As criminals and scammers adapt to a digital world, committing fraud has become far easier. According to the Global Fraud and Identity Report, 33% of businesses experienced more fraud losses than they did in the prior year. There seem to be several news stories revolving around fraudulent activity every week. Are you wondering what is forensic accounting and how it applies to detecting fraudulent activity? Below, we provide an overview of forensic accounting services and explore three scenarios that would call for you to hire a forensic accountant.
What is Forensic Accounting?
Forensic accounting is the process in which a forensic accountant investigates a case to determine whether fraud or embezzlement has occurred. For example, if you notice a discrepancy in your business paperwork, forensic accounting services examine the issue by auditing applicable financial records to ascertain why the numbers are incongruent.
Furthermore, upon finding the inconsistency, forensic accounting services then investigate who or what caused the suspicious financial activity. Oftentimes, businesses will use the reports of a forensic accountant as credible evidence in trials and/or recover losses from a scam.
What Does a Forensic Accountant Do?
Forensic accountants examine data and applicable financial records to determine where missing money has gone and how to recover it. Furthermore, they may help uncover if the misconstrued data was accidental or on purpose.
As a result, they may also present reports of their financial findings as evidence during hearings, where they often testify as expert witnesses. This work serves an important purpose at public accounting and consulting firms, law firms, law enforcement agencies, and insurance companies.
When Would I Need Forensic Accounting Services?
There are many different reasons why you would want to hire us for this bookkeeping service. For example, you could request the help of a forensic accountant for any of the following scenarios:
- If there is a legal dispute between partners
- When a court proceeding deems it necessary to get professional testimony on the activity
- After an IRS or State Agency audit sheds light on the impropriety and as a defense against malice calls for an independent review
- If after a divorce, you suspect your ex-spouse is being unfair in financial matters
- During the sale of a business and the buyer wants an outside opinion
Below, we explore the top three corporate scenarios that would call for forensic accounting services.
#1. Your Business is Behind on Taxes
If you and your business are behind on filing your taxes, there is no reason to worry. Forensic accounting services can help get you back on track. We promise you are not the only ones in this predicament. Forensic accountants can take care of everything from finding the missing information to submitting your final tax return and everything in between.
#2. You Suspect Theft or Embezzlement
Unfortunately, we cannot trust everyone, even if we run extensive background checks on them. Working with money seems to make some people forget basic morals, sometimes resulting in theft, fraud, or embezzlement. However, with the help of a forensic accounting team, we can determine if any financial incongruencies happened accidentally or on purpose.
#3. Your Accounting Procedure is Unorganized
Sometimes having an unorganized accounting procedure can hurt your business financially. If you fail to maintain accurate and timely records of where your money is going, then your reports will show up having too much or too little money when you file. Maintaining financial organization another great reason to invest in forensic accounting services.
Is your organization preparing for a finance-related lawsuit? Perhaps you suspect an employee or external CPA has cooked the books and embezzled funds from your firm? Contracting with a forensic accounting firm, such as Remote Quality Bookkeeping (RQB), will position you to defend yourself or prove your case in court.
What Does Forensic Accounting Look Like in My Industry?
Forensic bookkeeping and accounting services look very similar across all industries. A forensic specialist is highly trained to spot posting inconsistencies and transaction patterns that may indicate further investigation is warranted. Forensic audits essentially reconstruct transactions according to generally accepted accounting principles. Then, the accountant compares the organization’s actual records to their findings to verify all financial transactions were properly recorded.
There are some differences between different industries. For example, new car dealerships often rely on factoring, which is the sale of outstanding invoices at a discounted price to a funding source. This helps the business control cash flow more efficiently.
However, there are different types of factoring arrangements. Not all apply to the local automobile industry trade. For example, an import/export business may utilize domestic factoring and export factoring, plus agency factoring as a means to manage cash flow. Agency factoring is a split partnership where the factor provides finance and protection related to bad debt, while the client handles all administration and collection tasks.
Forensic accounting is tailored to the structure and financial workflow of an organization and the nature of the crime, or suspected crime, that requires a forensic review.
What is Forensic Accounting With MyRQB?
MyRQB bookkeepers and accountants apply highly-specialized skills to thoroughly investigate fraud, embezzlement, and intentional financial misappropriation within an agency’s financial records. They also prepare a detailed report of findings with supporting documentation suitable for use in legal proceedings.
There are other reasons beyond criminal activities that an organization or business may benefit from contracting with a remote forensic bookkeeper or accountant. People who are preparing for an IRS audit, as well as those who have missing invoices and receipts, often hire a professional to help them reconstruct financial records.
Five additional reasons why individuals and businesses hire a forensic financial team include:
- Preparing for a sale, merger or acquisition
- Conducting a general audit to ensure best practices are consistently followed
- Fulfilling contractual and financial obligations
- Reconstructing financial records after a disaster or vandalism destroys the originals
- Settling estate financial matters, especially if there is a dispute among heirs
RBQ forensic bookkeepers and accountants are experts at tracing funds, recovering assets, researching and identifying assets and liabilities, preparing legal court documents, and auditing financial records in a manner that best serves the client, whether they are seeking help with personal or business finances.
Do you need a forensic team to help you fix or prevent financial record inconsistencies? The RBQ bookkeeping and accounting team has you covered. Send us a secure message, or call (866) 567-4258 to learn more today!