Forensic Accounting

Hendrix & Barney
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What is Forensic Accounting?

Forensic accounting is a specialized practice area of accounting that employs procedures in an attempt to uncover financial irregularities that indicate the presence of willful misleading activities, internal and/or external theft, and various types of fraud within any sort of business.

With the recent economic downturn, we have seen an increased demand for forensic accounting services as the public deals with financial collapses, increased white collar crime, and growing occurrences of occupational fraud. The Association of Certified Fraud Examiners (ACFE) estimates that occupational fraud losses cost organizations $994 billion annually.

Today’s marketplace requires the forensic accountant to possess a different skill set from the traditional accountant. Many people believe forensic accounting and fraud auditing are the same. They are not. A fraud auditor is an accountant who is generally engaged in auditing with a view toward fraud discovery, documentation, and prevention. A forensic accountant may take on fraud auditing engagements and may in fact be a fraud auditor, but he or she also will use other accounting and consulting skills in broader engagements. In addition to the accounting and investigative skills that should certainly be present in the fraud auditor, the forensic accountant needs a working knowledge of the legal system and excellent quantitative analysis and communication skills to carry out expert testimony in the courtroom and to aid in other litigation support engagements.

Forensic accountants are employed to seek, interpret, and communicate transactional and reporting event evidence in an objective, legally sustainable fashion, not only in situations in which there are specific allegations of wrongdoing, but also in situations in which interested parties judge that the risk of loss from wrongdoing is such that proper prudence requires legally sustainable evidence to support the conclusion that no wrongdoing is occurring.

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