Forensic CPA Society. (2016). Fcpas.org. Retrieved 26 March 2016, from https://www.fcpas.org/about-us/what-is-a-forensic-accountant/
According to the Forensic CPA society article, financial irregularity is a major problem globally and more so it is a primary concern to the developing nations. Forensic accounting over the years has risen to prominence due to the increasing number of fraud cases that are a result of financial collapse. Forensic accounting has become a field of interest to various stakeholders including the government, investors, and practitioners to official bodies.
Crumbley, D. L. (2001) Forensic Accounting: Older than you think, JFA, 2 (2) 181
According to Crumbley (2001), forensic accounting deals with the application of laws. This is one of the fundamental knowledge that is used by forensic officers. In addition to that, these professionals are required to have great planning and presentation skills when gathering information. Forensic accountants are more of fraud detectives than auditors and financial accountants. There is a high level of expectance on them especially when matters related to fraud arise they are required to be so knowledgeable about issues related to fraud. It is for these reasons that there is a great difference between forensic accountants ate financial accountants.
Rahbar, S. (2016). What's the Difference Between Financial Accounting & Forensic Accounting? Retrieved 26 March 2016, from http://www.cfoedge.com/resources/articles/cfo-edge-forensic-accounting-vs-financial-accounting.pdf
In reference to Rahbar, financial accountants are mandated with the preparation of financial statements based on generally accepted accounting principles. They are required to adhere to a set of rules and guidelines regulated by the financial accounting standards. While forensic accountants use accounting skills to perform financial investigations. Forensic accounting follows rules under GAAP. Forensic accountants look at the past records of the company and deal with the business reality and situation, especially in fraud.
Objectives of forensic accounting
Nandy, D. (2016). Forensic Accounting and Audit. Retrieved 26 March 2016, from http://icmai.in/upload/Institute/Journal/Sep-2014-Issue.pdf
Forensic accounting is always performed to achieve specific objectives. However, the major objective is to detect fraud by examining high-risk areas where fraud could occur, and later to provide advice to the client in matters related to fraud. The system also assists in creating a good working environment where employees do not abuse their financial responsibilities in the organization. Forensic accounting assists companies in establishing a comprehensive corporate governance policy by preventing fraudulent activities. The accountants can also support the propagation of the required information about governance and ethics policies to interested parties inside and outside the organization. This assists in maintaining a healthy public image.
Crumbley, D. L. (2001) Forensic Accounting: Older than you think, JFA, 2 (2) 181. http://www.itkib.org.tr/hedef/200203mart/arastirma1.html. Accessed 1 Nov 2003
The most sophisticated way while conducting out fraudulent activities is through financial and accounting records. One of the most top energy companies in the USA Eron was defrauded by her top management to make the company look good in the public eye and convincing on paper than it was. Special subsidiaries that have a single purpose and those that did not need to be included in Euron`s balance sheet to conceal risky investment activities and financial losses. Through the use of forensic accounting, it was determined that many of Euron`s recorded assets and profits were inflated and in some cases downright fraudulent and non-existent. For instance, it was established that most of the company's debts were registered in offshore entities. Thus, it had an effect on its annual financial reports.
It has been concluded that the different causes of fraud among employees are pressure from financial aspects and the individual's job. Opportunity is also a cause of fraud in organizations and also justification. The three components create the fraud triangle which when they come together creates chances of fraud occurring.
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