As the business ecosystems are becoming more and more complex, there are more and more chances of companies becoming a part of the legal disputes due to illegal or wrongful activity in the Business or any other reason. This is where Forensic Accounting comes to the rescue.
Forensic Accounting can be defined as the process in which an examination of the accounts of the Business is conducted. The results of this examination are then presented in the court of law. There are different activities that are utilized to conduct the examination of the Business, such as Company Audit, Financial or Company Accounting and other investigative skills.
A forensic accountant has training in the field of both Finances as well as investigative techniques. This will allow him to understand the financial jargon of the Business and then also find out fraud or embezzlement in the company. After the examination, they will produce a report which will detail all the various findings of the accountant or team of accountants. These findings will be further used in the court of law to either prove malpractices or to acquit a company of such allegations.
Mainly there are two different types of Forensic accounting procedures:
1.Litigation Support Services
Here the accountant will calculate the total damages experienced by each of the parties and accordingly help in settling the dispute outside the court. In case the dispute reaches the court, the accountant can act as an expert witness.
2.Investigative or Fact-Finding Services
In this accounting, the accountant will have to understand the business activities and uncover the fraud or embezzlement, if any.
Once you have opted for forensic accounting, it directly reduces unwanted losses for your company as the entire documents gets detailed scrutiny, leveraging the chances of achieving the organization goal.
2. Enhances Efficiency
The forensic accounting procedures reduces the crucial error, which ultimately reflects on the efficiency of the employees. The loopholes or reasons of inefficiency gets clearly highlighted, paving out a path for improvement.
3. Diminishing Exploitation Risk
In this competitive world, it is possible that the chances of exploitation risk increases if it is not traced. The concept of forensic accounting helps you in dealing with the same, which will highlight the risks and makes sure that it gets diminished.
4. Prevent Legal Problems
As the business grows, the legal issues tend to increase at a faster pace. By availing for forensic accounting, you will be able to have a closer look at the legal issues. This helps to streamline the business processes and activities accordingly.
5. Decode Contractual Disputes
If you are facing continuous issues regarding the contracts while dealing with your business clients, then it’s high time that you infuse forensic accounting in your business premises, which will ultimately help you to decode the disputes and convert more customers to enhance business profits.
6. Supports Criminal Investigations and Defense
The forensic accounting service is used by various entities with the aim of catching the hold of any illegal activities or malpractices being followed in the company by gathering evidence of such illicit activities so that the management can take action accordingly.
7. Supports to formulate Economic Policies
With the help of forensic accounting, a company can determine the flaws in the working of the business and formulate their economic policies according to the budget they have in their hands and what goals does the company want to reach.
8. Improves Brand Reputation
If fraudulent activity is being conducted in the company, not only will it face losses but the goodwill of the company will also go down. Forensic accounting will help identify such unprofessional conduct and allow the management to take remedial measures so that the goodwill of the company improves.
9. Enhances the Investment Decisions
Forensic accounting allows us to compare the accounting information of the previous duration with the accounting information of the present times. This allows us to make the necessary changes in our decision regarding the allocation of resources in the company.
10. Litigation and Business Valuation will be simplified
In case of business valuation and litigations, forensic accounting helps in investigating a particular company regarding the accurate price and the potential profitability of the company and also presents the company’s net worth. Forensic accountants are also required if there is any lawsuit filed against a company.
There are various investigative techniques that are to be used by accountants all over the world to find out various important points of a business. Some of these techniques are as follows:
- One of the simplest yet effective techniques of investigating is conducting background checks. With background checks of a company, the accountant can see the past transactions and deals made, and these can tell a lot about the company.
- Gathering information from trustworthy sources is another simple yet effective solution for understanding the nature of the Business. It is to be kept in mind that information which is received are only from reputed and trusted sources should be taken, as there is a guarantee that information from such sources will be correct.
- One of the difficult technique of investigation is to go undercover and find the information first hand. One can go undercover physically or use any electronic means to do this snooping and monitor and track the target emails.
There are very important reasons why forensic accounting should be implemented for businesses.
- First of all, they provide awareness for the Business and help avoid any fraudulent activity.
- In case an asset has been misappropriated the forensic accounting can help in curing the situation
- It can help combat any growing threats such as Terrorism and counter intelligence.
- It provides greater insight into the present and helps to understand your Business.
At GSPU, we aim at designing the best financial structure to deliver a high cash-flow framework system. We provide a wide range of services that include:
- Financial data analysis
- Evidence Analysis
- Compiling information
- Tracing illicit funds
- Damage Assessment
- Due Diligence Reviews
- Business Valuation
- Report Generation