Forensic accounting is what businesses, big or small, use to investigate suspected financial crimes, as well as other purposes, including the validity of insurance claims, and working out fair market value estimates of businesses to sell or conduct mergers and acquisitions (M&A) activities. If you are considering forensic accounting to evaluate the value of your business, consult your business valuer first, or ask the business valuer to collaborate with your forensic accountant, so that the accountant will discover information needed to evaluate the business. The process for determining a business’s value does not involve an audit of a company’s financial records, nor does it involve the practice of forensic accounting. Forensic accounting has other uses for businesses besides investigating financial crimes, including the assessment of real value, which lies between perceived value and real value.
Examining personal and corporate financial records takes considerable time and effort, the eyes of an expert are crucial in making financial decisions and determinations in many situations. Since even the most astute of bosses are often too close to an important matter such as theft and employee losses, financial auditing from an external third party such as a forensic accountant can remove the personal aspects from the matter, and provide a ruling on exactly what is going on, so that you can decide the best way to handle the matter. At the conclusion of an investigation, the forensic accountant can summarise that information for the key staff in a manner that is easy to understand, so business leaders can make educated decisions about their businesses. Once an acquisition or merger process begins, the team of forensic accountants will begin investigating the target company in order to confirm financial statements for accuracy.
The forensic accountants will examine original documents, the asset values, and the cash flows in order to confirm that financial statements are accurate, as well as looking for hidden dangers such as pending litigation. Forensic accountants have an important role in law firms and insurance companies, where one single financial misstep can ruin the company. It is an important, yet often hidden, role that forensic accountants play in a number of common situations for businesses. Legal professionals are constantly hiring forensic accounting services experts for many reasons, including investigating white-collar crimes, high-value divorces, mergers and acquisitions, corporate disputes and insurance claims.
The services forensic accountants offer to small business owners can be summarized as offering financial counselling, providing initial financial documents, and producing detailed financial reports from their findings to legal professionals to use in judicial cases. Part finance expert, part investigator, a new breed of accountant looks at trends within your company in order to identify potential problems, including overbilling, inaccurate rent or lease contracts, and fraud, among others.
A forensic accountant may provide recommendations on how data-retention policies should be changed to better protect business interests, so data can be recovered meaningfully. Regular, in-house forensic audits may detect the breach fairly early on, and offer remedies without subjecting the company’s clients and public to exposure.