FORENSIC ACCOUNTING

1. FORENSIC ACCOUNTING

2. Contents • What is Forensic Accounting • Nature of work of Forensic Accountants • Need of Forensic accounting • Activities of Forensic accountants • Forensic Accountant…An Auditor by Another Name? • What a Forensic Accountant requires • Key distinctions between the roles • Scope for Forensic Accountants • Scope for CA’s • Some interesting points

3. What is Forensic Accounting • Forensic Accounting is :- • the investigation of an allegation whose evidence is expected to be presented in the Judicial forum. • different from old debit or credit accounting. It provides a scientific accounting analysis which help in resolving the disputes that arises in the organization.

4. Nature of Work • A FA has a unique job because the responsibility involve the integration of accounting, auditing and investigative skills. Using all of these skills, a FA is, in brief, a true investigator • Thinking beyond the numbers and Thinking out of Box • Presume the existence of fake transaction • Takes a more proactive, skeptical approach in examining the books of accounts.

5. Cont … • Looks beyond the numbers • Nothing to do with accounting or assurance standards. • Make no assumption of management integrity. • Show less concerns for arithmetical accuracy.

6. Need of Forensic Accounting • Forensic Accounting is essentially required in wake of growing frauds e.g. • Rapid use of information technology • Growing Cyber crime • Increase in number of Corporate Scams. • Failure of regulators to track the securities scams • Series of Co-operative Banks bursting • Helping to Gov. in achieving compliance with various form & regulation.

7. Activities • Investigating and analysing financial evidence. • Developing computerised applications to assist in the analysis and presentation of financial evidence. • Communicating their findings in the form of reports. • Assisting in legal proceedings as an expert witness.

8. Forensic Accountant…An Auditor by Another Name? • The term ‘forensic accounting’ is generally taken to refer to the comprehensive view of fraud investigation, including :- • The audit of accounting records to prove or disprove frauds • The interview of related parties • The act of serving as an expert witness

9. What a Forensic Accountant requires • Forensic Accountant has to become thief-in-virtual-sense. Surprised ? It means F/A has to think like thieves and find the trails or counter the same by putting adequate control mechanism. • Interpersonal and communication skills, which aid in disseminating information about the company’s ethical policies. • Thorough knowledge of company’s governance policies and laws that regulate these policies.

10. Key Distinctions between the roles… • The involvement of the forensic accountant is almost always reactive – they primarily respond to complaints arising in criminal matters, statements of claim arising in civil litigation and rumours and enquiries arising in corporate investigations. • The primary role of a financial internal auditor is to be proactive in the prevention and detection of fraud or irregularity in a corporate or regulatory environment. External auditor is monitoring compliance with GAAP and fair representation of the financial condition of the company • ‘Watchdog’ v ‘Bloodhound’

11. cont ..... • The major contribution of a forensic accountant is in translating complex financial transactions and numerical data into easily understood terminology. • External auditors find out the deliberate misstatements only but the forensic accountants find out the misstatement deliberately.

12. Scope for Forensic Accountant • In the scenario of implementing ERP’s, forensic accountants can play the role of proactive risk reduction tools by performing extended procedures as part of the design in the system development phase itself. • According to IMF, money laundering has become a major global problem as it seeks to show illegal money as the money from legitimate sources. A FA can unearth such money laundering transactions by application of his skills set.

13. Scope for CAs • CAs with in-depth analytical knowledge along with integrity and accountability are most suitable to be the forensic auditor . This fact is proven and has to be accepted by the legislatures. • With Indian courts overloaded with so many pending cases , people are increasingly going for alternative dispute resolution system which are generating ample opportunity for CAs, particularly forensic accounting among them.

14. Some interesting points The following facts hit at possible opportunities for Forensic Accountants : • Forensic Accountant are offered handsome pay packages (nearly $70000-$80000 P.a. ) • The recognition for Chartered Accountant to be the forensic auditor will be in the interest of all Govt. entities , Dept, Ministries and regulators. • Banks Frauds in India ; RBI > Rs 600 Corers .

15. Thank you.