What Do Forensic Accountants Do – And Do I Need One?

Forensic accountants are qualified and accredited accountants, often with knowledge of other areas of legislation or regulation, James Todd & Co explain more

Forensic accountants investigate and analyse a series of transactions, accounting records or expenditures to uncover answers to questions, perhaps to determine whether an instance of fraud has occurred or to disclose the circumstances behind an accounting irregularity.

While forensic accountants are commonly used as experts to assist with insurance claims and criminal and civil investigations, such as tracing the movements of funds between cross-border accounts or breaking down complex transactions, they also provide invaluable support to businesses.

For example, a company might hire a forensic accountant following an unexpected audit outcome to establish whether the auditor’s opinion is valid and has been arrived at properly or could potentially be considered negligent.

Let’s explain further what forensic accounting is all about, the myriad applications for this technical expertise, and how the James Todd & Co chartered accountants in Hampshire can assist if you discover a need for forensic accountancy support.

What Does Forensic Accountancy Involve?

Many business owners associate forensic accountancy with fraud and financial crime. These are, indeed, two of the most common reasons for a regulator, oversight committee, stakeholder or company to request the services of a forensic accountant.

Forensic accountants are qualified and accredited accountants but also have professional knowledge of other areas of legislation or regulation, depending on the services they provide. Many are familiar and well-versed in specific niche areas, such as forensic accountants focusing on civil dispute resolutions or assisting in regulatory investigations or conflicts.

The task of a forensic accountant isn’t necessarily to ‘crack the case’ or provide any judgement about what may have happened but to offer insights and factual information to ensure decision-makers have access to all the relevant data to move forward, including:

• What happened, in what time sequence, and where.
• What amounts were involved, and who was party to the transactions?
• Whether the transactions or activities were legal, approved, and compliant.

In most scenarios, forensic accountants work in teams or partnership with other experts since some investigations or assessments can involve large volumes of data – speed is also often a priority, particularly where high stakes are involved.

When Might a UK Business Need a Forensic Accountant?

Forensic accountants typically work on a project or consultative basis, analysing the scenario or situation they have been asked to investigate and creating a detailed brief covering the scope of their investigation, the access to resources needed, and how they will report their findings to the hiring party.

Businesses and organisations commonly hire a forensic accountant when dealing with suspected fraud, financial impropriety or wrongdoing, potentially by a senior team member, somebody with high-level access to accounts and information, or even a third party.

Making an unsubstantiated allegation could be extremely serious and cause untold reputational damage, particularly if the business owner suspects wrongdoing but cannot prove the accused was the responsible party.

In this situation, a forensic accountant would work as an independent, autonomous third party to get to the bottom of the events that led to the suspected fraud – while protecting the liability of the business and ensuring it can take decisive action to address the issue once the facts are known.

Other Reasons to Hire a Forensic Accountant

Outside of insurance claims, financial crimes, or unauthorised activities, a forensic accountant can apply their skills to other areas, often as a strategic move to ensure that organisations can proactively prevent fraud.

They offer assistance for:

• Companies, organisations, trusts and non-profits looking into ambiguities or unusual accounting transactions – whether from the current financial period or dating back some time.
• Loss adjusters and businesses managing insolvencies, acquisitions of new companies or stakeholders facing capital losses. Forensic accountants can report on the specific areas they are interested in, such as finding out how a loss has arisen, at what point this became known, and the key data underpinning the events.
• Commercial dispute advisers provide data and audit trails that help mediators or representatives decide which parties are at fault or in breach of contractual agreements.
• Businesses submitting insurance claims and creating a schedule of assets damaged or lost use forensic accountants to ensure that claims are supported by independent evaluations.

Forensic accountants can also work in completely different settings. Some divorce solicitors and legal advisers hire forensic accountants or employ them as part of their in-house teams to investigate asset ownership valuations to ensure settlements are fair and accurate.

They can also provide services to assess whether other accountants and professionals have upheld their duty of care or whether advice and information provided have had a material effect on losses suffered.

At What Point Should a Business Hire a Forensic Accountant?

As we’ve seen, forensic accountants apply their knowledge to a diverse array of situations and can help business owners worried about mistakes or inaccuracies in any aspect of their record-keeping or where there is reason to suspect deliberate fraud, theft or other unethical practices.

For some business owners, that might be as straightforward as having the peace of mind that their statutory returns, forecasts and stakeholder reports are accurate and have been prepared with third-party due diligence checks, such as ensuring stock or asset valuations are correct.

It's important to reiterate that the position of a forensic accountant isn't to decide on the outcome of a dispute or determine how a hiring company or individual proceeds thereon but to uncover the information requested to ensure they make informed choices backed by verified credible data.

Each project is based on the scope and details of the engagement set out at the start, where the auditor will return their findings in the form of a report to the appropriate party and explain how they have extracted information or conducted their investigation to reach these outcomes.

If you'd like more information about forensic accounting, when this service may add value, and how a forensic accountancy service may be relevant to any disputes or concerns you are managing, please get in touch with James Todd & Co at any time.

Read more about James Todd & Co - James Todd & Co Chartered Accountants Awarded Xero Platinum Partner Status 

About James Todd & Co

James Todd & Co have been providing accounting services for more than 30 years across Chichester, Fareham, and Lavant for Sussex and Hampshire businesses. Their clients trust them to provide bookkeeping, financial auditing and compliance, management accounting and financial advisory services.

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Source Company: https://www.jamestoddandco.co.uk/