FORENSIC ACCOUNTING

1. “ A Specific Study of FORENSIC ACCOUNTING –
An Essential & Modern Outlook Towards AccountabIlity &
Fraud Investigation "
PROPOSAL PRESENTED BY:
Prof. ABHISHEK K. GANDHI
[ M.Com (MUMBAI UNIVERSITY) ;
CHARTERED ACCOUNTANT (ICAI);
COMPANY SECRETARY (ICSI) ]

2.  RAPID CHANGES IN THE ACCOUNTING
PROFESSION
> Operations of Day to day task of
debiting and crediting.
> Reports on internets (Technology)
> Demand of Global Economy and
International market.

3.  Forensic accounting have been around for nearly 200 years
 Found in 1824
 First institutions to use the services IRS (International Financial
Statistics)
 GAAP ( General Accepted Accounting Principles) and tax laws
became widespread and mandatory.
 Companies that manipulated accounting rules to boost their
earnings in a stock market gone wild.
 The year 2002 the annals of accounting history as
the Year of Truth
 when companies disclosed billions of dollars of financial
fraud.
 SEC issued earnings restatements between the years 1997 and
2002.
 The FASB (Financial Accounting Standard Board) and the
SEC(Security and Exchange Commission) scrambled to find
solutions to the problem of such ubiquitous financial fraud.

4.  Forensic accounting is hardly a new field in
accountancy.
 Forensic accountants as preventative measures
as the demand for trustworthy financial
statements increases in the wake of the recent
accounting scandals.
Forensic accounting", provides an accounting
analysis that is suitable to the court which will
form the basis for discussion, debate and
ultimately dispute resolution.
Forensic Accounting encompasses both Litigation
Support and Investigative Accounting

5.  Litigation Support
 It deals primarily with
issues related to the
quantification of
economic damages. A
typical litigation
support assignment
would be calculating
the economic loss
resulting from a breach
of contract.
 Investigation Support
 “Investigative
accounting", is often
associated with
investigations of
criminal matters. A
typical investigative
accounting assignment
would be an
investigation of
employee theft. Other
examples include
securities fraud,
insurance fraud, and
proceeds of crime
investigations.”

6.  The expert witness –
preparation of formal
reports for filing in
Court and giving
evidence as an Expert
 Fraud Detection –
assisting clients in
detecting financial
fraud by employees
and others and
tracing
misappropriated
funds. This section
provides
information for
fraud-related
engagements
•Computer Forensics –
assisting in electronic
data recovery and
enforcement
of IP rights etc.

7. 1. Preparation (of the
investigator, not the data)
2. Collection (the data)
3. Examination
4. Analysis
5. Reporting
6. Comparison to Physical
Forensics

8. Shareholder/partnership disputes
•Personal injury claims/accidents
•Business interruption/insurance claims
•Employee fraud
•Divorce/bankruptcy
•Professional negligence
•Financial statement fraud
•Retained by lawyers, law enforcement,
banks and companies

10. Direct Method Indirect Method
 The Direct Method, also
known as the
Transaction Method, is
similar to traditional
auditing procedures. In
this method, the
appraiser commonly
examines:
 Cancelled checks &
invoices
 Contracts & agreements
 Public records & notices
 Interview management &
staff (multi levels)
 Indirect Method is
commonly employed
when the conventional
Direct Method is not
productive. The most
widely used techniques
under the Indirect
Method are the:
 Cash T Method
 Source & Application
of Funds Method
 Net Worth Method
 Bank Deposit Method

11. Forensic Accountants are often retained by
the following groups:
•Lawyers;
•Police Forces;
•Insurance Companies;
•Government Regulatory Bodies and Agencies;
•Banks;
•Courts; and
•Business Community.

12. “Auditor should be watchdog ”.
It’s a good quote that every
auditor should know. This quote
makes the definition of Forensic
accountants even more simple.”

13. Growing cyber crimes, failure of
regulators to track the security
scams,
Satyam scandal

14. Conclusion:……………………….
The importance of the forensic
accountant’s role in the detection of
fraud is continuously growing. Armed with
combination of skills, these financial
detectives are today important assets
to modern legal teams. In the backdrop
of increasing levels of frauds, the
demand for forensic accountants is bound
to substantially increase in the future.

17. End of Satyam
Empire
?