Forensic and Fraud Examination

Forensic and Fraud
Examination

Every business is susceptible to fraud and every day many businesses are affected by
fraudulent activities. Fraud could be understood as a criminal offence, which means use of
techniques, such as cunning, conniving, tricking or unfair behaviour of an individual leading to
cheat somebody (Bodnar and Hopwood, 2012.). An individual resorts to such kind of behaviour
to get an advantage over another by use of false means. According to Singleton & Singleton
(2010) corporate fraud is committing fraud by or for or against a corporation, for instance,
employee fraud or occupational fraud, etc. Forensic Accounting is a process for recording,
dividing and analysing financial data with the help of applying financial principles and theories,
which helps the management in reaching on to informed decisions.
What is Fraud?
Fraud, in general terms means any act which is committed with the intent to deceive
someone, which results in economic loss to someone or gaining advantage over someone. Fraud
can also be called as 'theft by deception'. In legal terms fraud is a criminal offence committed by
an individual with an intention to cause deception to any other person. Fraud could be
categorised as asset misappropriation, corruption or financial statement fraud. Asset
misappropriation is misusing or stealing the assets of an organisation, for instance, stealing
inventory etc. Corruption means unlawful or wrongful use of power or influence in a commercial
transaction to gain advantage or personal benefit while in an employment (Kossovsky, 2014).
And, financial statement fraud means misrepresenting the financial information intentionally to
misguide the persons who rely on such information to take economic decisions.
Fraud Examiner
Fraud examination is used in resolving fraud related disputes by a fraud examiner, who
inspects and analyses financial transactions. A fraud examiner should have knowledge of
properly and legally obtaining evidence for resolving a fraud related issue. An examiner should
also have specific skills to write a clear, accurate and unambiguous report after examination of
data collected pertaining to fraud. A fraud examiner has to testify his findings in a court
proceeding before the judicial authorities, as an expert evidence.
What is Forensic Accounting?
Accounting in general terms means collecting, classifying and calculating any financial
data to reach on to a specific results. Forensic accounting is application of financial principles
and theories to the facts of a circumstance or situation, involving a legal dispute. Primarily,
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forensic accounting is for providing – litigation advisory services and conducting investigations.
The professionals working for Forensic and Litigation Advisory Services (FLAS) are consulted
for providing technical, functional and industry related services, which are applied to resolve the
issues pertaining to occupational fraud, employee frauds, corruption or financial statement fraud
cases. These professionals help and provide assistance to the attorneys in collection of financial
information which could be useful to the party approaching the court. The FLAS professionals
are responsible for providing support in technical sphere such as, data mining etc.
Forensic Accountant
Forensic litigation professionals help with preparing a strategy for litigation, arguments
and preparing an inventory of testimony in both civil and criminal matters (Daniels, Ellis and
Gupta, 2013). The forensic accountants are involved in inspecting and analysing the accounts for
resolving legal disputes arising in any organisation. Financial forensic is a combination of two
different spheres – finance and law. Therefore, the forensic accountants are responsible for
application of financial principles such as accounting, auditing, quantitative techniques and
varied aspects of law in resolving the matters arising in any organisation pertaining to fraud.
Secondly, the forensic accountant investigates and collects data to be used as evidence in the
matter. And, thirdly, the accountants are responsible for critically examining the data and
communicating the same as a result of an investigation.
Forensic accounting versus Fraud examination
The two terms might be understood as same but both the terms are different on a variety
of grounds. Firstly, on the basis of timing forensic accounting is conducted after the allegations
of misconduct are made whereas, fraud examination is conducted even if there are predictions.
Secondly, the goals of fraud examiner and forensic accountant are different, as the former is
responsible for determination of fraud and the later analyses whether the allegations are
reasonable or not (Turvey, 2013). Thirdly, the methodology adopted by both the fraud examiner
and forensic accountant is different, as the former conducts document examination, reviews the
outside sources and conducts interviews, whereas, the later gathers financial and non-financial
evidences to critically analyse whether the allegations are correct or not. And, lastly, the
approaches of both the examination are different as one deals with resolution of fraudulent
conduct and the other attempts to gather sufficient evidence to prove or refute the allegations.
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