Finance 101 - Auditing And Accounting

"It was only during the past few years when we first heard about forensic auditing

. What really does it specifically mean? This article will explain how important this process is.

Let's start by defining accounting. This involves the identification, measurement, recording, and communication of economic information of a business organization. Through this, business people can make informed decisions. On the opposite side is forensic auditing which is a fairly new procedure under the field of auditing.

Crime was the reason why forensic auditing was born, most specifically economic crime. Economic crime has affected every country and industry and has escalated in recent times. Still, cases of fraud and corruption that are being reported has continued to grow. The conditions are worsened because of the challenges faced by the criminal justice system. The absence of the necessary skills to gather the proper audit evidence that is vital to criminal investigations is another factor.

According to information collected from law enforcement and criminal justice agencies, the success rate for convictions are not good because prosecuting authorities lack skills and know-how to provide effective investigation and prosecution. This is where forensic auditing comes in. Thus, forensic accounting gets its name from its association with a court of law. This is implement thorugh a judicial process.

The computation of asset values in a divorce proceeding is an example. The assessment of damages due to the negligence of an auditor is another. Still another is fact-finding to see whether fraud had taken place, in what amount, and whether or not criminal proceedings are to be set off. And lastly, the collection of evidence in a criminal proceeding. The main focus of forensic accounting are the evidence of financial transactions and reporting as found within an accounting system. It is the legal framework that allows such evidence to be suitable to the purpose of accounting.

Forensic accountants are chartered accountants who specialize in these types of cases and when there is a need for such evidence. Their job is to distinguish and interpret the evidences of both non-fraudulent and fraudulent transactions in the books and records of an accounting system. They also look out for the ensuing effect upon the accounts, inventories, and presentations. Forensic accountants must therefore understand the regular accounting procedures and processes. Therefore, this field is a specialized for of accounting.

by: Greg Pierce.

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