation expertises demand the forensic accountant to possess some computer skills, since it plays a vital role in his investigation arsenal (Gabriele, 2008; Pedneault et al, 2012). Thus, a forensic accountant is required to possess investigation skills that facilitate him in researching, gathering, analyzing, and interpreting the information related to the accounting dispute.

Interviewing Skills

Most types of forensic investigation demands the knowledge of effective interviewing techniques. Forensic accountant cannot just base his investigation and findings on paper trails, documents, or computer databases to provide and justify his evidences. In most of the scenarios, the accountant is required to acquire information from people who are supposed to have critical information. Interviewing skills facilitate the forensic accountant in obtaining information that identifies major problems of a case, and thereby leads to other sources of evidence as well. For example, the accountant can acquire information about personal backgrounds of those involved by using his interviewing techniques. In addition, forensic accountants can use the interview techniques in order to have the collaboration of eyewitnesses as well as victims. As in the cases of forensic accounting, attorneys and accountants collect the case evidences piece by ...