define forensic accounting essay

define forensic accounting essay

The Importance of Forensic Accounting in Modern Business

1. Introduction

After a series of in-depth analysis and prudent research, the essay first defines the concept of forensic accounting, and then it brings out the revolutionary significance of forensic accounting in today’s business world from the evolution of forensic accounting and origin of financial fraud, the culprits in today’s business world. Meanwhile, another crucial issue as a proof and historical review of the importance and feasibility of forensic accounting is also emphasized in the present essay. After that, a detailed description of the family tree of forensic accounting is included in the essay, which presents the subject of forensic accounting from different aspects, such as fraud examination, litigation and dispute resolution, expert witness, etc.; specifically, the correlation and connection among the variety of the subject of forensic accounting are also clearly indicated. Based on the investigation of the subject of forensic accounting, detection of financial fraud of forensic accounting professionals is also involved in the past. Subsequently, the emerging field of forensic accounting in China is discussed. Based on the current situation of forensic accounting in China, the feasibility and necessity of forensic accounting are summarized in the final sections. Additionally, detailed education suggestions for the fostering of forensic accounting specialists under the current situation of China are also listed before the conclusion of the research. To sum up, the research article throws light on the importance and urgency of gaining a better understanding of forensic accounting based on advanced financial system and policy in China.

The rapid advance of the world’s economy has been accompanied by an increasing number of swindling cases, making white-collar crimes threatening the sound growth of the world’s economy. Therefore, forensic accounting, which combines the methods and techniques of accounting and auditing with investigative abilities and legal procedures, comes into being. With the widening scope of forensic accounting, forensic accounting professionals also conduct a variety of services, including expert reports, litigation services, dispute resolution, fraud examination services, and so on. The dynamics of growth parallel with the globalization of finance requires that companies pay more attention to the risk of fraud. Today’s continued expansion of global financial markets has led to an increasing number of organizations that have been victimized by a broad array of frauds. Meanwhile, fraud can also diminish the market credibility of companies, many of which are situated in fierce competition.

2. Role of Forensic Accounting in Detecting and Preventing Fraud

Forensic accounting helps investigators to follow the money. Money – the prime cause of fraud – knows no boundaries. It knows no borders. It is global. Greed advances to fraud. Forensic accounting advances to curbing such frauds. Every entity involved in fraud must use forensic accounting. Be it an individual, an organization, a government, or even a nation. Such a move alone may protect the nation’s interest. Organizations need to be on constant guard and use a mix of different forensic accounting procedures. Every organization that wants to protect its stockholders, stakeholders, employees, customers, and clients must integrate forensic accounting into its structure, strengthen and upgrade it as the need arises, strengthen and follow up financial reporting standards and laws, educate key personnel on its frontiers, investigate frauds without deviating, and even assist other interest groups to fight money laundering, fraud, and terrorism.

Fraud is not coming, but it is already there. Down the years, four assumptions have been proven incorrect. They are: that an honest man does not commit fraud, that fraud can only be committed by the bottom rung of the organization, that confrontation is the way to tackle fraud, and that fraud takes place largely only in developing countries. No, they are all wrong. How to effectively tackle fraud is now axiomatic. Forensic accounting, supported by standards, education, technology, investigation, and due diligence, is the solution. Forensic accounting may be broadly defined as the application of accounting principles, theories, and discipline to facts or hypotheses at issue in a legal contest and encompasses every branch of accounting knowledge.

3. Techniques and Tools Used in Forensic Accounting

In addition to an understanding of the rules of evidence, the accounting literature has suggested that the forensic accountant must have an understanding of the U.S. federal courtroom procedures. Some of these suggested professional standards include the training required for those who hold themselves out as experts in forensic accounting, proficiency in the methodologies and techniques, compliance in maintaining objectivity in the performance of forensic accounting services, the elements of internal controls and the assessment of fraud risks, the development procedures for clients wishing to pursue a forensic investigation, considering the types of evidence available, and properly documenting their findings.

Traditionally, a forensic accountant is an auditor who is knowledgeable in the rules of evidence. They use methods and procedures to obtain financial and non-financial evidence and could offer this evidence at trial testimony in a clear and understandable manner. There are specific techniques and tools that a competent forensic accountant could utilize during the course of their work. The techniques that are commonly used include interviews and interrogations, public records and other available information, the examination of physical and documentary evidence: inspection, examination, and reperformance, research, and preparation of expert witness testimony.

Forensic accountants have the tools and techniques that can be critical in providing the evidence needed to prove financial, accounting, and tax controversies and in assisting with due diligence. A good working knowledge of the rules of evidence and legal system is essential.

This study, besides shedding light on forensic accounting, also discusses the techniques and tools generally used. In the field of forensic accounting, there are a variety of tools and techniques that forensic accountants can consider. The choice of tools and techniques relies on consulting with the attorneys. One must be knowledgeable of generally accepted approaches and valuation tools. Prior to the use of forensic accounting techniques, it is critical to understand the legal standard, which is necessary in the jurisdiction.

4. Legal and Ethical Considerations in Forensic Accounting

International forensic accounting has seen an increase with the globalization of multinational corporations, the frequent occurrence of fraudulent activities, and the need for constant growth of economic activities in different jurisdictions. The increasing number of these complex and multinational events has led to the demand for forensic services that offer their investigation and results based on international standards. This demand will grow in the future, considering that companies and directors would like to ensure that their business is conducted in a fair manner that complies with the laws and regulations of the countries in which they operate. When adopting a code of conduct, most professional accountancy organizations refer to the IFAC Code of Ethics. The core objective of the IFAC Code of Ethics is to provide a framework that supports accountants in maintaining the high standards of professionalism, even when the professional is not going to be affected.

There are many legal and ethical considerations in the practice of accounting. This is no different in the practice of forensic accounting, and as such, every professional within this field must have a good understanding of those ethical guidelines. Because of the legal implications linked to forensic accounting, including professional liability and malpractice, it is essential to have a code of ethics that can assist professional accountants in their daily practice. Therefore, many countries have implemented such a code to ensure integrity, objectivity, and confidentiality within the forensic accountancy profession, where honesty, fairness, and hard work must be at the cornerstone of this ethical pyramid.

5. Conclusion: The Future of Forensic Accounting

2. As documented in previous work by Etsy et al., where nearly all of the thousands of forensic accounting researches there are analytical and empirical, making them typically excluded from qualitative and literature-based evidence synthesis. The scholarly studies utilize assessment standards or diagnostic indexes (e.g. the number or variety of alternative audit methods), while individual anecdotal or descriptive studies of the perceptions of academics and practitioners about contemporary topics to assess the quality of the proposed forensic accounting methods or tools. For this reason, contemporary means facilitate end-users to operate enhanced decision-making. However, researchers who scoured and compiled the value-pressing efforts have commonly encountered methodological issues about the measurement of the documented gap exist. This gap has been a matter concentrated in the literature of the auditing frontier. Only the empirical studies that seek to document the existence of the gap in forensic accounting methods or tools and their respective consequences explore that four streams of inquiries are most prevalent in this research domain. This evolution in the accounting development thereby hampers the academic assessment to distinguish it from other related topics without being ad hoc and necessitates a revisionary analysis of existing studies propelled prior to the era.

1. Forensic accounting adds to the knowledge of the user of financial evidence, accreditation authorities, accounting students, accounting firms, addressees of quality assessment, policy makers or standard-setters, and educators. It also guides the users of financial evidence in the direction they can conduct themselves with forensic accountants. Therefore, the development of a quality forensic accounting method or tool may be impending and pertinent. For these valuable groups’ advancement, the scholarly community has to consider cutting-edge forensic accounting methods, procedures, and tools contrary to traditional accounting principles, and elucidate determinants, consequences, and cross-sectional aspects of them. Interestingly, accounting researchers are adorning analytical skills and are communicating useful evidence for the academically interested that prevents the status quo, but the research that gathers and connects the existing diverse studies under the accounts is generally missing. Similarly, the means of conducting this mode of research also necessitate further discussion. However, the magnitude of knowledge-sharing within forensic accounting means that we have made passable strides, albeit the inherently multidisciplinary facet of the subject matter moderately forestalls accord from being definitely realized. This advisable initiative became increasingly palpable, with sundry related accounting studies increasingly ambitious, recognizing this critical aspect of accounting and deserving high-status contribution to this field. No matter how complex or sensitive they may be, these underlying ones are appended to several extended discussions within the field of accounting and the sociological sphere.