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Forensic Accounting Explained

We’ve all come across ‘Forensic investigators’ or ‘Forensic scientists’ in many a TV drama – from NCIS to Silent Witness, where evidence is handed to a team of specialist experts to analyse and uncover facts.

Through Forensics they uncover that Dave shot the bank clerk but they need to substantiate the evidence to prove that he ‘did it’, how he ‘did it’ and in some cases, why he ‘did it’, in order to present to a court of law.

Forensic accountants do much the same job but with all things relating to money. We use a combination of financial, investigative and legal skills to provide a report, usually for presentation in court.

This could be anything from investigating where a missing £600,000 from a charity fund, or why Marcia in the Finance Dept has suddenly traded her battered VW Polo in for an F-type Jaguar while weekending in Monaco, or whether Company X that Company Y wants to buy them out are really as successful as they say they are at producing 20 million widgets a week (when they can’t pay their telephone bill).

If something doesn’t quite smell right – or organisations need to double and triple check finances, settlements and productivity – then it’s time to call in the forensic accounting experts.

Forensic Accounting in Business

In an increasingly competitive, often hostile, global business market, where margins are slimmer and companies are cutting corners, there is room for much mismanagement of funds as people take bigger risks with their own and other people’s money in order to survive. The downside can affect anybody and everybody – even the rich and mighty; for instance, Rock star Sting’s accountant ran off with £6m of his money; Enron, one of the biggest energy providers in the USA used complex financial structures to show the company to be significantly more profitable than it really was before the company was rumbled and ultimately collapsed- affecting the very fabric of American society.

This edgy business environment leads to individuals and companies inevitably getting into trouble or litigating between themselves and when this happens it is up to forensic accountants to follow the paper or electronic trail to uncover the truth – and determine exactly who did what with the money or shares, through a rigorous and thorough investigation of all the figures and facts.

Forensic Accounting in Divorce

Another popular area where one needs to call in the Forensic Accountants are divorce cases where one partner is trying to hide or protect money, income and assets they have to shield it from their spouse in the hope of paying out less. Or there may be a business to be valued and neither party can agree on the true value of the business.  Even in the most “amicable” of divorces, forensic accountants may be called upon to assess an individual’s situation and their ability to pay fair maintenance or child support.

Forensic Accounting in Fraudulent Activity

With economic hardship affecting people across society, then there is a huge temptation to file false or inflated insurance claims. This is often the case when companies or individuals have financial pressures or greed – this can then lead to crimes being committed within the workplace such as theft, false insurance claims etc.

It is up to the forensic accountant to calmly and professionally assess any questionable claims on behalf of either the insurance companies or the authorities. Here at Frenkels, we act for many insurers and solicitors to assist with the loss of earning claims arising from personal injury claims such as road traffic accidents, illness and negligence.

At Frenkels Forensics, our team of forensic accounting experts work regularly with solicitors, insurance companies and barristers across the UK and abroad helping them prevent and resolve legal disputes.

If you’re looking for advice in any aspect of forensic accountancy, then do get in touch via Twitter, Google+, LinkedIn or by visiting our website www.frenkels.com.

By Vitek Frenkel – find me via Google+