A Simple Understanding of Forensic Accounting
Forensic Accountants are accountants who are authorized for the legal review of business affairs and offer the highest level of assurance. They perform these jobs in scientific ways. In fact, their findings are based upon the scientific methods and they present the interpretations in a systematic manner.
Nevertheless, no impact on an accounting system means, there is no accounting evidence or any effect upon the accounts, inventories, or even the presentation; hence, in such situations it does not fall within the sphere of forensic accounting. The primary objective of forensic accounting is descriptive analysis i.e. cause and effect of accounting services. But the primary methodology used by forensic accountants is merely objective authentication.
Since, all professional accountants work within commercial legal surroundings, hence, all professional accountants are, to some extent forensic accountants. However, in common language the point that distinguishes forensic accounting and professional accounting is the engagement. When a professional accountant accepts an engagement where he anticipates that his decision or analysis may be subject to judicial inspection or administrative evaluation, then a professional accountant needs a level of evidentiary specification and analytical accuracy. Abreast, it must be sustainable within the legal framework of such inspection or evaluation. Although there are some evolutionary discussions, but in the end, the court or respective administrative body is the ultimate authority to decide what accounting facts are.
On the contrary, forensic accountant emphasizes upon the evidence of economic transactions as well as reporting as contained within an accounting system. He exercises these works under the legal guidelines that permits such evidence to be appropriate for the purpose of establishing accountability and/or evaluation. Forensic accountants’ engagements include transaction, reconstruction, and measurement. In addition, it also incorporates bankruptcy, matrimonial divorce, and probate asset identification and valuation. Forensic accountants manipulate falsifications of accounts or inventories and consider the accountability within the statutory audit.
Moreover, Forensic Accountants are assigned to play important anticipatory roles offering independent assurance in diversified areas such as audit committee advisory services, enterprise risk management, merger and underwriting due diligence, and investment analyst research.