Fans of long-running TV detective drama CSI will no doubt be familiar with what it is forensic investigators do. In a nutshell, they apply detailed scientific investigative techniques to crime scenes in order to piece together sequences of events and, ultimately, prove wrongdoing in a court of law.
This is a good starting point for understanding what a forensic accountant does – you just swap the science part for financial investigation. Forensic accountants are the people businesses call in when something goes wrong financially, or there is a suspicion or accusation of wrongdoing.
They delve deep into accounts, follow and probe paper trails for transactions and record-keeping, track down assets and generally go through procedures and documentation with a fine tooth comb. At the end of it all, they produce evidence-based analyses that are intended to stand up to legal scrutiny.
Forensic accountants therefore combine the skillsets of a professional accountant, auditor and financial legal specialist all rolled into one. Compared to auditors, they are much more concerned with the minutiae and detail of financial records. Rather than sampling accounts with the overarching theme of compliance in mind, they are interested in establishing facts for specific purposes and going as far as they need to demonstrate conclusive proof.
Forensic accountant roles
In general terms, the role of a forensic accountant has an investigative side and a legal side. The two often follow on from the other. In financial litigation cases, for example, a forensic accountant will be asked to investigate the complaint on behalf of one party or the other and then present their findings in court, perhaps standing as an expert witness to give testimony.
There are many reasons why a business might hire a forensic accountant. One is if they suspect an employee, stakeholder or business partner of defrauding the company, or if a supplier, customer or competitor accuses your business of wrongdoing and sues. Forensic accountants are not just required to represent one party or the other in a court battle, either. If a business thinks it is being defrauded, it has a pressing need to establish facts like the scale of any losses and how the fraud was perpetrated, so it can stop a repeat in the future.
Commercial disputes over payment and contract terms are another area where forensic accountants are often instructed, as are disputes between companies and HMRC over supposed breaches of tax regulations and accusations of maladministration by directors in insolvency cases. In the most serious examples, forensic accountants will be asked to act for either the prosecution or the defense in criminal trials.
Away from litigation, malpractice and financial crime, forensic accountants are also hired to value businesses ahead of proposed mergers and acquisitions, by both the business being sold and the would-be buyer. This is to establish a robust analysis of financial performance and the value of all assets, to provide a foundation for subsequent negotiations. Away from the commercial field, forensic accountants are also regularly asked to act in divorce cases where the two parties want to establish the value of all assets belonging to the other ahead of the financial settlement.