The Advantages of Using Forensic Accountants

A forensic accountant is extremely good at digging into details.

A forensic accountant is extremely good at digging into details.

Accountants help companies prepare and track budgets, determine and assign costs, manage day-to-day accounting and gather financial information. Accountants also help companies prepare financial statements. In addition to regular accountants, some companies may have a need for a forensic accountant including those firms that must defend or pursue financial statement-related litigation or that provide financing or credit terms to companies lacking audited or reviewed financial statements. A forensic accountant can also provide myriad advantages to regular firms.

Forensic Accountant Description

Forensic accounting blends accounting, auditing and investigating skills in one discipline. A forensic accountant looks deep into a firm’s numbers to determine what is truly going on within that business. She reviews and analyzes financial data and supporting information, investigates information that appears out of synch or erroneous and communicates her findings. Forensic accountants typically summarize and present their findings to management, at trial or to whoever requested and paid for the investigation.

Uncover Errors

Forensic accountants can help companies uncover accounting errors before they become problematic. This can aid tremendously in complying with the accounting and financial recordkeeping terms of a federal or state government contract. If a manager notices a mistake, a staff forensic accountant can drill down, identify the source of the mistake and correct the error.

Protect and Recover Assets

Fraud protection is the primary driver behind forensic accounting. Companies need not have had any fraud occur. The objective is to identify and eliminate the issues that could lead to fraud. Companies must protect their assets and business against certain people and situations that could damage or destroy them. Prevention is ongoing, not one-off. Forensic accountants can examine reporting structures, roles and responsibilities and internal controls to identify weaknesses. They can then make any necessary short-term changes and develop and implement permanent processes that eliminate those weaknesses.

Detect Fraud

Another key responsibility of forensic accountants is fraud detection. Fraud can occur in the accounting department but also in other areas of the business. Restaurants and similar cash-driven businesses provide several opportunities for employees to engage in fraud. Employees can skim cash from drawers, overcharge customers or take inventory. Forensic accountants are trained to notice discrepancies quickly. They can ferret out leakage and theft long before it becomes a substantial problem and jeopardizes the company’s health.

Acquisitions or Customers

Having a forensic accountant on staff can also help companies that use an acquisition strategy to expand. Most small businesses do not have reviewed or audited financials. Therefore, acquirers have to rely on tax returns which the owners claim do not represent the true picture due to their attempt to minimize tax obligations. Forensic accountants can drill down into the financials of small business targets to determine if their sellers’ claims are correct or false. Similarly, if a company extends significant trade credit to customers, forensic accountants can analyze the financial statements of those requesting credit.