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Unit 14: Forensic Accounting

accountants generally have to work. The forensic engagement is distinguished by engagement Notes
objective, emphasis on gathering evidence, and the application of a variety of techniques often
custom-developed to the requirements of the specific engagement.
The definition of forensic accounting is changing in response to the growing needs of corporations.
“Forensic Accounting is the application of accounting principles, theories and discipline to facts
or hypothesis at issues in a legal dispute and encompasses every branch of accounting knowledge”
AICPA.
“Forensic Accounting is a science that deals with the relation and application of finance,
accounting, tax and auditing knowledge to analyse, investigate, inquire, test and examine the
mater in civil law, criminal law in an attempt to obtain the truth from which to render an expert
opinion” Horty.
Simply we can say that forensic accounting includes the use of accounting, auditing, and
investigative skills to deal with the legal matters. It consists of two major components: litigation
services that recognise the role of an accountant as an expert consultant, and investigative
services that use a forensic accountant’s skills and may require possible courtroom testimony.

Self Assessment

Fill in the blanks:
1. Forensic accounting is the …………..practice area of accounting.
2. Financial auditing is performed by …………….to check the regulations of financial
statements of an organisation.
3. Forensic accounting includes the use of accounting, auditing, and investigative skills to
deal with the ………….matters.
4. Forensic accounting consists of two major components: litigation services and ……………..
services

14.2 Characteristics of Forensic Accounting

The following are the key characteristics of forensic accounting:
Forensic Accounting involves the use of accounting/ auditing, investigative skills and
data mining as an audit tool
It emphasizes a forensic approach in place of a risk management approach to the analysis
of corporate governance
The objective of forensic accounting is to check up for cyber frauds, prevention and
detection.
The key industries requiring the forensic accounting are insurance companies, banks,
police, and government agencies considering the growing incidence of cyber crimes or
frauds and corporate failures

Chartered Accountants, with their sound grounding in accounting/auditing/business
requirements/legal requirements, are the most appropriate professionals to offer Forensic
Accounting and Fraud Detection service.

Did u know? What is the meaning of cyber crime?
Cyber crimes may be defined as unlawful acts wherein the computer is either a tool or a
target or both.

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