Why is Forensic Accounting So Important in This Digital Age?
Forensic accounting is almost as old as the same king Hammurabi. The year 1780 BC is the first document that speaks of laws known to man. It suggests the concept of forensic accounting.
However, the forensic audit began to gain importance when an accountant masked a famous person named Alphonse Gabriel Capone in 1930. This man was engaged in money laundering and other crimes because, at that time, the police had other priorities. He made money laundering his main activity since, at that time; the authorities did not sanction this activity as a crime. This is how an accountant found sufficient evidence that the sales volume was not consistent with the theoretical importance of the business.
Forensic accounting has been recognized as a branch of accounting for strictly financial purposes. It began to enter the procedural areas of civil, criminal, commercial, tax, labor, family, administrative, and responsibility.
Here are some examples of the field where the presence of forensic accounting can be used:
- Labor cases: when it comes to errors in the liquidation of social benefits or compensation, they are resolved with the contribution of the merchant’s accounting.
- Criminal cases: when it comes to frauds committed by the infidelity of management and trust officials, they are only resolved and proven with the contribution of accounting through balances in inventories, cash, banks, investments, etc.
- Family cases: when it comes to divorce, inheritance, or the administration of injunctive assets, it is only possible to achieve it through the contribution of accounting.
Various skills are required to engage in forensic accounting, such as investigative skills, professional accounting skills, analytical skills, and knowledge of information technology, statistics, etc.
Role of forensic Accountant:
- Fraud detection
The forensic audit team is prepared to provide advice in circumstances that, although not stemming from fraud, can cause significant losses to the company.
When evaluating these leaks, the team must determine their reasons to know if they come from fraud or any other type of circumstance, allowing a range of solutions to the situation found.
- Correction and consequences
Once the forensic investigation has been carried out and the causes of the inaccuracies have been determined, the forensic audit will place the company or institution to apply the measures accordingly to compensate both the reasons that gave rise to the unwanted events.
- Internal control development
Another advantage of conducting forensic audits within companies is the integration of preventive, detective and corrective anti-fraud controls, strengthening the administration. But you have to take care when hiring them since they must be intelligent and not tie down the company’s operation as sometimes happens because we often find comments.
In addition to business-related cases, the service of the forensic accountant is used to resolve personal problems such as dissolution.