Making the Case: Just What Is Forensic Accounting?

Thanks to CSI, Bones and Hollywood in general, forensics are glamourous. What is not to like? Tease at the tiny sliver of evidence, cue the montage and solve the case! Forensic accounting is about the most glamourous thing accounting has going. So, you probably want to know: Is Hollywood getting it right?

Forensics, whether science or accounting, must be suitable for legal review. Forensic accounting touches upon the other accounting areas such as assurance services, internal audit, performance auditing, tax, and valuation. The work of forensic accounting encompasses banking, information technology, criminal prosecution, government, psychology and more. Though unlike CSI which has scientists who carry guns and go on police raids, forensic accountants do need investigative skills and may assist in collecting, analyzing and evaluating evidential matter. Hollywood gets it right in that working in forensics requires the application of specialized knowledge, education, experience and training. Additionally, forensic experts may be called upon to interpret and communicate findings in a courtroom or in other legal or administrative venues. As a forensic accountant, it is important to be able to communicate well both verbally and in writing and to simplify information for those without accounting or finance backgrounds.

Role in the Case

Forensic accountants are not doing the same work as auditors any more than police officers are doing the same work as detectives. Specialized knowledge and training means forensic accountants can support litigation as expert witnesses, consultants, triers of fact, special master, a referee, arbitrator or mediator. An expert witness is one who is designated to render an opinion. While being an expert witness gives the appearance of advocating for the client which would impair the independence of an auditor, the actual purpose of this role is to provide an objective opinion based on facts discovered during the investigative process. A consultant is hired to provide information about the facts, issues and strategy of a particular matter and does not testify regarding his or her opinion. Forensic accounting can take the form of other services, such as business valuation, analyzing business transactions, computing economic damages, fraud detection and investigation, bankruptcy consulting and insurance claims assessment.

Key Pieces Never Shown on Screen

The scene that ends up on the cutting room floor is the report writing. While not as exciting, report writing is as important as the work it discusses. Good report writing allows the forensic accountant to demonstrate his or her understanding and knowledge of the evidence. It shows that the evidence supports the opinions expressed. Good reports cite references and resources for the methodology used in the investigation and shows supporting evidence that the methodologies are reliable and accepted. The opinion is the star, and the rest of the pieces support it. The reports frame the argument for the opinion by establishing the parameters of the accepted methodologies and the logic used. Exhibits and visuals are good tools to summarize information and demonstrate relationships in an easy-to-understand format. Good reports can serve as a reference source for a judge while making decisions regarding expert opinions.

Early Involvement is Critical

Take a cue from Hollywood; consider there is a good chance for a situation to require legal attention. For maximum effectiveness, forensic accountants have to be involved early. Involving a forensic accountant early can prevent last minute independence issues and serve to strengthen the legal position through the preservation of evidence. It will also provide the forensic accountant time to consider the relevant information available so the forensic accountant is adequately prepared prior to trial or legal review and does not testify outside their area of expertise.

Dial Down the Drama

Drama makes for good television, but no one wants drama in a court case. A good expert witness is experienced, knowledgeable, qualified and uses acceptable methods. There are a number of ways an expert witness can be dangerous. Inexperienced and unqualified are the most obviously dangerous.

Another way would be if the expert used accepted methods but was intellectually dishonest or had substandard work. Intellectual dishonesty shows when evidence unfavorable to the expert witness’s opinion is ignored, not shared with his counsel or misrepresents the evidence used in the report and conclusions to the court. Substandard work, even if performed using accepted methods, can make for a dangerous expert witness. Substandard work includes lack of review of subordinates and inadequate time taken to properly assess evidence and prepare report and/or testimony, which is often the result of the low fees being charged by the expert or an overly restrictive budget imposed by counsel.

A third way an expert could be dangerous is if the expert was qualified but did not follow the accepted standards and methodologies. This could include tweaking methodologies as a result of working backward to reach a particular amount or goal in damages and making calculations to reach that goal. It could also involve the use of sweeping generalizations such as “all small companies have poor accounting records.”

We Can Help

It takes work both in front of the camera and behind the scenes to produce that one hour television show. Forensic accountants can work both in front of an audience in the courtroom and behind the scenes using their specialized knowledge and experience. Think you might need the assistance of a forensic accountant? Elliott Davis Decosimo is ready with a team of professionals dedicated to Forensics and Fraud. For more information, contact Natalie Shipley at or your Elliott Davis Decosimo Advisor.

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