Posted by Lynne Thach.
Forensic accountants play a very important role in court. They provide litigation advisory services, investigative services, and essential support for lawyers and attorneys in many situations in court. The most important role is that forensic accountants are used as financial expert witnesses because of their technique, investigation, knowledge, and practice skills assisting in uncovering truth. They ultimately provide a credible analysis that may be relied upon in court. In this paper, I only emphasize the role of forensic accountants in litigation, especially in discovering financial fraud.
Financial fraud has been increasing and a substantial threat to the development of economies and society’s stability. The need for forensic accounting stretches into any situation where there is suspicion of fraud in an entity’s financial transactions. Forensic accountants are trained to look beyond the numbers and deal with the business reality of a situation. It is more than accounting and more than detective work; forensic accountants combine their accounting knowledge with investigative skills to search through companies’ financial reports and uncover the facts of the case. It is always better to hire forensic accountants sooner than later “to assist the attorney in translating complex financial issues into a more understandable manner” (by Mark S. Warshavsky).
Financial fraud can take many forms including Ponzi schemes, securities fraud, tax evasion, and embezzlement that are so-called “white-collar crimes”. Some early scandals included Enron, WorldCom, and The Bernie Madoff, and were reminders of the harm that can be done by fraud. These events prompt high demand for forensic accountants. They are responsible for recognizing red flags and ending fraud before they become big enough to significantly impact large numbers of people. Discovering fraud requires high forensic accounting skills including communication skills, analytical skills, investigation skills, accounting skills, legal knowledge skill, and practicing skills. The articles “The role of forensic accounting in discovering financial fraud’ states the result which showed that practicing forensic accounting is effective in discovering fraud.
The field of forensic accounting will continue to grow and develop as more accounting and technological changes are made as more frauds are discovered. Until then it is important that forensic accountants are well-educated and well-trained, because thousands of innocent people rely on them every day.
Lynne is a master’s in accounting student at the Feliciano School of Business, Montclair State University.
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