Why Forensic Accounting Methods Are Important?
Embezzlement or any other sort of fraud that has happened in any business organization can be exposed by various ways. It can be done by a whistleblower who is obliged to update his managers that an employee has been dishonestly owned the company’s property or stolen the property of the company. However, one of the most effective ways is - regular activities and surveillance of the company (especially finance department) by the internal audit team. Corporate fraud is required to be investigated immediately in order to avert further potential losses. The internal audit team not only finds the fraudulent employee but also discovers the place and the reasons.
A specialist forensic accountant is most suitable investigator for such kind of task; this is the reason that often victim companies recruit the services of a competent forensic accountant. In many cases, such kind of person is supported by one or more other professionals to investigate a fraud matter. Generally, this person may be a Chartered Accountant or a Certified Fraud Examiner. In addition, the person who has done his degree in accounting along with specialization in forensic accounting is the most compatible to deal these cases.
The fraud occurs in almost every company (whether it is big or small), is different in nature. For example, business fraud, bank fraud, mortgage fraud, insurance fraud and others of similar features; all of them have different characteristics. In fact, these categories have their own weaknesses; hence, the fraudsters take the benefit of those weaknesses. This is the reason that a regular accountant finds difficulty in finding the fraudsters but the experienced forensic accountants are well aware of these facts. After doing small research and audit of the financial data, they (forensic accountants) can find the fraudsters very easily.
Under the forensic accounting methods, the investigators initially try to investigate fraud by determining what actually happened in the organization as well as what organization wants them to investigate. After all, the fraud not only causes loss to the respective organization but also hampers the ongoing business and damages the reputation. So, by proper forensic accounting methods, an investigator might get the money back; in addition, he may also give lesson to other fraudulent minds not to fraud.
Furthermore, the forensic accountant plans the outcome of the issue with the victim company and creates an investigation strategy. Possibly, he (investigator) takes interview of the whistleblower to get an immediate and effective response before beginning a comprehensive analysis of the accounting records.
Moreover, following the feasible techniques of the investigation, the forensic accountants most likely trace the stolen money. According to them (investigators), tracing of the lost money will provide not only possibility of getting the money back, but also proof of how and why the fraud took place.