The contemporary world has recorded an increase in criminal dramas especially in the workplace. As a result, most people tend to confuse forensic accounting and fraud examination because they are the main techniques used in solving these criminal activities. Both terms involve the use of investigative skills but forensic accounting in broader in that it also utilizes accounting and auditing skills to examine the financial statements of a firm. The types of crimes investigated using this method are classified under "crimes against property," and the evidence is used to give testimonies in courts. Making sure that a firm's finances are safe and adequately utilized has become a leading concern in today's business world. While many organizations have observed the policy of employing in-house accountants, there are still instances of irregularities related to fraud. The paper analyzes forensic accounting as a career and the growing importance of using this skill in the job market.
Breaking Down Forensic Accounting
Forensic accountants can be employed in a wide range of organizations because their primary role is to analyze, interpret and summarize complex financial matters. Examples of these firms include accounting companies, banks, insurance firms, and government parastatals. One of the main reasons why the filed has received more attention in recent years is that there is a dramatic increase in white-collar financial crimes that involve high profile employees (Kranacher et al. 2015). The findings from an investigation can be shared through reports and presentations where the visual aids support the trial evidence. When working on business investigations, the accounts major in asset identification, tracing funds and property recovery. Most of these workers seek additional training due to their high involvement in complex issues.
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Forensic accounting can be subdivided into three main categories. First, there is litigation support technique that is used to quantify the extent of damage on the commercial property. An example is calculating the economic loss as a result of a breach of contract between an employer and employee. The involved parties use the quantifications to help resolve their disputes through compensation. The process is also essential in minimizing future damages because workers are aware of the risk of loss. Litigation support also involves reporting the strengths and weaknesses of the parties involved in the trial. The kind of role conducted can vary significantly from case to case.
Secondly, forensic accounting is a tool for fraud detection. It is estimated that fraud costs American businesses more than four hundred billion dollars every year. Research shows that the effect of fraudulent activities is far great than the loss caused by customer misconduct. Business crimes are mainly categorized under two main forms which are; use of organizational resources for personal benefit and false drawing of financial statements. Examples of techniques used in the two methods include padding expense items, selling assets under the market value, creating ghost supplies among others (Rezaee et al. 2014). Forensic accountants help companies to detect such crimes and to set new controls that will be used after the problem is solved to avoid a similar occurrence.
Thirdly, there is computer forensic which involves collecting, analyzing and reporting matters related to digital information. Due to the high rate of technology use in organizations, the method has become a useful terminology in the detection and prevention of crime. Computers can provide evidence about a "crime scene," cases of denial of services, or hold proof in the form of files and internet history. It is not about the ability to retrieve these records but also the metadata associated with them. An example is revealing when a document first appeared in an organization system and how many users were able to access it both legally and illegally.
Benefits of Forensic Accounting
The digital era has made it easier than ever for criminals to access organization details and tamper with their accounts. The reason is that most companies rely on internet services and computers, but they lack enough knowledge on how to effectively handle these devices (Singleton & Singleton, 2015). However, the good news is that forensic accounting has also expanded to meet the needs of the digital world. Companies can now conduct comprehensive financial audits and investigations to ensure the safety of information stored both manually and online. It is now easy to sift through multiple business accounts for the hint of fraudulent activity. There are numerous benefits associated with forensic accounting.
Minimized losses - the primary benefit of employing an accountant expert, is the reduction of unnecessary losses. For example, a forensic expert can play a crucial role in loss prevention as well as the enhancement of new policies (Mohamed & Lashine, 2016). The process is beneficial in that rather than identifying the problem; the accounts ensure that the companies do not experience similar issues in the future. The experts also assess the business units that are vulnerable to digital crime and undertake advanced assessments. Patching these "gaps" means that the interests of business are protected in advance.
Improved efficiency - the accounting process is used in detecting problems as well as the areas of improvement for the benefit of a firm. Regular examination of financial operations and standards provides effective solutions towards the ever-changing needs of the digital world. Some of the most competitive firms employ professionals to investigate target measures regarding whether the internal estimations relating to profits and employee pay are fair and reasonable. Consequently, it is easy for such firms to partner with other organizations in a less formal and binding nature to improve on their level of productivity. Efficiency comes along with avoidance of legal problems that can be spectacularly disruptive and costly to a firm.
Improved brand reputation and authority - a study set out to examine the attitudes of different business shareholders on the impact of a data breach on overall brand reputation shows that breaches that occur as a result of fraud are among the leading most negative events. Consumers place a significant amount of trust in the firms that prioritize client information in security measures. Some of the main details include customer names, account passwords, financial details, and contributions (Carpenter et al. 2017) Modern firms must, therefore, leave up to these requirements to ensure that they are always at a competitive edge. In the future, firms that have highlighted security as an integral part of their growth and implemented up-to-date security systems will relate effectively with both the consumers and investors. The forensic accounting tool is a primary element in the strategic security infrastructure.
Conclusion
The fight for maintaining accurate internal audits in companies has just begun. It is expected that the perspective of accounting influence will remain to be bright, as companies continue to uphold the pillars of corporate governance. The main issues to consider include transparency, fairness, and accountability. Assuming that one considers fraud to be the leading cause of organization failure, forensic accounting is one of the main fields of accounting that need to be developed. By taking a proactive approach to accountancy, companies will be able to safeguard themselves from unnecessary losses as well as legal consequences that result from fraud. Leaders should ensure that probable fiscal malpractices do not negatively affect their corporate cultures. Taking legal actions against wrongdoers translates into enhanced productivity for a firm.
References
Carpenter, T. D., Durtschi, C., & Gaynor, L. M. (2017). The incremental benefits of a forensic accounting course on skepticism and fraud-related judgments. Issues in Accounting Education , 26 (1), 1-21.
Kranacher, M. J., Riley, R., & Wells, J. T. (2015). Forensic accounting and fraud examination . John Wiley & Sons.
Mohamed, E. K., & Lashine, S. H. (2016). Accounting knowledge and skills and the challenges of a global business environment. Managerial Finance , 29 (7), 3-16.
Rezaee, Z., Larry Crumbley, D., & Elmore, R. C. (2014). Forensic accounting education. In Advances in accounting education teaching and curriculum innovations (pp. 193-231). Emerald Group Publishing Limited.
Singleton, T. W., & Singleton, A. J. (2015). Fraud auditing and forensic accounting (Vol. 11). John Wiley & Sons.
