As businesses progress, they might become a part of legal disputes. This may be due to illegal or wrongful activity in the Business or any other reason. As the business ecosystems are becoming more and more complex, there are more and more chances of companies becoming a part of the legal disputes. This is where Forensic Accounting comes to the rescue.
What does one mean by Forensic Accounting?
Forensic Accounting can be defined as the process in which an examination of the accounts of the Business is conducted. The results of this examination are then presented in the court of law. There are different activities that are utilized to conduct the examination of the Business, such as Company Audit, Financial or Company Accounting and other investigative skills.
A forensic accountant has training in the field of both Finances as well as investigative techniques. This will allow him to understand the financial jargon of the Business and then also find out fraud or embezzlement in the company. After the examination, they will produce a report which will detail all the various findings of the accountant or team of accountants. These findings will be further used in the court of law to either prove malpractices or to acquit a company of such allegations.
Mainly there are two different types of Forensic accounting procedures:
1. Litigation Support Services
Here the accountant will calculate the total damages experienced by each of the parties and accordingly help in settling the dispute outside the court. In case the dispute reached court, the accountant can act as an expert witness.
2. Investigative or Fact-Finding Services
In this accounting, the accountant will have to understand the business activities and uncover the fraud or embezzlement, if any.
Benefits of Forensic Accounting
Once you have opted for forensic accounting, it directly minimizes unwanted losses for your company as the entire documents gets detailed scrutiny, leveraging the chances of achieving the organization goal.
The forensic accounting procedures reduces the crucial error, which ultimately reflects on the efficiency of the employees. The loopholes or reasons of inefficiency gets clearly highlighted, paving out a path for improvement.
Reduces Exploitation Risk
In this competitive world, it is possible that the chances of exploitation risk increase if it is not traced. The concept of forensic accounting helps you in dealing with the same, which will highlight the risks and makes sure that it gets reduce.
Averts Legal Problems
As the business grows, the legal issues tend to increase at a faster pace. By availing for forensic accounting, you will be able to have a closer look at the legal issues. This helps to streamline the business processes and activities accordingly.
Solves Contractual Disputes
If you are facing continuous issues regarding the contracts while dealing with your business clients, then it's high time that you infuse forensic accounting in your business premises, which will ultimately help you to solve the disputes and converts more customers to enhance business profits.
Helps in Criminal Investigations and Defense
The forensic accounting service is used by various entities with the aim of catching hold of any illegal activities or malpractices being followed in the company by gathering evidence of such illicit activities so that the management can take action.
Aids in the Formulation of Economic Policies
With the help of forensic accounting, a company can determine the flaws in the working of the business and formulate their economic policies according to the budget they have in their hands and what goals does the company want to reach.
Improves Brand Reputation
If fraudulent activity is being conducted in the company, not only will it face losses but the goodwill of the company will also go down. Forensic accounting will help identify such unprofessional conduct and allow the management to take remedial measures so that the goodwill of the company improves.
Leads to Sounder Investment Decisions
Forensic accounting allows us to compare the accounting information of the previous duration with the accounting information of the present times. This allows us to make the necessary changes in our decision regarding the allocation of resources in the company.
Simplifies Litigation and Business Valuation
In case of business valuation and litigations, forensic accounting helps in investigating a particular company regarding the accurate price and the potential profitability of the company and also presents the company’s net worth. Forensic accountants are also required if there is any lawsuit filed against a company.
What are the Different techniques for forensic Accounting?
There are various investigative techniques that are used by accountants all over the world to find out various important points of a business. Some of these techniques are as follows:
- One of the simplest yet effective techniques of investigating is conducting background checks. With background checks of a company, the accountant can see the past transactions and deals made, and these can tell a lot about the company.
- Gathering information from trustworthy sources is another simple yet effective solution for understanding the nature of the Business. It is to be kept in mind that information which is received only from reputed and trusted sources should be taken as there is a guarantee that information from such sources will be correct.
- One of the difficult technique of investigation is to go undercover and find the information first hand. One can go undercover physically or use any electronic means to do this snooping and monitor and track the target emails.
There are various other methods of investigation, and to know more about them, read out the blog titled “7 investigative Technique of Forensic Accounting in 2020.”
What are the Reasons to implement Forensic Accounting in Business?
There are very important reasons why forensic accounting should be implemented for businesses.
- First of all, they provide awareness for the Business and help avoid any fraudulent activity.
- In case an asset has been misappropriated the forensic accounting can help in remedying the situation
- It can help combat growing threats such as Terrorism and counterintelligence.
- It provides greater insight into the present and helps to understand your Business.
To read these reasons in detail, read out the blog titled “Reasons to Implement Forensic Accounting in Business”.
JAXA Forensic Accounting Services
At JAXA, we aim at designing the best financial structure to deliver a high cash-flow framework system. We provide a wide range of services that include:
- Financial data analysis
- Evidence Analysis
- Compiling information
- Tracing illicit funds
- Damage Assessment
- Due Diligence Reviews
- Business Valuation
- Report Generation
We are a financial consulting firm based in Dubai, and assure our clients in providing reputation building, maximizing the credibility, and standing out from their competitors. We hold ISO 9001-2015 certification, and follow the International Financial Reporting Standards (IFRS) to main the professionalism in our deliverables that made us one of the top audit firms in Dubai. Currently, we hold more than 750+ clients at a global count that includes multinationals, limited liability, offshore companies etc. At Jaxa, our forensic experts provide you the forensic accounting related services, cash flow forecasts and projection reports satisfying your requirements and that will help your business to grow further. If you are looking forward to initiating the process, do contact us. We'd be happy to assist you.