User:Sleavers/Forensic accounting

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Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accounting that investigates whether firms engage in financial reporting misconduct. Financial misconduct has severe consequences for both the economy and the individuals involved, forensic accounting looks to lessen these consequences by predicting whether or not a firm has committed financial misconduct. Forensic accountants are responsible for financial misconduct that arises from criminal intent. An investigation for a forensic accountant typically consist of interviews, audits of financial information and analysis of performance reviews in a company to be able to detect fraud or some other form financial misconduct.

Types of cases
Forensic accountants apply a range of skills and methods to determine whether there has been financial reporting misconduct. These misconducts may include:
 * Economic damages calculations, whether suffered through tort or breach of contract;
 * Post-acquisition disputes such as earnouts or breaches of warranties;
 * Bankruptcy, insolvency, and reorganization;
 * Securities fraud;
 * Tax fraud;
 * Money laundering;
 * Business valuation; and
 * Computer forensics/e-discovery.

Forensic Accountants
Forensic accountants, investigative accountants or expert accountants may be involved in detecting and preventing fraud, litigation support, testifying as an expert witness and other investigative supports. Typical qualifications for forensic accountants include: Certified Public Accountant (CPA); Certified Fraud Examiner (CFE); Certified Forensic Consultant (CFC); Certified Business Appraiser (CBA); Certified Valuation Analyst (CVA); and Certified Forensic Financial Analyst (CFFA). The importance of Forensic Accountants getting the proper qualifications is so that they can be considered as expert witnesses in court.

The Certified Forensic Accountant (CRFAC) program from the American Board of Forensic Accounting assesses Certified Public Accountants (CPAs) knowledge and competence in professional forensic accounting services in a multitude of areas. Forensic accountants may be involved in both litigation support (providing assistance on a given case, primarily related to the calculation or estimation of economic damages and related issues) and investigative accounting (looking into illegal activities). The American Board of Forensic Accounting was established in 1993.

The main goal of Forensic accountants is to determine if financial crime has been committed and if so, to what extent. They are often used as expert witness to assist the judge or jury in forming the verdict. It is important that forensic accountants possess skills such as microeconomics, cost-center accounting systems, coming up with conclusions with little data, report writing, research skills and interview skills.

Analytical Techniques
Forensic accountants utilize an understanding of economic theories, business information, financial reporting systems, accounting and auditing standards and procedures, data management & electronic discovery, data analysis techniques for fraud detection, evidence gathering and investigative techniques, and litigation processes and procedures to perform their work.

When detecting fraud in public organizations accountants will look in areas such as billing, corruption, cash and non-cash asset misappropriation, refunds and issues in the payroll department. To detect fraud, companies may undergo management reviews, audits (both internally and externally) and inspection of documents. Forensic accountants will often try to prevent fraud before it happens but searching for errors and in-precise operations as well as poorly documents transactions.

The process begins with the forensic accountant gathering as much information as possible from clients, suppliers, stakeholders and anyone else involved in the company. Next, they will analyze financial statements in order to try and find errors or mistakes in the reporting of those financial statements as well as they will analyze any background information provided. The next step involves interviewing employees in order to try and find where the fraud may be occurring. Investigators will look at company values, performance reviews, management styles and the overall structure of the company. After this is complete the forensic accountant will try to draw conclusions from their findings.

Case Study
The following case study talks about a case in trying to detect counterfeit pharmaceutical drugs. This is a dangerous case type because some patients may receive the wrong medication and are therefore not being treated for their condition. The financial aspect of this type of case comes from profit loss for patent holders, manufacturers and wholesalers. It is estimated that the sale of counterfeit pharmaceuticals generate 75 billion dollars in illegal sales. In the United States, as part of the Prescription Drug Marketing Act of 1987 all distributors, manufacturers and wholesalers must keep record of the drug sales and how these sales progress through the supply chain. Since pharmaceutical drug counterfeit provides profit to those counterfeiting them it does become an issue for a forensic accountant. The profits tend to be as much as selling narcotics however the jail time is less for this offence.