Forensic Accounting

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1. What is Forensic Accounting ?

The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting. "Forensic", according to the  the Webster's Dictionary means, "Belonging to, used in or suitable to courts of judicature or to public discussion and debate." "Forensic Accounting", provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution. Forensic Accounting encompasses both  Litig  Litigation ation Supp Support  ort and Inves  Investigati tigative ve  Accounting   Accou nting . As Forensic Accountants, we utilize accounting, auditing and investigative skills when conducting conducting an investigation. investigation. Equally critical is our ability to respond immediately and to communicate financial information clearly and concisely in a courtroom setting. Forensic Accountants are trained to look beyond the numbers and deal with the  business reality of the situation. situation.  Other Terminology

Forensic Investigation The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of  law. A Forensic Inves Investigation tigation may be gr grounded ounded in accounti accounting, ng, medicine, engineering or some other discipline. Forensic Audit An examination of evidence regarding an assertion to determine its correspondence to established criteria carried out in a manner suitable to the court. An example wo would uld be a For Forensic ensic Audit of sales rrecords ecords to determine the quantum of rent owing under a lease agreement, which is the subject of  litigation. Internal Audit

 

An audit performed by an employee who examines operational evidence to determine whether prescribed operating procedures have been followed. External Audit An audit performed by an auditor engaged in public practice leading to the expression of a professional opinion which lends credibility to the assertion under examination.  

2. What is Litigation Support ?

"Litigation Support", provides assistance of an accounting nature in a matter  involving existing or pending pending litigation. It deals primarily with iss issues ues related to the quantification of of economic damage damages. s. A typical lit litigation igation support assignment would be calculating the economic loss resulting from a breach of  contract 3. What is Investigative Accounting ?

"Investigative Accounting", is often associated with investigations of criminal matters. A typical inve investigative stigative accounting assig assignment nment would be an investigation of employee employee theft. Other examples incl include ude securities fraud, insurance fraud, kickbacks and proceeds of crime investigations  . What What does a For Forensic ensic A Accoun ccountant tant d do? o?

A Forensic Accountant is often retained to analyze, interpret, summarize and  present complex financial and business business related issues in a man manner ner which is both understandable and properly supported. Forensic Accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other  organizations. A Forensic Accountant is often involved in the following: •

Investigating and analyzing financial evidence; 

 







Developing computerized applications to assist in the analysis and  presentation of financial evidence; evidence;  Communicating their findings in the form of reports, exhibits and collections of documents; and  Assisting in legal proceedings, including testifying in court as an expert witness and preparing visual aids to support trial evidence. 

In order to properly perform these services a Forensic Accountant must be familiar with legal legal concepts and pro procedures. cedures. In addition, a F Forensic orensic Accountant must be able to identify substance over form when dealing with an issue.  5. How can a Forensic Accountant be of assistance?

A Forensic Accountant can be of assistance in various ways, including:  Investigativ  Invest igativee Acco Accountin unting  g  •

Review of the factual situation and provision of suggestions regarding  possible courses of action. 



Assistance with the protection and recovery of assets. 



Co-ordination of other experts, including: 

o o o



Private investigators;  Forensic document examiners;   Consulting engineers. 

Assistance with the recovery of assets by way of civil action or criminal  prosecution. 

 Litigation  Litiga tion Supp Support  ort  •

Assistance in obtaining documentation necessary to support or refute a claim.  

 













Review of the relevant documentation to form an initial assessment of  the case and identify areas of loss.  Assistance with Examination for Discovery including the formulation of  questions to be asked regarding the financial evidence.  Attendance at the Examination for Discovery to review the testimony, assist with understanding the financial issues and to formulate additional questions to be asked.  Review of the opposing expert's damages report and reporting on both the strengths and weaknesses of the positions taken.  Assistance with settlement discussions and negotiations.  Attendance at trial to hear the testimony of the opposing expert and to  provide assistance with cross-examination. cross-examination.

6. What types of assignments does a Forensic Accountant perform?

Forensic Accountants become involved in a wide range of investigations, spanning many different different industries. The practical and iin-depth n-depth analysis tthat hat a Forensic Accountant will bring to a case helps uncover trends that bring to light the relevant issues. Detailed below are various areas in which a Forensic Accountant will often  become involved. Criminal Investigations

Forensic investigations often relate to criminal investigations on behalf of   police forces. For example, a Forensi Forensicc Accountant may be retained by the R.C.M.P., the O.P.P., as well as by regional or local police forces and organizations such as the Law Society. A Forensic Accountant's report is prepared with the objective of presenting evidence in a professional and concise manner.  Shareholde  Share holders' rs' an and d Par Partners tnership hip D Disput isputes es

 

These assignments often involve a detailed analysis of numerous years accounting records to quantify quantify the issues in dispute. For example, a comm common on issue that often arises is the compensation and benefits received by each of the disputing shareholders or partners.  Personal  Perso nal In Injury jury C Claims laims / Mo Motor tor Ve Vehicle hicle A Acciden ccidents ts

A Forensic Accountant is often asked to quantify the economic losses resulting from a motor motor vehicle accident. A Forensic Acco Accountant untant needs to be familiar  with the legislation in place which pertains to motor vehicle accidents. Cases of medical malpractice and wrongful dismissal often involve similar  issues in calculating the resulting economic damages.  Business  Busin ess In Interru terruption ption / Othe Otherr Type Typess of In Insura surance nce Cl Claims aims

Insurance policies differ significantly as to their terms and conditions. Accordingly, these assignments involve a detailed review of the policy to investigate coverage issues and the appropriate method of calulating the loss. A Forensic Accountant is often asked to assist from either an insured or  insurer's perspective in the settlement of a case. Examples of these types of assignments include; business interruptions,  property losses and employee employee dishonesty (fidelity) claims.  Business/E  Busin ess/Employ mployee ee Fra Fraud ud Inv Investiga estigations tions

Business investigations can involve funds tracing, asset identification and recovery, forensic intelligence gathering and due diligence reviews. Employee fraud investigations often involve procedures to determine the existence, nature and extent of fraud and may concern the identification of a  perpetrator. These investigation investigationss often entail interviews of personnel personnel who had access to the funds and a detailed review of the documentary evidence.  Matrimonia  Matri moniall Disp Disputes utes

Matrimonial disputes from a Forensic Accounting point-of-view often involve the tracing, locating locating and evaluation of assets. assets. The assets to be evaluated and valued may be businesses, property or other assets.

 

 Business  Busin ess Ec Econom onomic ic Los Losses ses

Examples of assignments involving business economic losses include; contract disputes, construction claims, expropriations, product liability claims, trademark and patent infringements and losses stemming from a breach of a non-competition agreement.  Professiona  Profes sionall Negl Negligence igence

These investigations are often approached from two different but complimentary perspectives, these being: •



Technical - has a breach of Generally Accepted Accounting Principles or  Generally Accepted Auditing Standards or other standards of practice occurred; and  Loss Quantification. 

If the professional in question is an accountant then a Forensic Accountant could be involved involved with both per perspectives. spectives. If the matt matter er involves some o other  ther   profession a Forensic Accountant Accountant will normally be retained to perform perform only a loss quantification.  Mediation  Media tion a and nd Ar Arbitrat bitration ion

Because of their familiarity and comfort with legal issues and procedures some Forensic Accountants have sought out special training and become involved in alternative dispute resolution (ADR). ADR services both resolve mediation and arbitration and are designed toin help individuals andinclude businesses disputes with minimal disruption and a timely fashion. 

6. What types of assignments does a Forensic Accountant perform?

Forensic Accountants become involved in a wide range of investigations, spanning many different different industries. The practical and iin-depth n-depth analysis tthat hat a Forensic Accountant will bring to a case helps uncover trends that bring to light the relevant issues.

 

Detailed below are various areas in which a Forensic Accountant will often  become involved. Criminal Investigations

Forensic investigations often relate to criminal investigations on behalf of   police forces. For example, a Forensi Forensicc Accountant may be retained by the R.C.M.P., the O.P.P., as well as by regional or local police forces and organizations such as the Law Society. A Forensic Accountant's report is prepared with the objective of presenting evidence in a professional and concise manner.  Shareholde  Share holders' rs' an and d Par Partners tnership hip D Disput isputes es

These assignments often involve a detailed analysis of numerous years accounting records to quantify quantify the issues in dispute. For example, a comm common on issue that often arises is the compensation and benefits received by each of the disputing shareholders or partners.  Personal  Perso nal In Injury jury C Claims laims / Mo Motor tor Ve Vehicle hicle A Acciden ccidents ts

A Forensic Accountant is often asked to quantify the economic losses resulting from a motor motor vehicle accident. A Forensic Acco Accountant untant needs to be familiar  with the legislation in place which pertains to motor vehicle accidents. Cases of medical malpractice and wrongful dismissal often involve similar  issues in calculating the resulting economic damages.  Business In  Business Interru terruption ption / Othe Otherr Type Typess of In Insura surance nce Cl Claims aims Insurance policies differ significantly as to their terms and conditions. Accordingly, these assignments involve a detailed review of the policy to investigate coverage issues and the appropriate method of calulating the loss.

A Forensic Accountant is often asked to assist from either an insured or  insurer's perspective in the settlement of a case. Examples of these types of assignments include; business interruptions,  property losses and employee employee dishonesty (fidelity) claims.  Business/E  Busin ess/Employ mployee ee Fra Fraud ud Inv Investiga estigations tions

 

Business investigations can involve funds tracing, asset identification and recovery, forensic intelligence gathering and due diligence reviews. Employee fraud investigations often involve procedures to determine the existence, nature and extent of fraud and may concern the identification of a  perpetrator. These investigation investigationss often entail interviews of personnel personnel who had access to the funds and a detailed review of the documentary evidence.  Matrimonia  Matri moniall Disp Disputes utes

Matrimonial disputes from a Forensic Accounting point-of-view often involve the tracing, locating locating and evaluation of assets. assets. The assets to be evaluated and valued may be businesses, property or other assets.  Business  Busin ess Ec Econom onomic ic Los Losses ses

Examples of assignments involving business economic losses include; contract disputes, construction claims, expropriations, product liability claims, trademark and patent infringements and losses stemming from a breach of a non-competition agreement.  Professiona  Profes sionall Negl Negligence igence

These investigations are often approached from two different but complimentary perspectives, these being: •



Technical - has a breach of Generally Accepted Accounting Principles or  Generally Accepted Auditing Standards or other standards of practice occurred; and  Loss Quantification. 

If the professional in question is an accountant then a Forensic Accountant could be involved involved with both per perspectives. spectives. If the matt matter er involves some o other  ther   profession a Forensic Accountant Accountant will normally be retained to perform perform only a loss quantification.  Mediation  Media tion a and nd Ar Arbitrat bitration ion

Because of their familiarity and comfort with legal issues and procedures some Forensic Accountants have sought out special training and become involved in alternative dispute resolution (ADR).

 

ADR services include both mediation and arbitration and are designed to help individuals and businesses resolve disputes with minimal disruption and in a timely fashion. 

6. What types of assignments does a Forensic Accountant perform?

Forensic Accountants become involved in a wide range of investigations, spanning many different different industries. The practical and iin-depth n-depth analysis tthat hat a Forensic Accountant will bring to a case helps uncover trends that bring to light the relevant issues. Detailed below are various areas in which a Forensic Accountant will often  become involved. Criminal Investigations

Forensic investigations often relate to criminal investigations on behalf of   police forces. For example, a Forensi Forensicc Accountant may be retained by the R.C.M.P., the O.P.P., as well as by regional or local police forces and organizations such as the Law Society. A Forensic Accountant's report is prepared with the objective of presenting evidence in a professional and concise manner.  Shareholde  Share holders' rs' an and d Par Partners tnership hip D Disput isputes es

These assignments often involve a detailed analysis of numerous years accounting records to quantify quantify the issues in dispute. For example, a comm common on issue that often arises is the compensation and benefits received by each of the disputing shareholders or partners.  Personal  Perso nal In Injury jury C Claims laims / Mo Motor tor Ve Vehicle hicle A Acciden ccidents ts

A Forensic Accountant is often asked to quantify the economic losses resulting from a motor motor vehicle accident. A Forensic Acco Accountant untant needs to be familiar  with the legislation in place which pertains to motor vehicle accidents. Cases of medical malpractice and wrongful dismissal often involve similar  issues in calculating the resulting economic damages.

 

 Business  Busin ess In Interru terruption ption / Othe Otherr Type Typess of In Insura surance nce Cl Claims aims

Insurance policies differ significantly as to their terms and conditions. Accordingly, these assignments involve a detailed review of the policy to investigate coverage issues and the appropriate method of calulating the loss. A Forensic Accountant is often asked to assist from either an insured or  insurer's perspective in the settlement of a case. Examples of these types of assignments include; business interruptions,  property losses and employee employee dishonesty (fidelity) claims.  Business/E  Busin ess/Employ mployee ee Fra Fraud ud Inv Investiga estigations tions

Business investigations can involve funds tracing, asset identification and recovery, forensic intelligence gathering and due diligence reviews. Employee fraud investigations often involve procedures to determine the existence, nature and extent of fraud and may concern the identification of a  perpetrator. These investigation investigationss often entail interviews of personnel personnel who had access to the funds and a detailed review of the documentary evidence.  Matrimonia  Matri moniall Disp Disputes utes

Matrimonial disputes from a Forensic Accounting point-of-view often involve the tracing, locating locating and evaluation of assets. assets. The assets to be evaluated and valued may be businesses, property or other assets.  Business  Busin ess Ec Econom onomic ic Los Losses ses

Examples of assignments involving business economic losses include; contract disputes, construction claims, expropriations, product liability claims, trademark and patent infringements and losses stemming from a breach of a non-competition agreement.  Professiona  Profes sionall Negl Negligence igence

These investigations are often approached from two different but complimentary perspectives, these being:

 





Technical - has a breach of Generally Accepted Accounting Principles or  Generally Accepted Auditing Standards or other standards of practice occurred; and  Loss Quantification. 

If the professional in question is an accountant then a Forensic Accountant could be involved involved with both per perspectives. spectives. If the matt matter er involves some o other  ther   profession a Forensic Accountant Accountant will normally be retained to perform perform only a loss quantification.  Mediation  Media tion a and nd Ar Arbitrat bitration ion

Because of their familiarity and comfort with legal issues and procedures some Forensic Accountants have sought out special training and become involved in alternative dispute resolution (ADR). ADR services include both mediation and arbitration and are designed to help individuals and businesses resolve disputes with minimal disruption and in a timely fashion. 

 . Who retai retains ns a F Forens orensic ic Acco Accountan untant? t?

Forensic Accountants are often retained by the following groups: •

Lawyers; 



Police Forces; 



Insurance Companies; 



Government Regulatory Bodies and Agencies;  



Banks;  



Courts; and 



Business Community. 

 . What What shou should ld I co consider nsider when retain retaining ing a Fore Forensic nsic A Accoun ccountant? tant?

 

The following issues should be considered on retaining a Forensic Accountant: •



The experience and qualifications of the Forensic Accountant;  A Forensic Accountant should be retained as early as possible in order to obtain maximum maximum benefit. The assistance that a Forensic Accountant Accountant can  provide early in the process can be significant significant in reducing the overall cost and maximizing maximizing the benefit. If retained early, a F Forensic orensic Accountant can assist with the Examination for Discovery, identify additional areas of damages, assist with settlement negotiations and  provide a preliminary assessment assessment of the quantum of damages; 





If a Forensic Accountant is engaged as an expert witness then he or she should be given given access to all o off the relevant do documentation. cumentation. If  restrictions are imposed upon the scope of the investigation there may be an impact upon the acceptance of the findings; and In situations where counsel is involved, the Forensic Accountant should  be retained by counsel so that the the privilege which exists between between the client and counsel will be extended to the work product of the Forensic Accountant

10. What characteristics should a Forensic Accountant possess?

A capable Forensic Accountant should have the following characteristics: •



curiosity;   persistence; 



creativity; 



discretion; 



organization; 



confidence; and 



sound professional judgement.  

A Forensic Accountant must be open to consider all alternatives, scrutinize the fine details and at the same time time see the big picture. In addition, a Forens Forensic ic

 

Accountant must be able to listen effectively and communicate clearly and concisely. 

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