Contents -

1. Introduction, Meaning and Definition of Forensic Accounting.
2. Need for Forensic Accounting.
3. Scope / Areas of Forensic Accounting.
4. Basics and Role of Forensic Accounting.
5. Skill Needed for Forensic Accountant.


Introduction -

The growth of the public limited liability companies and large increase in the number of investor owning share and the divorce of ownership from control of companies has called for regular auditing of Corporate financial report.
The objectives of the ordinary audit of financial statement by the independent auditor according to AICPA (1992) is the expression of an opinion on the fairness or otherwise in all material with respect to financial position, results of operations and its cash flow in keeping with generally accepted Accounting Principles.
However, modern organised corporate frauds are sophisticated, and well organised by manager, entrepreneur and politicians to mention but few. There is the need to respond to this changing criminal thread and the skill of non traditional investigators like accountant and Legal Experts are needed to combat the corporate ill, this has aroused the call for forensic accountant.

Meaning of Forensic Accounting -

Forensic accounting is the practice of utilising accounting, auditing and investigative skill to assist in legal matter and the application of specialised body of knowledge to the evidence of economic transaction and suitable reporting for the purpose of establishing accountability for valuation of Administrative proceeding. In a wider sense, it can be said as the integrity of accounting, auditing and investigative skills to obtain a particular result.
US News and World report listed "forensic accountant" as one of the 20 hot job tracks of the future and has made this branch of accounting trendy. But kessler International experts said that the fields popularity has attracted many inexperienced Accountants who lack skill to carefully and cost-effectively conduct inquiries.
However, Forensic accounting is different from the old debit or credit accounting as it is provides and accounting analysis that is suitable to the organisation which will help in resolving the disputes that arise in the organisation.
Forensic accountant utilise accounting, auditing and investigation skill while conducting an investigation. These accountant are trained to look into the disputes in a number of ways. They are often retained to analyse, interpret, summarise and present a complex idea in a manner which is understandable and probably supported by the fact and figures.
Also they are often involved in various activities such as investing and analysing financial evidence, developing computerized application exhibiting documents and presenting the evidence obtained.

Definitions -

1. Websters Dictionary -
Forensic accounting means, "Belonging to, used in for suitable to court, of judicature or to public discussions, debate and ultimately disputes resolutions, it is also defined as an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution."

2. Dictionary of accounting terms -
"Forensic accounting is a science (i.e. a department of systemised knowledge) dealing with the applications of accounting facts gathered through auditing methods and procedure to resolve legal problems."


Need for Forensic Accounting -

The need for forensic accountant arose because of the failure of audit system in the organisation as the organisational internal and external audit failed to figure certain errors in the managerial systems. 
Experts in the field pointed out that the intense economic pressure, with more companies facing bankruptcy, jobs and careers are at risk and employees feel pressured to maintain and support performance level forcing many to commit corrupt and whatever the reasoning may be, more and more forensic accountants are being called up to meticulously search through document, Discover a new information and help in putting together the irregular pieces of company financial puzzles to solve the vaxing problem. The following are the important reason for the growth of forensic accounting.

1. Failure of audit -
Internal audit and audit committee as a point of the management function could not through light on the different facts and other hidden aspects of corporate fraud.

2. Defective audit appointment method -
Rotation of the statutory auditor touches as part of the problem while it refuses emphasis but it adversely need longer duration. The method of appointing the statutory auditors used not foolproof as its books collusion and lobbying.

3. Position of internal auditors -
The internal auditor can surely detect what was happening but they are hardly in a position to initiate proper action in proper time.

4. Failure in scrutiny of certificates -
The certificate of the auditors are hardly scrutinized carefully especially when the reports are unclean and qualified. 


Scope / Areas of Forensic Accounting -

The new and ground-breaking accounting has to main areas which are :

1. Litigation support and investigation -
The former represent the factual presentation of economic issues related to existing litigation. In this capacity, the forensic accounting Sustained by parties involved in the legal disputes and can assist in resolution dispute, even before they reach the contraction, if dispute researchers the court room, the forensic accountant may testify as an expert witness.

2. Dispute resolution -
On the other hand the latter is the out of determining, whether criminal matters such as securities fraud which include financial settlement, identify theft and insurance fraud etc. in such Complex cases forensic accountants make some recommendations / actions that can be taken to minimize future risk or loss.


Basics of Forensic Accounting -

Forensic Accountants are more than just number crunchers who happen to work on criminal or civil disputes these accountants possess additional skills. They must conduct investigation, know how to use a variety of computer programs and communicate well. Some forensic accountant specialised in specific Industries that are susceptible to fraud, such as insurance or banking and learn the business practices associated with those fields.
A forensic accountant May come upon a scene like this one when working with law enforcement. Because the reputation of individuals and companies are at stake, forensic accountant must be very discreet when conducting their investigation. They must be independent and impartial, taking into account both the financial records and the conduct of employees. Unlike other accountants, when forensic accountants conduct audits, they are actively looking for sign of fraud. In addition to examining financial statement to determine whether they are accurate and complete, they may seek out internal databases and court records. Because people committing fraud have hidden the evidence of their crimes, forensic accountants must look beyond the number and anticipate criminal actions.
Regardless of whether their assignments are criminal or civil, these accountants follow of same forensic accounting basics when conducting their investigations.

1. Initial Research -
First, they meet with a government representative, attorney or other client to learn the specifics of the alleged frauds. Then, they being their initial research and plan the logistics of the investigation.

2. Gathering Records -
The next step is to search the records from bank statements, credit statement, journals, ledgers, database, email and memos anything that will offer a bigger picture of the financial situation.

3. Interviews -
After gathering the records, forensic accountant often conduct interviews with the accused and other involving parties to get individual stories about the in irregularities, forensic accounting must process observational skills to pick up subtle hints or suspicious clues that may eventually lead them to the perpetrator. Claus may include new cars, numerous vacations and starting additional businesses without other visible sources of capital.
How far will forensic accountant go to obtain information ?
It all depends on the nature of the case. In criminal cases, they usually work with law enforcement and the district attorney office. Just as with other type of evidence, the process prosecution must often search warrant and summons to locate financial information and compel knowledgeable people to give interview about the situation in question. If the case is civil, their are empowered by the client, who is usually a part of the company being investigated or holes agreements that permit accounting investigations.

4. Analysis -
After gathering all of the information, a forensic accountant begins the analysis. He or she may be trace the Assets of the company, calculate the total loss and exactly how in occurred, and summarise various transactions. The final step (unless the accountant is also testifying in court) is to prepare a report detailing the plan of action and what the investigation uncovered. This may include graphs, charts, separate sheets and other methods of explaining the case.

5. Litigation Support -
In addition to investigating, forensic accountant may provide litigation support. Attorneys engage the services of forensic accountants to review existing documentation and testimony and explain their financial significance. A forensic accountant can tell the attorney what additional information may be needed to prove the case and what question to ask of witnesses. The forensic accountant may also review damage report and state whether the report was put together accurately and supports the case.


Role of Forensic Accountant -

A forensic accountant is often retained to analyze, interpret, summarize and present complex financial and business information in a manner, which is both understandable and properly supported.
A forensic accountant is time and again involved in the investigating and analyzing financial evidence development of computerized application to assist in the analysis and presentation of financial evidence communicating their findings in a form of report exhibits and collection of document and assisting in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence.
The role of forensic accountant can be explained with the following points :

1. Advice -
Giving preliminary advice as an initial appraisal of the pleading and evidence available at the start of proceedings.

2. Identification of key documents -
Identifying the key documents which should be made available as evidence. This is important when the forensic accountant is acting for the defense and lawyers are preparing lists of documents to tender in court.

3. Preparation of report -
Preparing a detailed balanced report on quantum of evidence, written in a language readily understood by a non accountant and dealing with all issues, irrespective of whether or not they are favourable to the client.

4. Review of reports -
Reviewing the expert accounting reports submitted by the other party which may have impact on the quantum of evidence and advising lawyers on these reports.

5. Briefing -
Briefing legal counsels of the financial and accounting aspects of the case during pre trial preparation.

6. Initiative in Environmental accounting -
The other plane of the forensic accountant can initiate measure for introduction of environment accounting to highlight the damage done to the environment by the possible recoupment of such damages or replenishment of lost properties through environmental management continually.
The occupational fraud committed by employees usually involve the theft of Assets and embezzlement and the involvement of employees in kick back schemes or conversion of corporate assets for personnel use, the forensic accountant can intervene and observe the suspected examination of assets, invigilation, inspection or documents and interview of those involved to control such practices.

7. Suggestions -
Experience and these type of engagement enables the forensic accountant to offer suggestions as to internal control that owners could implement to reduce the likelihood of fraud.

8. Criminal investigation -
Besides, the forensic accountant will also engage himself in criminal Investigation on behalf of Police Force, where his report is prepared with the objective of presenting evidence in a professional and concise manner.
These assumptions often involve a detailed analysis of numerous years accounting records to qualify the issues in dispute. He does need an understanding of legal issues of business activities.

Skill Needed for Forensic Accountant -

Arising from the need for forensic accountant is the quality and skill required for the performance of his duties.
Aderibigbe (2000) suggested that a forensic accountant requires high level of competence, integrity and honesty to perform his job. He is one of opinion that a forensic accountant must be thoroughly trained and must prove his competence by passing all relevant examination to become a member of the recognised accountancy body.
He maintained that a forensic accountant should always out with integrity, honesty and probity and must maintain a professional attribute in the performance of his responsibilities.
The skills which are required are numerous but many he must training development during the training years.

1. Ability to review -
An ability to review a large volume of documentation ranging from the more usual accounting records and management information system to memos correspondence and other less obviously financial data and to exact the key issue quickly.

2. Sense of urgency and commitment -
A sense of urgency and commitment which will be ensure promote response when required however slow civil litigation may appear to the onlooker or even to the participants in the dispute.

3. Understanding -
A sound understanding of peculiarity of the various business methods.

4. Hard working -
Adherence of strict time table even when need arises to work for more hours of meet targeted time.

5. Ability to appear objective and professional -
Most essentially an ability to appear objective and professional even when taking part in the inherently partisan process of a court case.

6. Ability to communicate -
An ability to communicate complex theoretical ideas in the manner which is readily understandable by the layman supporting with the fact of figure when necessary without giving an impression of superiority.