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Forensic Accounting

By Edward Tudor

Forensic Accounting is a branch of accounting that describes the work of an accountant who investigates and reports on the financial activities of a business or individual with the aim of producing information for the settlement of disputes. Forensic means “suitable for use in a Court of Law.”

Some of the uses of Forensic Accounting information are:-

  • Economic damages calculations, losses suffered from a tort or breach of contract.
  • Post Acquisition disputes such as earnouts or breaches of warranties
  • Bankruptcy, insolvency and reorganisations
  • Fraud
  • Business Valuation – Going and gone concern.
  • Computer forensics and discovery.
  • Family disputes for the valuations for divorce etc.

A forensic accountant will:

  • Collect all the data.
  • Data preparation and processing
  • Analysis of the information to produce information.
  • Reporting the findings of the investigation.

An example of forensic analytics would be to review employee’s expenses to assess whether purchases have been diverted from a business for personal use.

Forensic accountants use their understanding of economic theories, business information, financial reporting systems, accounting and internal auditing controls and procedures, data processing and management systems and electronic discovery to produce information and evidence.

Forensic accountants and Internal Auditors are increasingly involved in assessing risk and establishing controls to ensure the protection of business assets. This is designed to ensure the deterrence of fraud and to ensure the efficient and effective running of an organisation.

Forensic Accountants do not provide opinions but work to provide the answers to who, what, why, when, where and how. Forensic Accountants identify the anomalies and inconsistencies to provide answers.

It is important to remember that Forensic Accountants do not determine fraud, which is the preview of the Courts.

For more information please contact Edward Tudor or use the Get in Touch link below.

Typical assignments have been:

Case Study 1

An SME was struggling and had an overdraft of over £600,000 even after growing the turnover from £1M to £6M. The cash was being drained from the business by the Financial Controller. We documented the theft of £400,000 and passed the evidence to the police.

Case Study 2

A director of a property company asked us to investigate a property company to see why a development that should have cost £1.1M actually cost £2.3M. The cause was that the main contractor went through a phoenix and therefore the development company paid for some of the work twice. The director who was project managing the development was paying the contractor in advance of the surveyor’s sign off of work done.

Case Study 3

A director of an SME was concerned about the expenses being incurred by the business. When we analysed the expenses we found that the MD was charging expenses to the business which should have been either personal expenses or should have been charged to his other business.

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