Accounting is a very important part of any business, so important that it is considered as the language of businesses. Accounting deals with the recording summarizing analysing and presenting all the business calculations performed by an organization over a definite period or the business cycle. Now, there are a number of subcategories of accounting that have come up over the years. One such subset of accounting is forensic accounting, whose demand has been increasing at an intense rate. With the gradual increase in the setting up of businesses all over the world, there has been an increased demand for such services.
This article will act as a guide and will make the reader aware of the various benefits of forensic accounting to a business. However, before proceeding ahead with the ideas, let’s have a walkthrough over the basics of forensic accounting and its growth in the corporate world.
Growth of Forensic Accounting over the Years
In simple terms, forensic accounting can be referred to as a branch of accounting that deals with the implementation of scientific methods while dealing with the business records of a company. The main use of forensic accounting is to find out if the company has been involved in fraudulent activities such as money laundering or whitewashing the accounting numbers.
The process of forensic audit involves significant three steps that include:
This is one of the major parts in which the various reports of the company are analysed to find out any incongruences in the business. Once the part is done, the kit is time for reporting.
A report after the analysis of all the reports is prepared. This report provides a definite conclusion if the company is involved in any fraudulent activities or not.
This is the part where the action is taken against the company and the management.
Main Reasons to Implement Forensic Accounting in Business
Be it a small or a large business enterprise the size of the business does not matter but the implementation of the forensic accounting terms turns out to be a practical step. Some of the core reasons for implementing forensic accounting in business imply the following:
Awareness for Business Proceedings & Fraudulent Activities
A forensic auditor takes the initiative to understand the fraudulent activities that are getting implemented in an organization. Understanding about such activities at the initial stage is essential for the management, and procrastinating the same might lead you to suffer massive business loss. The more in-depth knowledge the company management has in the initial phase the better it is for the company.
Calculation of the Misappropriated Business Assets
Forensic accounting is used to highlight the criminal activities of a business nature that take place in an organization. As the size of the business increases, the need for new and bigger machinery and other assets also increase. Any miscalculation regarding the assets and liabilities of a business entity might become a massive issue at a later stage.
Some of the examples of misappropriating assets appear as embezzlement, payroll fraud, mismatch in the balance sheet, etc. Once you have implemented the same in your business premise, you get an overall idea regarding the correct valuation of the assets and liabilities of your business.
Business Terrorism and Business Counterintelligence
Cybersecurity is another concern when it comes to business entities. There is has been an increase in the number of businesses as the rate of cybercrime has been increased to the next level. Now, the tasks turn out to be more complicated when it comes to the financial department of a business entity. Tracking the business cash flow is a significant move that every business entity needs to keep track of. Forensic accountants help a business entity to take a step to identify the cybercrimes and fix them accordingly.
Prevention of Bankruptcy
Over the years, a business entity might collide with bankruptcy. Now, to avoid this in the future stage, it is recommended to proceed ahead with the implementation of forensic accounting once a year, to analyse the accounting and bookkeeping records of a business entity. This move will help you to understand the way your business entity performs and figure out the fraudulent activities that would save you from being bankrupt.
Now, it is clearly understood that the implementation of forensic accounting in a business entity serves out to be a profitable move. The application of this process will also help you to ease the external audit process. To carry out the same process in an error-free way, it is recommended to proceed ahead with certified auditors. Are you wondering why? Well, your answer is highlighted below.
How Can JAXA Chartered Accountants Help?
With the intent of providing the best accounting and audit services, JAXA Chartered Accountants stands as one of the top Abu Dhabi Auditors, who has been providing simple audit and accounting solutions. Our audit and accounting experts are well-versed with the required business proceedings and can carry out the business proceedings at ease. Their knowledge and industry experience help them to provide tailored solutions when it comes to the implementation of forensic accounting solutions in business entities. In case you hold any query, we encourage you to have a word with our business experts. Contact us today- we’d be glad to assist.