Forensic Accounting

Forensic accounting is an investigation into identified abnormalities within an accounting system, and identifies the root cause of those abnormalities. Commonly utilized as a component of litigation support or fraud investigations, Forensic accounting traditionally involves misappropriation of assets or fraudulent reporting. Specific engagements that can fall under the forensic accounting umbrella include:

• Forensic audits
• Damage calculations
• Due Diligence and compliance audits
• Investigation of fraud, money laundering, or embezzlement
• Analysis of accounting issues in complex commercial litigation
• Bankruptcy or business proposal analysis
• Reconstruction of accounting records
• Preparation or analysis of insurance claims
• Participation in settlement negotiations
• Identification of departures from customary business practices or professional standards
• Expert witness testimony for demonstration/communication purposes

Forensic Accounting Engagement Phases

A typical forensic engagement includes the following processes:

Pre-engagement and planning procedure phase

• Fact-finding and basic firm overview
• Conflict of interest
• Preparation of preliminary fee estimate
• Determine scope of engagement and develop agreement with client

Investigation Phase

• Ascertain financial records, legal procedures
• Identify and evaluate fraud exposure
• Obtain and inspect relevant documents
• Plan and conduct interviews
• Evaluate evidence

Reporting and Wrap-up Phase

• Prepare investigative findings
• Discuss with client and client’s attorney
• Prepare reports and/or testify

Each forensic engagement stands on its own merits. The initial meeting with the client in which the scope of work is determined, also defines the extent of the procedures to be utilized throughout the investigation. The above is a general outline and should be used as a guide – the nuances of each engagement are what make them unique.