Forensic Accounting: Its Importance in the Present World

This report delves into the significance of forensic accounting in the modern business landscape. It begins with an abstract summarizing the key aspects of the research, including aims, objectives, research questions, and methodology. The report highlights the role of forensic accounting in investigating financial crimes, supporting decision-making, and preventing fraud. It explores the differences between forensic accounting and auditing, the connection between forensic accounting and corporate finance, and its role in preventing/tackling accounting frauds. The research methodology includes a review of literature, data collection, and analysis to provide a comprehensive understanding of the topic. Ethical considerations are also addressed to ensure the reliability and validity of the information. The report uses a case study of Crawford to illustrate the practical applications of forensic accounting, emphasizing its importance in resolving disputes, investigating financial losses, and protecting businesses from fraudulent activities. Various authors' viewpoints from articles, research papers, and studies are analyzed, providing a well-rounded perspective on the subject.

THE IMPORTANCE OF
FORENSIC
ACCOUNTING

ABSTRACT
The research summarized the brief information regarding the importance of Forensic
accounting in the real world. The various aims and objectives are prepared to get in depth and
insight information about the research topic. The research question are prepared to get the
relation between the forensic accounting and corporate finance & the difference between the
forensic accounting and auditing. It can be identified by the various views of different authors
from the articles, research paper and research study. The literature review part describes the
thoughts of authors in respect to the research objectives. The research methodology helps to
develop the understanding of researcher by the in-depth knowledge regarding the research type,
methods, data collection, data analyse and research approach to conduct research in accurate
manner. Ethical-considerations is used to check the reliability and validity of the information and
ensure that the gathered information is free from the biases and fraudulent activity.
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Table of Contents
ABSTRACT.....................................................................................................................................2
TITLE: To understand the importance of forensic accounting in the present world that support in
decision-making...............................................................................................................................4
RESEARCH BACKGROUND.......................................................................................................4
AIMS AND OBJECTIVES.............................................................................................................5
LITERATURE REVIEW................................................................................................................5
RESEARCH METHODOLOGY...................................................................................................11
Research type........................................................................................................................11
Research approach................................................................................................................12
Types of data........................................................................................................................12
Data collection......................................................................................................................13
Data analysis.........................................................................................................................13
ETHICAL CONSIDERATION.....................................................................................................14
REFERENCES..............................................................................................................................15
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TITLE: To understand the importance of forensic accounting in the present
world that support in decision-making.
RESEARCH BACKGROUND
Forensic accounting is the process of discovering or identifying the accounting crimes by
the combination of investigation and accounting. It helps to explain the financial crimes nature in
court. It is mainly used by insurance company to establish the different damages from the
proposed claims. In forensic accounting auditing, accounting and investigation skills are used to
analyse the situation or crime. In the present world forensic accounting is very useful. The most
important role of Forensic accounting in the present world is to investigate the information
behind the digits and make effective strategies to solve the business related issues. It helps to
take the effective and efficient decision by analysing the mistakes of internal and external audit
or investigate the fraud in the organization (Kramer, Seda and Bobashev, 2017). It helps to
resolve the criminal investigation, business interruption, disputes between shareholders and
partnerships, employees fraud investigation and business economic losses. Forensic Accounting
helps to take the decision regarding the functioning of company and solve the criminal or
fraudulent cases. Employees or management manipulate the data according to their interest or
profit, Forensic accounting helps to investigate the fraud and resolve the cases.
Crawford is world largest claim management company who operates their business in
different area such as Australia, Middle east and Africa, Asia, New Zealand, America and
Canada. They provide their Forensic accounting services to protect the insurer in the market
from the fraudulent activities. They offer various services to their client such as rehabilitation
service, Catastrophe services and risk management services. The report highlights the objectives
of Forensic accounting in business organization. It helps to investigate the difference Forensic
accounting and Forensic auditing (Ozili, 2015). The literature review part explains the views of
different author regarding the importance of Forensic accounting, connection between Forensic
and corporate accounting and ways to overcome the fraudulent activities. The research
methodology part helps to define the research purpose and the ways to collect data & interpret
them to get the useful information. The data analyse and data collection method helps to get the
precise information regarding the importance of Forensic accounting in the present world to take
the effective decisions. Different themes are prepared to analyse and present the information in
precise format to get the reliable results.
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AIMS AND OBJECTIVES
Aims: “To analyse the detail information regarding the importance of Forensic Accounting in
the real world”. A case study on Crawford.
Objectives
Research objectives offered a specific guideline and set of rules and regulation to
investigate and understand the research model. The main objectives if the following research are
as follows:
 To ascertain the significance of Forensic Accounting.
 To determine the difference between forensic accounting and auditing.
 To figure out role-played by Forensic Accounting in preventing/tackling accounting
frauds.
 To find out the connection of Forensic Accounting in Corporate Finance?
 To Estimate About Forensic Accounting and it Relationship with Tax Evasion and Any
Other Financial crimes.
Research questions
Research question helps to investigate the research problem or identify that what is
treated at first phase. The questions related to t eh following research are:
11 What is main significance of forensic accounting?11 Evaluate the difference among auditing and forensic accounting?11 What is the major role-played by Forensic Accounting in preventing accounting frauds
within companies?11 What is the relevance of Forensic Accounting in Corporate Finance?11 Critically discusses about forensic accounting and it relationship with tax evasion and any
other financial crimes?
LITERATURE REVIEW
Literature review presents the view and critiques of different authors. It is collected from
newspapers, journals, articles and previous researches. Literature review is the collection of
secondary data. In the present report 20 articles are used to identify the importance of forensic
accounting.
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Use of Forensic Accounting
As per the views of Riley, (2019) forensic accounting is the combination of accounting
and auditing. It helps to resolve the white collar crime which was not detected by the internal and
external auditor of the company. Author explains in their study that due to the auditors' lack of
understanding they are unable to identify the fraud activities in the company which results to
face various losses to the shareholders. Auditor fails to identify the fraud activity because of the
expectation gap. It refers to difference between what auditor achieve and what they expect to
achieve. Due to the unrealistic expectation they are unable to identify the real issues in the
company which increases the role of forensic accounting. Forensic accounting is mainly used to
identify the fraud activity. It provides various benefits such as minimised losses, avoid legal
problems and improved the efficiency of work.
Kranacher and Riley, (2019) criticise that Forensic accounting minimise the scope of
auditor in corporate world. Due to excessive usage of forensic accounting the role of auditor is
diminished because more and more organisation appoint the Forensic auditor to identify the
issues rather than to auditor. At the same time forensic accounting is quite expensive because it
takes lot of time to analyse the information and investigate the issues. It also affects the morale
of employees because they feel insecure and bounded in company. Forensic accounting aims at
utilising financials of the company, perform audit and investigate by conducting an examination
in the finance of the business. It provides company accounting analysis which is used in the legal
proceeding. The main objective of forensic accountant is to identify issues and fraud in the
financials of the company to maintain the reliability and consistency. It is beneficial in
explaining the nature of financial crime.
According to the Rezaee and Wang, (2019) forensic accounting is useful to investigate
the criminal cases on the behalf of police force. Their aim is to present and prepare the report in
concise and professional manner. It used to resolve the conflicts and disputes between the
shareholders and the partners. Forensic auditor analyse the accounting records of numerous years
in detailed manner to identify the issues of disputes. Forensic accounting also helps the insurance
company to calculate the losses and investigate the coverage issues. It also used in identifying
the business economic losses such as product liability claims, contract disputes, expropriations,
patent and trademark infringements etc. companies use forensic accounting to analyse and
interpret their complex financial data to make decisions and improve the performance of the
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business. Forensic accountant collect evidence regarding the fraud and make sure that it does not
happen again by making policies and procedures.
Difference between Forensic auditing and forensic accounting
As per the views of Schreyer and et.al., 92017) forensic accounting and forensic auditing
is two different concepts. Forensic accounting refers to use accounting skills to investigate the
different accounting issues. The forensic accounting is used to identify the fraud against the
business while the forensic auditing refers to identify the fraud for the business. Forensic
accountant identify the fraud incurred by the employees, client and customer because of the
disputes with management. On the other hand the role of Forensic auditor is to identify the
frauds which are done by shareholders and owners to get the benefits from the market such as
manipulate the market share, financial data etc.
Another author Jenkins, Negangard and Oler, (2018) suggest that the role of forensic
accountant is to identify the answer of the question that who done the fraud while the role of
Forensic auditor is to identify the reason behind the fraud and get that who earn the money
because of the fraud. Forensic accountant use different kinds of tools to investigate the
fraudulent activities such as forensic tool is used to recover the deleted data and CDR tool is
used to analyse the recording of mobile data, so they can identify the fraud done by the
employees against the business. While forensic auditor analyse the financial transaction used in
the court cases. They also measure the organisation financial records to maintain and determine
the reliability, accountability and accuracy of the data. Forensic auditor used the monitoring
system tool to investigate the fraud done by shareholders for their personal benefits.
As per the authors Crain and et.al., (2019) views forensic auditor are ordered by the
different regulators, bankers or revenue authorities to identify the issues in business organisation
and measure the performance of company. Forensic accountant are appointed by the business
themselves to measure the data leakage and fraud activity done by the employees and clients
against the company. Different authors present various views regarding the difference in
Forensic accounting and auditing. But some authors argue that forensic accounting and auditing
are similar cases and there is no difference in their investigation because both works to
investigate the business fraud.
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Forensic accounting inter connected links with the organisation
According to the view of Tommie W. Singleton, 2010, forensic accounting is done to
determine the errors, frauds complexity and issues in the organisation. The main purpose of
conducting forensic accounting is to identify and understand the issues in the company's account.
Forensic accountant evaluates the financials of the company in order to prevent fraud. It is
beneficial for organisation for internal control such as policies and procedures. It will reduce cost
and increase efficiency in the firm. It is used to identify the risk by analysing and tracking the
transactions of business activity. On the other side Mark J. Nigrini, 2018 stated that the main
function of forensic accounting is to detect frauds by engaging in the identification of
misrepresentation in the financial statements. Regular audits expose the secrets of business and
affect the performance of business but forensic auditing is beneficial for company as it
determines issues internally and make solutions to overcome them. The overall function of
forensic accountant in the company is to keep track on computer systems and financials in order
to prevent frauds. It also helps business to improve their performance.
However Brian Lafountain, 2016 stated that by evaluating the transaction of the company
will assess them in making policies and strategies in order to achieve objectives. Forensic
accountant also assess company to measure whether they are performing with scrutiny and
whether their standards are matched with the company policy. The also evaluates the the ledger
and accounts and match with the law in order to underline the consequences of
misrepresentation. Forensic accountant also assist company by forecasting the economic changes
and demand so that company is ready to face the challenges.
Forensic accounting through an investigation of round numbers
As per the view of Nigrini, (2017), financial auditors round off the figures to the nearest
of thousand or million so that stakeholders and investors emphasis on the feature of audit.
Contrary to this forensic auditors identify the real figures through analytic test in order to find
out misrepresentation and misstatement. It is useful for company to identify the fraud done by
employees. In general auditors does not use round number test to identify and detect bribes ans
frauds. Forensic auditors use round number test to investigate and identify the frauds, all these
test results are beneficial for company in highlighting their mistakes and formulate policies to
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overcome the. It is also advantageous for companies to prevent frauds in the future by regularly
conducting forensic auditing.
Goetz, (2016) stated that round number identification is complicated as it includes
authentic and legitimate transactions. Experiences has shown that round numbers are linked with
purchase of property, goods and services, equipments and charitable or political campaign. To
investigate fraud in the round number, CPA need to collect and analyse data to detect bribes and
frauds. Forensic auditors identify the variance between the round numbers and real numbers so
that management of the company is able to see the amount of fraud performed by employees.
On the other hand Flasher, Janes and Wright, (2017) highlighted that round number
frauds decreases the reputation of the organisation and break the trust of stakeholders and
investors. Companies perform forensic auditing regularly so that there is no chance of fraud and
bribe. Forensic auditors will constantly check whether company is meeting the standards which
were implemented previously.
To find out the connection of Forensic Accounting in Corporate Finance
From the view point of Goetz, (2016), corporate finance is defines as how a particular
organisation is financed through tax implications, equity and debt. Forensic accounting is refers
to the analysis and evaluation of the financials and accounting skills in order to identify frauds.
Author thinks that forensic accounting and corporate accounting is related with each other as
finance providers need to know whether company is displaying correct and honest information to
take funds. Company's internal auditors need to make sure the board that corporate financing is
consistent and proper according to the previously formulated policies.
As per the view of Terence, (2017), it is stated that if a company is going for acquisition
then the acquiring company need to do due diligence in order to check the corporate finance
arrangements are at risk of being misrepresented. Improper due diligence will lead to loss for the
acquiring company because if there is no forensic accounting done properly to detect the fraud
then acquiring company need to pay off the debts and bear loss.
However Aduwo, (2016) stated that forensic accounting and corporate finance are both
particularly important while examining criminal reported concerning with the purchase of joint-
stock, mergers and acquisitions etc. the main purpose of both of them is to determine financial
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imbalance by allying different practices of accounting. Companies use modern analytical
techniques to perform economic financial crunches. Both of them is useful for the company to be
safe and secure before entering into joint venture, mergers and acquisitions. It is important to
conduct forensic accounting and and corporate finance as it is influenced by the compliance and
reliability with company procedures and it is beneficial for detecting criminal activities.
To figure out role played by Forensic Accounting in preventing/tackling accounting frauds.
Van Akkeren and Buckby, (2017), states that in recent times there were many corporate
scandals identified in the accounting bodies. One of the main reason for causing fraud is
improper practice of corporate governance. The main role of forensic accounting here is to
identify mistakes, frauds by collecting the financials of the company and analysing it in order to
find out misrepresentation and misstatement. The aim of forensic accountant is to protect the
interest of customers, stakeholders and employees. They provide transparency in the company
and improve the performance of the organisation.
On the other hand Enofe, Omagbon and Ehigiator, (2015) stated that forensic accountant
helps company in identifying their drawbacks and reason behind inefficient working. They assist
companies various policies through which the risk can be reduced. Forensic accountant create a
proper plan to identify the risk related to the business which is affecting the performance of
company. They propose unique and different approaches to reduce the risk which are not
implemented by the auditors. FA role is to think out of the box in order to understand the
problems and bring solutions.
On the other hand Smith, (2015) stated that forensic accountant plays an important role in
the detection and prevention of frauds. Nowadays government has made compulsory forensic
auditing and it is necessary for companies to include forensic auditing in their auditing report.
Thus, it is necessary for companies to perform forensic auditing as an anti-fraud method. They
perform various test like round numbers in order to find out the difference between the round off
number and real number.
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To Estimate About Forensic Accounting and it Relationship with Tax Evasion and Any
Other Financial crimes
According to the Kranacher and Riley, (2019), tax evasion is related with any illegal
activity performed by an individual or business in order to avoid tax liability. Forensic
accounting has an inverse relation with tax evasion as it identifies the main problem, or issues
where the fraud has happened. It is a process of identifying the the misrepresentation or
misstatement made by an employee or an individual to avoid tax liability. It is very beneficial
activity which improves the performance of the company.
As per the view of Hamdan, (2018) there is a relation between forensic accounting and
other financial crimes such as inappropriate insurance claims, disputes between shareholders or
among business partners and employee theft etc. for example if a business partners pays off their
bills of credit cards and personal bill with company checks, it is a fraud. The role of forensic
department here is to check profit and loss account, cash account etc. in order to detect the fraud
and solve them.
From the view of McMahon and et.al., (2016), forensic accounting investigates complex
financial crimes, forensic accountants play an essential role in private audits, criminal enquiry
and matters of national security. They determine and analyse suspicious activity, uncover
possible new leads for an research, get together with colleagues and other organizations to
explore complex financial issues, and communicate concerns about financial crimes.
RESEARCH METHODOLOGY
Research methodology refers to the process which are used to identify, measure and
analyse the information regarding the research topic. It helps to critically evaluate the reliability
and validity of the research.
Research type
It refers to the systematic process of collecting and interpreting the data to identify the
business problem and get the useful information. It can be classified in two broad category
descriptive research and exploratory research (Mackey and Gass, 2015). Exploratory research
aims to develop the understanding or researcher by providing insight information regarding the
research topic. It is conducted for formulating the investigation of deeper knowledge. It
discovers new ideas and thoughts by insight information. While descriptive research refers to
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explore and explain the situation to get in-depth knowledge. It describes the function and
characteristics of research. It explains the accurate and complete information regarding the
research topic in structured manner.
As per the above research researcher will use the exploratory research to develop
understanding regarding Forensic Accounting in the present world. Exploratory research also
helps to identify the difference between the Forensic accounting and auditing by the in-depth
information. It helps to develop new ideas and thought to solve the fraudulent cases in the
company.
Research approach
It refers to the plan and process which consist detailed information regarding the data
collection, analysing and interpretation. There are two kinds of research approach i.e. inductive
research and deductive research approach (Taylor, Bogdan and DeVault, 2015). Inductive
research approach starts with observation and end with theory. It generalizes from the specific
information to general. In inductive research data are collected to explore phenomenon and
identify the pattern of themes for conceptual framework or develop theory. While deductive
research refers to collect data, test the hypothesis related to the existing theory. It start with
theory, test hypothesis and observe the test to confirm the results.
In the above research researcher will use the deductive research to identify the
importance of Forensic accounting to resolve the criminal cases, fraudulent activities and
disputes in the shareholders. Deductive approach will help them to test the hypothesis on the
basis of existing theory. It will help them to analyse the reliability and validity of the research.
Types of data
There are mainly two types of data i.e. qualitative data and quantitative data. Qualitative
data refers to the exploratory research. They are mainly concerned to gain the insight and in-
depth information regarding the subject area. The qualitative data can be gathered by interview,
focused group and observation method (Quantitative Data Collection Methods, 2019).
Qualitative data provide the detailed information regarding the subject area. On the other hand
quantitative research refers to gather the numeric data from the various sources. It helps to
measure the reliability and validity of data on the basis of calculation and numbers. They support
the deductive research approach by using the existing theory and test the hypothesis to get the
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