Forensic Accounting is the specialty practice area of accounting 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. It has been suggested that Accounting scholarship be merged into this article or section. ... A lawsuit is a civil action brought before a court in order to recover a right, obtain damages for an injury, obtain an injunction to prevent an injury, or obtain a declaratory judgment to prevent future legal disputes. ... Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ... This page is a candidate for speedy deletion. ... A personal injury occurs when a person has suffered some form of injury, either physical or psychological, as the result of an accident. ... For other uses, see Construction (disambiguation). ... This article or section does not adequately cite its references or sources. ... For other uses, see Audit (disambiguation). ...

Categories and Examples

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 acquisitions—perhaps 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. In law, damages refers to the money paid or awarded to a claimant (as it is known in the UK) or plaintiff (in the US) following their successful claim in a civil action. ... Not to be confused with torte, an iced cake. ... Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other partys performance. ... Earn out is a phrase used by venture capitalists to describe a formula by which management of a target company earn a bigger share of the targets share capital by achieving results above pre-determined levels. ... In commercial and consumer transactions, a warranty is an obligation that an article or service sold is as factually stated or legally implied by the seller, and that often provides for a specific remedy such as repair or replacement in the event the article or service fails to meet the... Business valuation is a process and a set of procedures used to determine the economic value of an owner’s interest in a business. ... Negligence is a legal concept usually used to achieve compensation for accidents and injuries. ...

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.

Three public high-profile examples of cases in which Forensic Accounting has been essential to revealing possible illegal activities are the Los Gatos Union Elementary School District Audit, The Compton Community College School District Audit, and The City of Cape Coral Utilities Expansion Review. In all of these cases, Forensic Auditing coupled with investigative procedures produced evidence that fraud or misappropriation of funds may have occurred. See external links below for the FCMAT audits. Compton Community College is a public two-year college established in 1927, located in Compton, California. ...

Forensic Accountants

Forensic Accountants may be involved in recovering proceeds of crime and in relation to confiscation proceedings concerning actual or assumed proceeds of crime or money laundering. In the United Kingdom, relevant legislation is contained in the Proceeds of Crime Act 2002. Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... Proceeds of Crime Act 2002 (2002 c. ...

Many Forensic Accountants are also Certified Fraud Examiners and/or Certified Public Accountants. The designation of CFE and/or CPA should follow their name in any professional documents, i.e. John Doe, CFE, CPA. Certified Fraud Examiner (CFE) is a designation awarded by The Association of Certified Fraud Examiners (ACFE). ... Certified Accountant redirects here. ...

Forensic Accountants utilize an understanding of business information and financial reporting systems, accounting and auditing standards and procedures, evidence gathering and investigative techniques, and litigation processes and procedures to perform their work. Forensic Accountants are also increasingly playing more proactive risk reduction roles by designing and performing extended procedures as part of the statutory audit, acting as advisers to audit committees, fraud deterrence engagements, and assisting in investment analyst research. Business Information is a broad category that includes data derived from newspapers, databases, competitive intelligence, and research related to gaining knowledge about companies, people and industries engaged in for-profit enterprises. ... Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ... This article does not cite any references or sources. ... // Fraud deterrence has gained public recognition and spotlight since the 2002 inception of the Sarbanes-Oxley Act. ...

Licensure Requirements

As Forensic Accounting often falls within the scope of Private Investigation, many states require specialized certifications and licenses to work within the field. In many cases, accountants cannot perform Forensic audits without the proper state-required private investigator licenses.

See Also

Benford's Law A logarithmic scale bar. ...

External links

• General Forensic Accounting Information
• Journal of Forensic Accounting
• FCMAT Public Audits Using Forensic Accounting
• JFA: What is Forensic Accounting?
• Forensic Accounting Case Studies
• Article on Forensic accounting