While for most people ‘forensic’ refers to crime-fighting detectives and scientists on TV, for those in the world of finance, ‘forensic’ has a different association: forensic accounting. This form of accounting is scary to a business owner; forensic implies crime, and nobody wants to be associated with crime. And while forensic accountants do have a role in the judicial system, they also can provide businesses with important benefits.
Forensic accountants go through a business’ files, personnel, and records with a magnifying glass in order to find evidence of any wrongdoing or fraud. These accountants can act on both the legal and investigative side. In terms of the legal side of forensic accounting, in court cases involving finances and financial wrongdoing, a forensic accountant will be requested by the court in order to delve deep into the Defendant’s records to find evidence. Often, these accountants serve as expert witnesses and will give a testimony as to their findings.
“While forensic accountants do have a legal side, they also have a very powerful investigative side.”
While forensic accountants do have a legal side, they also have a very powerful investigative side. Businesses may choose to bring in a financial accountant when they are worried about mistakes in their finances, or when they suspect an employee, partner, or stakeholder to be committing fraud. When hired by a business, these accountants can comb through a business’ finances in order to find mistakes or trends that are indicative that something is wrong. Additionally, should a business be sued by another business or a customer, a financial accountant can prove that no malfeasance occurred, thus protecting the business.
While often contracted to conduct thorough checks into financial records, forensic accountants can also take an important role in contract terms, commercial disputes, and payment issues. They are able to prove misconduct or innocence, and, in extreme cases, may be asked to act on behalf of the prosecution or defense, depending on the situation.
“Financial accountants are often involved in business mergers or sales.”
On a positive note, financial accountants are often involved in business mergers or sales. They ensure that both parties are honest as to their financial standing and history so that neither party enters into a deal without proper knowledge.
While not needed every day, it is important to know that forensic accountants may be the ones to call in a variety of situations. If you think you are in need of a forensic accountant, do not hesitate to reach out to a professional!