Forensic Accounting: When one would need it   by Nasreen Haque

in Finance / Accounting    (submitted 2010-02-16)

Forensic Accounting: When one would need it
Forensic accounting is used in a wide variety of situations. Any time that there is a suspicion that funds are being hidden or that money has been handled in an inappropriate way, forensic accountants may be called upon to review the books and business practices of a person or a company. In many cases, forensic accountants are used to look for criminal activity. However, this form of accounting is also needed in many civil court cases. Forensic accountants may also review a company's accounting procedures as part of the normal course of business when no crime has been committed and no court action is contemplated. In these situations, forensic accounting provides assurance that financial reports accurately represent the economic condition of a business or individual.
Forensic accountants are often the most significant witnesses in many federal criminal cases. Charges involving money laundering, embezzlement and fraud require expert analysis of accounting information. Corporate crimes that make the headlines are often discovered by forensic accountants who dig out information that was cleverly hidden in a company's books. This sort of white collar criminal charge has become a significant part of the investigative work of the Federal Bureau of Investigation. The FBI lists college graduates who majored in Accounting among their top priorities for recruiting.
Many civil court cases also require the use of forensic accounting. In divorce cases, accountants may be asked to search to see if one of the parties is hiding assets. Forensic accountants can be involved in determining proper levels of child and spousal support. And, in complex cases, they may determine the value of community property for the purpose of making a fair division of joint assets.
Litigants in business disputes may call upon forensic accountants to review financial information to determine if claims are true. In both business and personal injury claims, forensic accounting is used to determine the appropriate amount of damages. In a personal injury case, they use standard methods to determine the monetary value that should be placed on the loss that was suffered.
Corporations and individuals who are purchasing a business go through a process of due diligence to determine whether or not they should acquire a particular company and how much they should pay. Since some businesses may have gaps or ambiguities in their records, forensic accounting techniques may be used to find out if the company is hiding significant financial data.