7 Investigative Techniques of Forensic Accounting in 2021
05

Apr 2019

In recent years, there have been considerable changes in the business landscape. The increasing globalization, free movement of people, easy communication, technological advancements, and the shrinking of the world have helped change the business environment. These factors have led to the rapid growth of established businesses and the sprouting of new ones. However, this growth of companies has also increased in financial crimes and frauds.

Many businesses keep a separate department of in-house accountants who keep an eye on all the business activities and strive to minimize any irregularities in the businesses recordings. However, there are still cases of new and innovative fraudulent activities that can only be uncovered after an in-depth analysis of all the records and books of the business.

This situation has led to the growth of a niche field known as forensic accounting, which can be explained as the integration of accounting and investigative skills. To understand more about forensic accounting and the various techniques which help in uncovering any financial fraud.

Keep reading to know more about Forensic Accounting and how it can help a business.

What is Forensic Accounting?

Forensic accounting is a type of accounting that cross-checks a business's various financial records to find any indication of fraud being committed. It also provides an in-depth analysis of all of the business's financial books, which could be presented in the court of law as evidence. Forensic accountants can be considered detectives in the economic and business field. These people go through every recorded transaction and try to find any fraudulent or illegal activity within the industry. To be a respectable forensic accountant, you are required to have certain qualities.

Forensic accounting not only helps the business minimize its losses but will also help improve the efficiency of the business, ultimately leading to greater profitability. Furthermore, it can help the management keep track of the various business activities and prevent any fraud from happening in the future.

Qualities a Forensic Accountant Should Have

Here are some qualities which a forensic accountant should possess. These are only some of the rates and not an exhaustive list. More qualities can be added to this list.

  1. Have a Logical Mind
  2. Give attention to detail
  3. Give value to Moral Principles
  4. Question Everything
  5. Be Spontaneous

Having these qualities will provide forensic accountants with an urge to dig deeper and will make them a very successful forensic accountants. With proper investigative techniques added to the mix, the accountants would be capable of digging out even the most minute discrepancy in the accounting records.

Let’s have a look at some of the investigative techniques for forensic accounting.

Accounting Fraud Investigation Process

There are several techniques for conducting a forensic review of the business. The ones provided below are generic but effective. These are the forensic techniques that apply to almost all companies. These are:

  1. Reviewing Public Documents and Conducting Background Checks

The documents made available to the public are scrutinized as they are the easiest to obtain. Also, thorough background checks of a particular company are done to see the past dealings of the business. Public Documents would include any information in the public database, the corporate records, and any legally available information on the internet.

  1. Conducting Detailed Interviews

Conducting an interview is an essential technique that can transform an unwilling person into a source of valuable information. It helps in fully understanding all the facts. An interview should be conducted by accurately assessing the gravity of the situation and preparing the questions according to it. Discussions should take every detail into account and look at the greater picture to figure out the magnitude of the illegal activity and the culprit responsible.

  1. Gathering Information from Trustworthy Sources

Information provided by a confidential and trustworthy source can be precious to any case. When a piece of information is gained from a confidential source or a confidential informant, all the necessary precautions should be taken to hide the identity of the so-called cause. A forensic accountant should try to have as many confidential sources as possible because such sources can virtually guarantee a correct result.

  1. Analyzing Evidence Gathered

Proper analysis of the obtained evidence can point to the guilty party and assist in understanding the extent of the fraud committed in the business. Furthermore, this analysis would also help understand how secure the company is against financial scams and installing various austerity measures to prevent any such future situation.

  1. Conducting Surveillance

This can be done physically or electronically and is one of the conventional measures to uncover any fraud. It can be done by monitoring and tracking all the official emails and messages.               

  1. Going Undercover

This is an extreme measure and should be used only as a last resort. It is best left to the professionals as they know how and where to conduct the investigations. Even a small mistake while being undercover can signal the offender that something is wrong, and the person might vanish.

  1. Analyzing the Financial Statements

This is a special tool for finding out the fraud committed. All the necessary details are summarised in the financial statement, and the analysis of these statements can help a forensic accountant figure out the scam.

Nowadays, the economic conditions are getting stricter, and each country’s government is now implementing tighter laws regarding the governance of the businesses. As the companies are increasing the level of sophistication, so is fraud. This has led to a higher sensitivity to fraud which can be interpreted as massive demand for the services of forensic accountants by all the businesses.

Thus it can be clearly understood that if forensic accounting is best left to the professionals, they can provide you with solutions to the business problems tailored to your needs. Therefore, if you search for the services of forensic accountants in the UAE, then look no further. JAXA will take care of all your financial and business-related problems. Moreover, we provide forensic accounting services and offer a range of various other facilities such as Audit and Assurance Services, Tax services, etc. In case of any questions or to inquire about the multiple services we provide, don’t hesitate to contact us - we’d be glad to assist you.