Forensic Accounting Techniques
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This document discusses forensic accounting. It defines forensic accounting as integrating accounting, auditing, and investigative skills, especially for use in potential court cases. Forensic accountants conduct examinations of financial statements using investigative and auditing techniques. They may provide expert advice in court or help companies improve internal controls. The document outlines the techniques, skills, and stages of forensic accounting assignments, including planning, evidence collection, analysis, and reporting. It also discusses the ethical principles and types of cases forensic accountants may work on.
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Forensic Accounting Techniques
- 1. Presented by: Ruquia Batool Lubna mueen Hafiz Adnan
- 2. Word forensic What is Forensic Accounting? O the r Te rm ino lo g y . Te c hniq ue s o f Fo re ns ic A c o unting ? c Ty p e s o f a s s ig nm e nts a Fo re ns ic A c o unta nt p e rfo rm . c Skills re q uire d . Ethic a l Princ ip le s Stage to Forensic A c o unting . c Ca s e s tud ie s . M.Com 3rd(Auditing) Islamia University Bahawalpur
- 3. Meaning in Urdu ب حث مبا ح ثہ ۔ اس تدلل کا فن ۔ ف ن ب حث َ ّ َ َ َ ِ ََ ُ َ ۔ The adjective forensic describes scientific methods used to investigate crimes. It could also mean that it has to do with the courts or legal system. •belonging to, used in, or suitable to courts of judicature or to public discussion or debate’ •In the accounting profession the term ‘forensic’ deals with the relation and application of financial facts to legal problems M.Com 3rd(Auditing) Islamia University Bahawalpur
- 5. • The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting. • Professional accountant conduct an examination on the client’s Financial statement using Investigative and Auditing techniques , only needed in the potential court cases. M.Com 3rd(Auditing) Islamia University Bahawalpur
- 6. So we can say that Forensic Accounting is an umbrella of Forensic Auditing + Forensic Investigation. M.Com 3rd(Auditing) Islamia University Bahawalpur
- 7. Forensic Audit The process of gathering, analysing and reporting on data , in a pre-defined context, for the purpose of finding facts and evidence in the context of financial/legal disputes and irregularities and giving preventative advice in this area. M.Com 3rd(Auditing) Islamia University Bahawalpur
- 8. The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law. A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline. Main purpose is to find out possible fraud committers, may be specialized investigation applied in court proceeding M.Com 3rd(Auditing) Islamia University Bahawalpur
- 10. (THEIR EXPERT ADVICE) Type of fraud How it happened(check internal control system) Evidence Interview with suspects(gain a confession from him) Report(summarize suspects and quantify economic loss M.Com 3rd(Auditing) Islamia University Bahawalpur
- 11. • EXPERT Witness in the Court • ADVICE To Company how to improve their internal control system in the future M.Com 3rd(Auditing) Islamia University Bahawalpur
- 12. • Materiality (no materiality threshold) • Timing (less predictable than audit. Timing of procedures need to be unpredictable). • Documentation Needs to be reviewed more critically than on an audit. • Interviews (required high skill level) • Computer-aided techniques (access, management and knowledge of Computer-aided techniques ) M.Com 3rd(Auditing) Islamia University Bahawalpur
- 15. Pressure Personal or family financial problems Gambling or drug problems Financial Expectations Opportunity Weaknesses in controls Third parties Rationalization M.Com 3rd(Auditing) Islamia University Bahawalpur
- 16. Crim inal Investigations S hareholders' and P artnership Disputes B usiness Interruption /Other Types of Insurance Claim s B usiness/ m E ployee F raud Investigations B usiness E conom L ic osses P rofessional Negligence Terrorist F inancing M.Com 3rd(Auditing) Islamia University Bahawalpur
- 17. • • • • • • • Gender (male) Marital status (married) Education status (highly educated) IQ level (high IQ level) Age level (done by older than young's one) Position at the business (mostly at managerial post) Relations outside of business (good business relations) M.Com 3rd(Auditing) Islamia University Bahawalpur
- 18. Invetigative Accounting Auditing Creativity –(where might I find evidence?) Curiosity (recognise the warning signs) Perseverance (paper or accounting irregularities may exist, but unless the evidence is connected to individuals, no fraud can be established) • Common sense (what is possible?) • • • • • • M.Com 3rd(Auditing) Islamia University Bahawalpur
- 19. • Business sense (understanding of how a business functions) • Confidence (stand up in court and present evidence in a clear and concise manner) • Attention to detail (evidence must be gathered & preserved in such a way that it can meet the standard of proof test in court) • Communication skills M.Com 3rd(Auditing) Islamia University Bahawalpur
- 20. • • • • • Integrity (be honest otherwise withdraw assignment) Objectivity(independence and objectivity) Professional competence and due care Confidentiality Professional behavior M.Com 3rd(Auditing) Islamia University Bahawalpur
- 21. Meet with the client Perform a conflict check Perform an initial investigation Develop an Action Plan Obtain the relevant evidence Perform the analysis Prepare the report Attendance at Court M.Com 3rd(Auditing) Islamia University Bahawalpur
- 22. Planning Stage Meet with the Client Obtain an understanding of issues at hand Perform preliminary assessment of work to be done and prepare tentative schedule Perform a Conflict Check Ensure that the firm does not have conflicts of interest Perform an Initial Investigation Preliminary investigations examination of available information Allows auditors to identify likely trouble areas and assess the work to be done Plan the Audit It Should identify objectives to be achieved and plan audit methodology to be used M.Com 3rd(Auditing) Islamia University Bahawalpur
- 23. Execution Stage Collect the Relevant Information In depth interviews with client’s staff Examination of hard-copy & electronic info Electronic info is often best source for forensic auditors Specialized computer forensic auditors are sometimes called in, depending on the audit Off-site computers & servers, hard-copy info, etc. are also examined M.Com 3rd(Auditing) Islamia University Bahawalpur
- 24. • Perform the Analysis • Highly dependent on specifics of the engagement • Often involves: calculating economic damages and sensitivity analysis, tracing of assets • Prepare the report • It contains the details of the engagement, the scope, any limitations and a detailed summary of the findings • Reports are generally confidential and often used in court proceedings • Review Process & report to the client. • Identify those involved and quantify amount of fraud. • Present findings to the client and court M.Com 3rd(Auditing) Islamia University Bahawalpur
- 25. • It is to exclusively associated with "negative" applications, such as bankruptcy, fraud, business disputes, or matrimonial divorce insurance claims legal disputes. • It may also be applied in "positive" assurance engagements such as due diligence reviews, business valuations, audit committee advisory services and enterprise risk management M.Com 3rd(Auditing) Islamia University Bahawalpur
- 28. • Forensic accounting, which has been growing rapidly as a profession in the world and has been accepted as a profession in countries such as Canada, Australia, the USA, and the UK, is beginning to gain the importance that it deserves. The traditional auditor was following a reactive approach during the audit process. Now we see that proactive approaches have begun to replace the reactive solutions. M.Com 3rd(Auditing) Islamia University Bahawalpur
Editor's Notes
- Computer forensics is the area of forensics in which professionals analyze and gather data from a PC or other form of digital media. Forensic anthropology is another type of forensic that involves in the examining bone fragments for clues to the conditions surrounding the people’s death. Forensic accounting is also quite popular and a forensic accountant will seek to trace any financial inconsistencies within a company’s account. Forensic scientist is a professional who applies a scientific knowledge in a legal context.
- Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law"
- A Preliminary Assessment is the process of collecting and reviewing available information to identify any potentially contaminated areas of concern on a property Tentative agreements, plans, or arrangements are not definite or certain, but have been made as a first step. The preliminary investigation is the process of studying the systems request and preparing a recommendation.
- A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions. This technique is used within specific boundaries that will depend on one or more input variables, such as the effect that changes in interest rates will have on a bond's price.Sensitivity analysis is a way to predict the outcome of a decision if a situation turns out to be different compared to the key prediction(s).