Amelia Grant
6 Reasons Forensic Accountants are HiredUltimately, the role of a forensic accountant is to provide accounting support for litigation. To detect and prosecute financial crimes, they employ tools such as digital forensics, historical accounting, and frequently observational methods. They can also be used when a defendant has been wrongfully charged, or when individuals or entities must prove a case. A company or individual may hire a forensic accountant for a variety of reasons. They have specialized skills that make them ideal for investigative auditing, which is required in many cases. Here are eight scenarios in which people and businesses seek the assistance of forensic accountants. 1. Divorce and Marital Assets As a result, a forensic accountant is required to go over all of the marital accounts and financial statements. They can detect irregularities and locate funds that have been obscured or hidden. When parties submit disorganized and illogical financial records, a forensic accountant can sort through it all efficiently and conduct the analysis on time. When large and complicated asset portfolios are involved in divorce cases, it is critical to find and hire a reputable forensic accountant. If the parties have owned or have mutual claims on a corporation, it is critical that the company's financial statements be reviewed by a forensic accounting professional who is specifically trained to detect patterns and irregularities consistent with fraud. Their final report may even be beneficial to the corporation, potentially assisting in the repair of potential leaks and opportunities for malfeasance. 2. Merges and Acquisitions Indeed, some argue that forensic audits and analyses should be included in every merger and acquisition due diligence period. They have specialized tools and skills that allow them to detect irregularities and outright fraud that traditional accounting methods cannot detect. Their efforts will enable all parties to move forward with greater certainty. After all, it is not uncommon for employees of a target company to raid the coffers prior to the sale. During a full, forensic due diligence audit, the target company's tax picture can be revealed to provide a complete picture of any future tax exposure that may arise from previous fraud or other problems. A forensic accountant may discover not only instances of crime, but also that a target company's statements about projected earnings, debts, or asset value may have been inflated or otherwise erroneous. This could have been a simple mistake, but the acquiring company will want to adjust its bid accordingly. Naturally, it is possible that a target company has undervalued itself, indicating to the buyer that he is getting a better deal than previously thought. 3. Company Audits In fact, the goal of a forensic accounting team is to uncover theft and fraud. They have different goals and methods than a standard accountant's audit and analysis. They may delve deeper into financial and information technology systems to determine if there are any weaknesses, exploited or not, that the company must address to avoid future problems. 4. Contract Disputes These disagreements can arise in a variety of circumstances. It may even arise in the context of employee compensation. That is, employees may receive the majority of their annual salary in the form of a bonus payment. These payments are based on their success as well as the success of the company or department as a whole. Employees who believe that their seemingly small bonus checks were the result of under-reported revenue may seek redress through a forensic accounting audit. It's possible that the standard accounting methods missed the fraud that affected the bonus payments. A forensic accountant can provide detailed, objective testimony if contract disputes escalate and must be resolved in court. In some cases, both parties may hire forensic accountants, resulting in opposing perspectives on the case that lawyers must argue in front of the jury. 5. Insurance Claims Insurance companies may also attempt to avoid paying claims. After all, their primary goal is to reduce claim payouts. A person or company may lose all of its records in the event of a fire or other disaster. As a result, insurers attempt to exploit this by paying only a portion of their contracted obligation. Attorneys can hire forensic accountants to recreate financial documents and thus bolster the claimant's assertions in court. In fact, when a forensic accountant's evidence is overwhelming, insurance companies may opt-out of a court battle. 6. Embezzlement Cases Even if an executive was regularly embezzling large sums of money using what appeared to be obvious methods, a standard accounting team might be unable to detect the theft. For example, if the executive was paid from an expense account rather than a regular, taxed paycheck. He may also accept client payments in cash, which is against company policy, and then pocket these large sums, or he may purchase artwork using the company's accounts but have it shipped to his home. A tenacious forensic accounting team could document all of the crimes and successfully prosecute the executive. |
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