What Is Forensic Accounting, And Why Would You Need It?

Forensic accounting might sound complicated, and we’re going to be honest – it is! But it’s still something all businesses should know about, as it can be helpful to improving the health and success of your business, and prevent you from making expensive mistakes. But because it sounds so complex a lot of people don’t bother learning more about it. So today we’re going to be taking a look at what forensic accounting is and how it works.

What Is Forensic Accounting?

Forensic accounting is an approach to accounting that combines auditing, investigation and advanced accounting knowledge, and is used to examine the finances of an individual or business. There are a number of reasons this approach to accounting is used, including to look for evidence of crimes, to validate insurance queries or investigate on behalf of financial institutions and law enforcement agencies. They can also be used to identify cases of fraud or embezzlement, or to better understand the inner workings of a business.

How Does It Work?

First, you need a forensic accountant. This is a person who has been trained not only as an accountant, but in the detailed study of accounts to detect criminal activity. This person will go through a series of financial documentation from a business, analyze them for anomalies and report any inconsistencies that could point to a crime being committed. Forensic account analysis isn’t a commonly needed service – but it’s something that needs to be done right when you do need it.

The process itself is divided up into three distinct categories – the litigation support (where the accountant gathers information to help with bringing a case against a business), the investigation of the documents themselves, and then the potential resolution of the dispute which prompted the research in the first place. At every stage, the forensic account analyst is there to provide impartial evidence and support for their client.

Why Would You Need Forensic Accounting?

There are many different reasons why your business would benefit from such a service. Identifying theft or deception in a prompt manner is crucial for making sure that whoever has committed the crime is stopped before they are allowed to get away with it and can rescue both the financial health and reputation of your business. This is essential in smaller businesses, especially where a chunk of money going missing could make a big difference. Of course, you need to consider the fact that if someone does something once, they’re more likely to do it again if they feel that they can get away with it. The very act of investigating the discrepancies will often scare these people away from committing further offences, and help to keep people aware that there are consequences for their actions.

It also gives you a much needed backing in the event that the dispute goes to court. The financial accountant who located the evidence to substantiate the claims would be required in many instances to testify in court, as well as an independent analyst who can confirm the findings. This means that if a company has to take an employee or client to court in order to settle the dispute, they will have the backing of an independent source, which can be very reassuring to a lot of people.

At Debtcol, we provide forensic account analysis and reporting on an outsourced, independent basis. Our experts are trained in forensic analysis, financial accounting and private investigations, helping you get to the truth of an issue before you go to court. We are dedicated to providing impartial advice and support, whenever you need it. For more information, just get in touch with us today.