Forensic Accounting – What it is, definition and concept

Forensic accounting is the exhaustive evaluation of the economic information of a company or institution in order to detect irregularities or criminal conduct.

Through forensic accounting, it is possible to detect or prevent accounting activities of a fraudulent or irregular nature.

Usually, accounting of this type focuses on locating critical points to subsequently promote their internal resolution prior to litigation.

In other words, in most cases, forensic accounting seeks to avoid the appearance of fines or financial penalties.

On the other hand, it is assumed that forensic accounting is part, in turn, of another economic discipline: forensic auditing.

Forensic accounting growth

Although the accounting practice itself presupposes the main aspects of the forensic trend, in recent decades this new branch has experienced great growth.

Its expansion is due especially to the assumption of different economic and financial crises (oil crisis in the 70s, the crisis of the “dot-com” in the 90s or the global financial crisis of the early 21st century).

The appearance of an increasing variety of economic crimes and computer instruments have helped, at the same time, to its development as an established accounting branch.

Although its birth lies in the public sector and economic organizations, it has an increasing presence in the private sphere, given the actions of companies themselves.

Objectives of forensic accounting

Within its scope of action, this accounting modality is based on the following points to highlight:

  • Detection of economic irregularities: This activity focuses on the detection of situations such as accounting fraud, money laundering or embezzlement.
  • Comprehensive evaluation: Both financial statements and accounting books are the object of study of this discipline.
  • Adequacy of accounting books in accordance with legality: This accounting method should avoid disconnection points between economic regulation and the situation of the company.
  • Prevention against future behaviors: The forensic accountant not only deals with past accounting events, but must also provide the organization with the accounting tools for proper regulatory compliance.
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Before finishing, it is convenient to highlight that we have two options in our company to carry out forensic accounting. On the one hand, this work can be carried out by the company itself. While, on the other hand, we can also turn to specialized professionals through actions such as subcontracting or outsourcing.

Performing forensic accounting work

The work related to this type of accounting is usually carried out by a specialized accounting technician.

In that sense, there is the figure of the commercial expert. A profile focused on the performance of forensic accounting tasks. These generally integrate the ranks of regulatory institutions or organizations.

However, often, in large companies, the presence of specialized professionals with experience in the performance of this accounting trend is frequent.

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