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Forensic Accounting Techniques

Mark Jenner & Co is a firm of Chartered Accountants that specialises solely in forensic accountancy. Although services do not include normal accounting lines such as auditing, preparation of year end accounts and the provision of tax advice, a forensic accountant must be competent in all these areas in order to be able to examine financial records, often produced by accountants, and provide an unbiased and “expert” viewpoint on their content.

Forensic accounting techniques are used by investigative accountants to look at financial records, dig into their background and present a clear and concise account of what they mean and how they impact a particular matter that they have been asked to consider. Forensic accounting techniques are not the same as normal accounting methods, such as auditing techniques or methods for considering tax issues – but they may include the use of these skills along with investigation techniques, legal understanding and a natural tenacious desire to uncover a hidden issue.

A forensic accountant is an expert accountant and experienced business advisor that is asked by one party in a dispute to provide clarification and opinion concerning the issues being debated. There are a wide range of circumstances that can involve the need for forensic accountants. These can range from valuing assets for one or both parties in a matrimonial dispute in order that a division of wealth can be made, to establishing how much profit has been lost as a result of a factory stoppage that is being blamed on another party. Quantification of the value of damages or losses in order to assist with a claim is a big part of a forensic accountant’s work.

However, one of the biggest branches of forensic accounting is focused on crime. In particular financial crime or, in other words – fraud. This is the area of work that Mark Jenner & Co focuses on. Indeed the general public often associate fraud with forensic accounting. Fraud by its very nature involves some form of accounting anomaly or financial deceit. It is the manipulation of accounting records by business criminals (white collar criminals) to hide the theft. As such, one of the most important persons needed to investigate and deal with fraud is the expert accountant.

It is the financial and business expert that is able to understand the accounting evidence in order to recognise, or unravel, the fraud. He or she will look for the reasons it was possible for the fraudster to commit the crime and try to discover the route the losses have taken leaving the victim company. It is this forensic accountant who traces these losses and demonstrates the ultimate destination of the money by analysing bank statements and other financial records when “following the money”. It is arguably the most important part of the fraud investigation because without it, interviewing suspects or gathering evidence does not have a focus.

When confronted with a new case, the forensic accountant does not have a specific set procedure. Every fraud is different, it is the unusual and new loophole that every fraudster is seeking in order to surprise an organisation that thought it had covered all the bases. The money trail is the starting point and establishing how the losses occurred and how much has been stolen is the first task. The forensic accountant must try to place himself in the fraudster’s mind and attempt to answer the question “how would I steal the money?”

The forensic accountant may enlist the help of other competent accountants to analyse bank statements and collate data. He or she may often use a victim organisation’s own resources. Sometimes accounting software is utilised to make the repetitive tasks easier, such as IDEA for Windows or Altia statement analysis software. Spreadsheets are by far the most common tool for collating vast quantities of records and analysing unusual events within normally repetitive data.

It is the interpretation of results and provision of opinion where the forensic accounting skills are most valuable in any fraud. An opinion may have to be supported when under cross examination and the other party is not going to simply accept one persons say so. It can be very lonely in the witness box for a forensic accountant! However, a good forensic investigator will only present balanced and independent opinions that are based on a thorough understanding of all the facts.