ACCA AAA ^INT Syllabus F. Other Assignments - Forensic Definitions - Notes ^{1 / 3}

Forensic Accounting

Forensic accounting uses accounting, auditing, and investigative skills to examine a company’s financial statements.

• A financial investigation where the evidence may be use in court generally

• Covers..

  Forensic Investigations &

  Forensic Auditing

Forensic Investigations

A forensic investigation is a process whereby a forensic accountant carries out procedures to gather evidence, which could ultimately be used in legal proceedings or to settle disputes.

• Eg. fraud or money laundering cases

Forensic Auditing

Forensic auditing uses audit procedures within a forensic investigation to find facts and gather evidence, usually focused on the quantification of a financial loss.

Objectives of a Forensic Investigation

1. Decide if a fraud  has actually taken place

2. Discover the perpetrator(s) of the fraud, and ultimately to assist in their prosecution

3. Quantify the financial loss

4. Produce evidence which is sufficient and relevant enough to be used to assist legal proceedings

Steps in investigating a suspected fraud

1. Determine the type of fraud

2. Consider how the fraud could have taken place

   Eg. Usually by circumventing internal controls

3. Gather evidence

   - Determine the identity of the perpetrator(s) and
   - The monetary value of the fraud. 

   Gathering evidence includes:

   – The motive for the fraud,
   – The ability of the alleged fraudster to conduct the fraud, and
   – Any attempt made by the alleged to conceal the crime.
   - An examination of accounting records and other documentation, 
   - The use of computer-assisted auditing techniques (CAATs),
   - Interviewing employees of the company, and 
   - Discussions with management.

   Evidence must be sufficient and relevant.

4. An interview with the suspect(s)

5. Produce a report for the management

   - summarising all findings
   - concluding on the identity of the fraudster(s) and 
   - the amount of financial loss suffered. 

   This report is also likely to be presented as part of evidence during court proceedings.

6. An advice can be provided to management