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The True Relation between Fraud and Forensic Accounting

The frauds that take place in the businesses, in the civil life, as well as even in the marital life cannot be detected and proved easily in the court of law. The developments in the technology as well as in other fields, has made it easier for the people indulging in malpractices to get away with their acts. In particular, in the domain of businesses where the companies are totally focused on augmenting their profits and trying to minimize their expenditures, and not to mention, by doing their best to avoid paying their due taxes, the occurrence of a fraud is more likely. The simple and traditional accounting methods are not sufficient as well as robust enough to detect frauds.  This led to the development of the new field of accountancy known as the forensic accountancy.

The scope as well as the domain of operations of the forensic accounting is very much different than the other fields of accountancy. The term Forensic means ‘suitable as evidence in the court of law’. There are further diversifications in the field of forensic accounting, like insurance claims, fraud, and personal injury claims, construction as well as royalty audits. Almost all the big accounting firms have their own specific forensic accountancy departments that have the forensic accountants specializing in different sub domains of accountancy.  

In a relation between fraud and forensic accounting it is not the forensic accountant who decides whether a particular party or individual is guilty or not, his main job is to make sure that he presents the relevant as well as comprehensive evidence in the court of law. A forensic accountant is primarily concerned in detecting whether there is any breach of contract, disagreements related to the company acquisitions, as well as in the professional negligence claims. A forensic accountant might also be required to work in the cases involving marital discords and other domestic issues. In such cases he is concerned with the assessments of the lifestyle, in the support to the spouse, in finding out the income that is available for child support as well as equal distribution of the finances.

The true relationship between the frauds and forensic accountancy begins once it has been established that a fraud has occurred. The forensic accountants analyze the financial accounting systems that the companies have put into place, and the presentation of their financial reports to make sure that there is no discrepancy in the numbers in the report as well as the actual reality.