Forensic accounting is a detailed examination and analysis of financial documents and records embarked upon to establish the correctness and accuracy of financial transactions. It is also known as investigative accounting.
The term “forensic accounting” can refer to anything from the execution of a fraud analysis to the recreation of true accounting records after the discovery that they have been manipulated.
Forensic accountants are retained by companies, law firms, banks, government agencies, insurance companies and other organisations to analyze, interpret, summarise and present complex financial and business related issues in a simple and concise manner.
° Fraud detection, documentation and presentation in criminal trials and claims
° Calculate economic damages (if any) due to an aggrieved party
° Trace income and assets, often in an attempt to find hidden assets or income
° Verify and validate excessive financial & bank charges in a loan situation
° Reconstruct financial statements that may have been destroyed or manipulated
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How forensic accounting differs from audit
| Forensic Accounting | Audit |
| In response to an event | Mandatory |
| Financial investigation | Measures compliance with reporting standards |
| Findings used as evidence in court or to resolve disputes | Obtain reasonable assurance that financial statements are free of material misstatement |