What Are The Applications Of Forensic Accounting?   by Matthew Kerridge

in Finance / Accounting    (submitted 2010-02-18)

Forensic accounting is a specialized branch of accounting that deals with such diverse issues as fraud, theft, and money laundering. A forensic accountant is often also used to derive the true value of a business or its losses. In all cases, the focus is not only on what happened or who did it, but how to present the evidence in court.
Many law enforcement agencies make use of forensic accountants to follow a money trail. This can lead to evidence of tax evasion, money laundering, embezzlement, or other malpractice. For example, when a business burns and arson is suspected, an examination of the books may prove or disprove that the business stood to benefit from the fire.
Divorce attorneys may use a forensic accountant to discover where a spouse has concealed assets. Sometimes, the question to be resolved is how much of a business belonging to one spouse is a fair portion for the other. They may also be used to establish alimony or child support payments, especially when the responsible party is self employed.
A writer or artist who suspects royalty payments are being underpaid might request an audit of the company. By comparing sales and expense records to royalties paid, a forensic accountant can arrive at an answer. If necessary, he or she can provide clear, concise reports and offer testimony in a court of law.
Banks sometimes need to know exactly what a company is worth before approving a loan. A careful examination of their books by an accountant trained to look for evidence of fraud or deceptive practices can be the difference between whether the loan is offered or not.
Forensic accounting is a specialty branch of accounting that offers an interesting career path for those with the skills and desire. Seldom will any two assignments be the same, so the field provides a great deal more variety than most accounting categories.