Forensic accounting is one of the best careers that a person could ever have. It is a career that is completely different from the contemporary humdrum careers which have wasted a lot of great minds. It involves the active involvement of a person’s analytical skills and helps to substantially develop both the accounting and detective skills of the person who pursues it (McKittrick, 2009, p. 1). Apart from its intellectual benefits, forensic accounting pays well with salaries that can go as high as $ 100, 000 and it is highly esteemed by society as a good career. Students pursuing accounting who have detective skills should consider this career. This paper describes the necessity for forensic accounting in contemporary corporations, defines forensic accounting, and describes the scope of its work.
As of the year 2000, there have been several corporate failures along with an increase in the number of financial frauds. The effect of this has been a considerable decrease in the confidence entrusted to organizations by individual investors and other stakeholders. The main stakeholders of corporations have therefore doubted the power of auditors and the management of organizations to guard their interests and the interests of the organizations. The control of an organization is multidimensional. Therefore, with the extensive use of information systems in the running and control of contemporary businesses, it is necessary for the intervention of independent parties to review transactions and other business processes for abnormalities. This is where forensic accountants come in. They fill in the control gap left by the use of information systems and the inefficiency of fraudulent managers and auditors (McKittrick, 2009, p. 1).
Forensic accounting refers to the integration of accounting, investigative and auditing skills in providing supportive information to litigations. It mainly covers investigation, dispute resolution, and support of litigations. In its investigative function, it determines whether frauds have occurred in statements of financial reporting. In this aspect, the forensic accountant may be required to give out suggestions for improvement of controls to prevent future occurrences of fraud. Civil cases may also require forensic accounting intervention in solving them. For instance, in a divorce case, the total number of assets may need determination by a forensic accountant to evade problems of non-disclosure (McKittrick, 2009, p. 1). Litigation support involves holding and disseminating information related to the economic implications of litigation. The forensic accountant may help to settle disputes out of court or act as an expert witness in court. Thus forensic accounting is greater than both accounting and detective work (Davis, Farrel, and Ogilby, 2001, p. 2).
Several skills are prerequisites to forensic accounting. These include professional qualifications and responsibilities. In this requirement, a person intending to pursue forensic accounting should have professional accounting knowledge and he/she will be better placed if he/she has held practical accounting or auditing positions in organizations. Additionally, a person with a deep knowledge of dispute resolution and legal matters will also have an easy time pursuing forensic accounting. Another skill that can be very instrumental in performing forensic accounting duties is the ability to gather accurate and reliable information in all forms. A person who can obtain electronic information, gather documentary information, and perform interviews to collect oral information will have an upper hand in forensic accounting. The profession also requires planning, preparation, and discovery skills (Davis, Farrel, and Ogilby, 2001, p. 2). It is therefore evident that most people in professions related to accountancy will qualify for forensic accountancy since most accountants understand the law and they may also possess detective skills. On the contrary, detectives can hardly qualify for forensic accounting since most of them lack accounting skills. This is one reason why forensic accounting is as popular as it is. That is, detectives are hardly able to perform analysis of financial data to provide evidence to civil cases characterized by financial disputes.
Some specific issues addressed by forensic accounting in organizations include a careful review of the operations of the organization to ensure that they comply with the set procedural standards of the organization. It also performs a detailed analysis of financial disbursements to check their compliance with the policies of the company (McKittrick, 2009, p. 1). The stated function is very instrumental in determining if financial disbursements are, possibly, fraudulent and thus it identifies the areas in which auditors need to concentrate on when performing their audits. Forensic accounting also helps in the reappraisal of reported transactions to determine their correctness of reporting and gauge the effects of mistakes in financial reporting. It is also used to probe possible frauds concealed in returns and warranty claims. It is also instrumental in the determination of the economic impacts of disasters and insurance claims of the same. Lastly, forensic accounting is extensively used in merger and acquisition cases to determine the accuracy of valuations (Davis, Farrel, and Ogilby, 2001, p. 2). Thus forensic accounting is extensively used in businesses to perform corroborative duties. It is commonly used to substantiate legal claims and provide evidence of fraudulent undertakings, especially, in financial records.
Additionally, forensic accounting provides very critical secondary information while undertaking its functions. Such information can be used by relevant stakeholders to make productive decisions. For instance, forensic accounting aimed at checking the consistency of the details of financial statements with company policies can be very useful in improving internal audits. This is because the issues that it addresses, in this case, are primarily related to internal audit and thus its data will be useful to internal audit (Davis, Farrel, and Ogilby, 2001, p. 2). Thus, in issues that are addressed by forensic accounting, the latter provides data that is very useful to the organization.
As evidenced in the discussion above, the scope of forensic accounting spans more aspects than what it is thought by many to entail. A lot of people view forensic accounting as either the analysis of financial data used in civil cases or the use of detective techniques to discover fraud in accounting. Although these views are close to the definition of forensic accounting, none fully defines it. Thus forensic accounting covers details that cannot be defined either legally or financially. It is a process that involves a holistic appraisal of the business. It is, therefore, very critical to shareholders and other stakeholders of an organization. It helps them understand the business in a way that they cannot achieve if they depend solely on the basics of accounting. Conclusively, forensic accounting can be viewed to, arguably, major on the substance of a business other than concentrating on the form of the business.
Reference List
Davis, C., Farrel, R., & Ogilby, S. (2001). Characteristics and Skills of the Forensic Accountant. Web.
McKittrick, C. (2009). Forensic Accounting. Web.