FORENSIC ACCOUNTING

Introduction Forensic Accounting is the fastest growing area of Accounting today.

Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial. All of the larger accounting firms, as well as many medium-sized and boutique firms, have specialist forensic accounting departments. Within these groups, there may be further sub-specializations: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims, fraud, construction or royalty audits

Engagements relating to civil disputes may fall into several categories: calculating and quantifying losses and economic damages, whether suffered through tort or breach of contract; disagreements relating to company acquisitionsperhaps earn outs or breaches of warranties; and business valuation. Forensic accountants often assist in professional negligence claims where they are assessing and commenting on the work of other professionals. Forensic Accountants Forensic accountants are also engaged in marital and family law of analyzing lifestyle for spousal support purposes, determining income available for child support and equitable distribution. Engagements relating to criminal matters typically arise in the aftermath of fraud. They frequently involve the assessment of accounting systems and accounts presentation in essence assessing if the numbers reflect reality.

Some forensic accountants specialize in forensic analytics which is the procurement and analysis of electronic data to reconstruct, detect, or otherwise support a claim of financial fraud. The main steps in forensic analytics are (a) data collection, (b) data preparation, (c) data analysis, and (d) reporting. For example, forensic analytics may be used to review an employee's purchasing card activity to assess whether any of the purchases were diverted or divertible for personal use. Forensic Accountants work in most major accounting firms and are needed for investigating mergers and acquisitions, and in tax investigations, economic crime investigations, all kinds of civil litigation support, specialized audits, and even in terrorist investigations. Forensic Accountants work throughout the business world, in public

accounting, corporations, and in all branches of government (from the FBI and CIA to the offices of the local authorities).

ICAI and Forensic Accounting

The Council of the Institute of Chartered Accountants of India, recognizing the need for Forensic Accounting and Fraud Detection, in the emerging economic scenario, has decided to launch this Certificate Course on Forensic Accounting and Fraud Detection using IT and CAATs. Forensic Accounting and Fraud Detection specialisation is in increasing demand considering increasing incidents of cyber crimes and frauds detection. It is the practice of utilizing accounting, auditing, CAATs/ Data Mining Tools, and investigative skills to detect fraud/ mistakes.

Assessment of the damages Fact finding to see whether fraud/ embezzlement has taken place Collection of evidences Investigating and analyzing financial evidences

QUESTIONS RELATED TO THE TOPIC 1. 2. 3. 4. Define Forensic Accounting. Explain the ares where the forensic accountants are engaged. What are the steps in forensic analytics? Explain the role that ICAI plays in the area of forensic accounting.

Source :

Wikipedia, ICAI website

Compiled by Gayathri Mohan J gayathrimohanj@gmail.com Mob: 9746926725/ 8089904693