Forensic Accounting

Fraud Investigations

Risk Assessment

Detection & Mitigation

Forensic Audit & Litigation Advisory

Forensic accounting is a combination of accounting and investigative techniques used to discover financial crimes. One of the key functions of forensic accounting is to explain the nature of a financial crime to the courts.

Today, no domain is spared from misconduct, fraudulence and injustice. According to a joint study conducted by ASSOCHAM , corruption, money laundering, tax evasion, window dressing, financial reporting fraud and bribery are the most common corporate frauds occurring in India Inc. The study revealed that nearly 52% of corporate frauds have taken place in real estate and infrastructure in the last few years followed by financial services sectors recording 34% frauds.

Business ecosystem has become increasingly complex due to the rising number of business-related investigations. The need for transparency and accountability is imperative and the demand for forensic accounting is greater than ever. Nevertheless, the field is still in its nascent stage in India.

What does Forensic Accounting cover?

The two major aspects within forensic accounting practices are:

1. Litigation support services. A forensic accounting expert measures the damages experienced by the parties implicated in legal disputes and can aid in settling conflicts, even before it reaches the courtroom. In the event that a conflict reaches the courtroom, the forensic accounting professional could give evidence as an expert witness.

2. Investigative/fact-finding services. A forensic accountant must determine whether illegal matters such as employee felony, securities embezzlement (including tampering and distortion of financial accounts), identity theft and insurance racket have taken place.

The scope of forensic accounting is to:

1. Look for evidence of unusual development in the accounting and financial systems.

2. Design accounting processes for verifying important premises and data. A forensic accounting orientation also calls for skills in identifying possible fraud.

3. Perform audit type processes on a routine schedule in order to reduce transaction processing risks.

4. Cover a broad range of businesses and locations that require customary or continuous surveillance of all transaction processing systems.

Relevance of forensic accounting in an organisation

Assessing working transactions for compliance with basic operating processes and agreement.

Performing thorough scrutiny and examination of financial payment dealings in the accounting system to decide if they are standard or beyond company policy.

Assessing standard ledger and financial reporting system transactions for likely unlawful tampering or falsification of information or accounts and its consequences on the ensuing financial accounts.

Analysing warranty requests or returns for practices of fraudulence or misuse.

Assisting in estimating the economic damages and the ensuing insurance demands that arise from catastrophes such as fires or other natural setbacks.

Assessing or affirming business rating in consolidations and accomplishments.

Forensic Accountants: Scope of work

Although the focus is fundamentally on accounting concerns, the function of a forensic accountant may also cover a more generic investigation including collection of evidence.

Almost every accounting firm in the country today has forensic accounting sections. Within these sections, there may be sub-differentiations; for instance, some forensic accounting experts may specialise in insurance applications, personal injury declarations, fraudulence, construction or royalty audits.

Forensic accountants may also offer their services in retrieving profits from crime and in relation to appropriation proceedings relevant to definite or assumed proceeds of crime or dubious transfer of funds. Unique only to India, there is a specific species of forensic accountants known as Certified Forensic Accounting Professionals.

Forensic Accounting in India

Given the nature and types of fraud in India, the Reserve Bank of India (RBI) has compulsorily made forensic accounting audit mandatory for all banks within the country. The establishment of Serious Fraud Investigation Office (SFIO) in India has become the turning point for forensic accountants in the country. The indications of the growing demand for the field are:

The growing list of online criminal offences

Breakdown of regulators to trace and detect cyber-security frauds

The long chain of co-operative banks going bust