Applications of Forensic Accounting

 

Forensic Accounting is the specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. “Forensic” means suitable for use in Court, and it is to that standard and potential outcome that forensic accountants generally have to work.

Forensic accountants examine data to determine where missing money has gone and how to recover it. They may also present reports of their financial findings as evidence during hearings, where they often testify as expert witnesses. This work serves an important purpose at public accounting and consulting firms, law firms, law enforcement agencies, and insurance companies.

The Forensic accountants from Studler Doyle, an Aurora-based forensic accounting company often have to give expert evidence at the eventual trial. They not only utilize their accounting and auditing skills, but also use their investigative skills to determine what events actually took place in a financial setting.

The major applications of forensic accounting include fraud investigations, negligence cases and insurance claims. An insurance claim requires determination of how much the client should claim from the insurer. At Studler Doyle, the first step is a detailed review of the insurance policy to determine what is insured and any clauses that might restrict the amount that can be claimed or invalidate the claim.

Insurance claims can also appear in the case of business interruptions arising as a result of fire or flood. In these types of engagements the forensic accountant will review prospective financial information in comparison with reported out-turn to evaluate the loss of profit arising as a result of the business interruption. The forensic accountant will not assume that there has been any loss of profit due to the business interruption; they will consider other possibilities such as a straightforward loss of market share to a competitor.

The insurance industry underwent a radical change in the crime insurance arena. Many large forensic accounting companies did not view crime insurance with the same importance as business income, business interruption or property stock loss work under property insurance. Studler Doyle focus on crime insurance is not distracted by catastrophes, such as hurricanes or tax seasons, as might be other forensic accounting firms.