From finance to business to legal issues, the role of a forensic accountant stretches further than many people realize. Sure, the $360 billion hit the economy takes each year due to corporate fraud gets most of the attention, but the reality is that forensic accounting weaves its way into a plethora of situations. Forensic accountants must be ethical, analytical, and intuitive to do adequately fulfill their duties. In doing so, they are able to provide valuable insight into financial investigations, divorce cases, and much, much more.
Taking complex financial accounts and records and conducting an in-depth investigation means utilizing a range of skillsets. Forensic accountants seamlessly integrate three core skills in their day-to-day activity: accounting, auditing, and investigating. While many turn to their expertise in times of need and desperation, it is prudent for business owners to look at forensic accounting as a preventative measure, particularly as it relates to fraud. Minimizing risk is one of the key advantages to consulting with a forensic accounting proactively.
Since their skillset is so broad, there is a multitude of scenarios that would require the expertise of a forensic accounting firm. The following highlights some of the common reasons that you may need a forensic accountant:
- You are considering selling your business and therefore will need a precise valuation
- A supplier demands to only work with a particular employee
- You notice unusual transactions or write-offs
- The personnel at your company seems to being living lavishly and beyond their means
- Your company is facing a tax audit
- A divorce is inevitable and you have suspicions that your partner is hiding money
- The company’s bookkeeper is suspected of accounting misconduct
- A natural disaster strikes and your paper records are missing or damaged
- You are left with a significant amount of money and property following the death of a wealthy relative
- Upon divorce, your partner believes they are owed more money due to incorrect perceptions of the value of your business
- A supplier seems to be overcharging you
- You are a lawyer who represents a permanently injured party and require an analysis of current and future economic losses
- You plan to purchase an established business and need to know assess the financials provided by the seller
- An employer or business partner is suspected of stealing products or equipment from the business
- A fire destroys your business and you need to determine that the insurance policy’s terms and conditions are calculated accurately
- Something fishy appears in your financial report
- You believe that the royalties you are owed are not being paid out fairly
- Employees are suspected of working together to divert money into their personal accounts
- Intercompany accounts appear to be unbalanced
While these reasons may only scratch the surface of potential reasons to hire a forensic accountant, they serve to paint a picture of prospective fraudulent activities to be aware of in the future. The common process for forensic accounting involves discovery, analysis, and then reporting. However, there are seldom two scenarios that are entirely the same. As a result, it is imperative to consult with a forensic accounting firm if any red flags are raised in your business or personal life.