Money often leaves a trail, and ensuring that funds have been used correctly is an important part of life, whether you’re running a business or keeping your personal affairs in order.
It’s in this respect that the importance of forensic accounting can’t be understated. Specialist accountants are experts at following the money. It’s their job not just to track funds, but to ask the important questions on why the money was spent in the first place.
In this article, we explain what forensic accounting means, we detail what it involves, and why forensic accounting is important.
What Does Forensic Accounting Mean?
Forensic accounting is the procedure conducted to determine where missing money has gone and how it can be recovered. It can be used in a wide range of scenarios such as:
- Business disputes
- Personal injury claims
- Matrimonial disputes
- Unexplained wealth and proceeds of crime confiscation
Successful forensic accounting requires three key skills:
It’s these three skills that make forensic accounting such a difficult undertaking. Traditional accountants only deal with the numbers, but a specialist in this line of work has to look beyond the transactions that have taken place to get the full picture.
Missing funds could be the result of a crime or an accident. A forensic accountant’s findings may form the basis of criminal proceedings, or help to resolve an ongoing dispute. Following the path can also help locate where the money has gone, so it can be retrieved.
What Does Forensic Accounting Involve?
Forensic accounting involves following money trails to determine whether transactions have been made legally or illegally. The main duties of a forensic accountant include:
- Reviewing documents
- Conducting interviews
- Finding trustworthy sources
- Carrying out surveillance
- Analysing evidence
- Creating detailed reports
The full forensic accounting investigation process requires a sharp, analytical mind to be comprehensively carried out, which is why you should only hire a specialist with years of experience.
When Should You Use a Forensic Accountant?
As a forensic accountant’s skills can be used in a wide range of scenarios, their role will differ depending on your needs.
In litigation cases, a forensic accountant is often brought in to help determine the financial impact of damages. For example, if one individual has taken another to court over damage to a property, the forensic accountant will take into account the cost of repairs to see if a settlement can be reached.
In business, their skills are used to detect:
- Bookkeeping misrepresentation
Forensic accounting is particularly useful during company mergers and acquisitions. Before any deal is agreed, an accountant can determine whether the business being taken over has any skeletons in the closet that could cost the purchasing company a great deal of money to resolve.
Insurance companies use forensic accountants to ensure others aren’t trying to turn the tables on their own unfortunate circumstances. A common type of investigation is assessing damage done to vehicles, to see if claims being made are fair.
It’s not uncommon for a forensic accountant to assist with divorce proceedings either. As an example, if a spouse has hidden assets, the accountant will uncover them to ensure they are included in the settlement negotiations.
If required, a forensic accountant can be called upon as an expert witness in legal cases. Because of the implications of fraudulent use of money, it’s vital that the forensic accountant whose services you employ has an excellent track record and a substantial amount of experience in the field.
Why is Forensic Accounting Important?
As a constantly growing specialism, forensic accounting’s importance in the modern world is expanding exponentially year on year. The rapid growth of forensic accounting is, in part, due to the increasing emergence of new businesses and enterprises being set up each and every year. It’s estimated that between 500,000-700,000 new businesses are formed each year in the UK, and many of them will require the needs of a forensic accountant, although some may not even know that until it is too late.
This influx of new entrepreneurs, perhaps not savvy to the subtleties of business, means there is a much greater need for the skills and protection of a forensic accountant.
Forensic accountants can support and protect all business owners from anybody looking to defraud them, regardless of if they have been trading for decades or hours.
Lost money without a clear and obvious cause can quickly lead to a downward spiral in profits and performance. Protect yourself and the future of your business and keep your money safe with a forensic accountant.
The Future of Forensic Accounting
With the modern world’s heavy reliance on the internet, the role of a forensic accountant is rapidly changing. The skills that forensic accountants have relied upon for decades may not all be used on a day-to-day basis anymore.
The rapid shift to using the internet for almost everything in business, from financial transactions to communication and more has seen a marked rise in the amount of fraudulent activity.
The anonymity that the internet gives also allows fraudsters some security. Due to the lack of face-to-face interaction, many of these scammers believe that they are able to conceal their tracks, and remain totally anonymous, allowing them to get away with their schemes.
This is where the modern forensic accountant comes in. The latest technology has supercharged the industry, what could have taken accountants hours in the past, will only take minutes today.
How Inquesta’s Forensic Accounting Services Can Help
Inquesta has been providing our clients with expert forensic accounting – offering specialist support no matter what you need; from fraud, to malpractice, commercial dispute, and compensation claims.
Our dedicated team will work methodically, leaving no stone unturned, no angle left unchecked. As experts in all aspects of forensic accounting, we understand that each and every client is unique — and we shift our strategy to support this.
Able to offer a complete, all-encompassing service throughout the time you work with us. Getting you the best result possible always comes first.
Inquesta specialises in providing top of the range services in all aspects of forensic accounting. For further support and information on what Inquesta can do to help, contact our team today or request a free consultation.