Forensic accounting is that aspect of accounting that deals with litigation and investigative accounting with the aim of presenting evidence in the court of law. Internal thefts are criminal activities perpetrated by employees of an organization. Under normal condition, it is very difficult to curb and prevent internal thefts, but the advent of forensic accounting has helped to expose most fraudulent and criminal actions of employees and other insiders.
Forensic accountants have helped uncover and prevent many occupational frauds and other Ponzi schemes that are engineered by employees. Forensic accounting doesn’t just expose internal theft, certain calculated steps needs to taken to ensure that forensic accounting exposes frauds and other financial crimes.
EMPLOYMENT OF FORENSIC ANALYSIS TOOLS
Further and useful insights into the cause of variances are obtained with the use of forensic tools. Unlike the traditional way of analyzing accounts manually, were variances analyses are done manually on various components of the financial statements. Under the traditional method of variance analysis, a comparison will be made between goods that depleted and the ones that are properly accounted for. Attention shouldn’t be directed solely to negative variances (a situation where the variance analysis shows that the depleted quantity is more than what is recorded).
Apart from analyzing transactions manually, forensic tools employ advanced techniques like biometrics to prevent and deter internal fraud / internal theft. Someone may at this point be saying that implementation of access control and other assets protection methods is the duty of information security professionals. I do agree with you but I would like to make you understand the fact that the bar has been raised on what is expected of the accountants.
Forensic tools are also used to analyse transactions that are performed with the computer. This is especially more important now that the world has developed high dependence on computers and network infrastructures. The complex nature of computer transaction makes it feasibly impossible to perform an effective data analysis in an organization.
Again, the psychological effect that the installment of forensic tools will have on internal thieves is that fear of being caught will be instilled in them thereby deterring them from committing fraud and other economic crime. Even your presence in a company as forensic accountant is enough to make any body that want to steal internally to think twice.
It is important that every accountants and auditors acknowledge the fact that forensic tools and other investigative tools can help relieve them of avoidable stress and heartache.