We provide Forensic Accounting and Forensic Audit services to identify hidden income and fraud financial transactions. Dr. Fiona Chen uses her well trained skills by the IRS to systematically identify fraudulent activities. The IRS is the only U.S. government agency formally and systematically trains its employees to identify unreported income and fraudulent activities and to make sure the evidence and identification procedure are properly collected and handled to be used in litigation.
What is Forensic Accounting? Forensic Accounting is investigative accounting. It is a relatively new and specialized practice area in Accounting. A forensic accountant needs to know how to preserve and handling the evidence for court litigation purpose.
Forensic accounting and forensic audit is different from auditing in general in the following aspects. By comparing the two, it help us to understand what Forensic Accounting is.
Auditors are usually paid by the client for the auditor to independently examine the client's books and records. An auditor's report without opinion is for the auditor's to certify the client's financial statements factually representing the client's financial condition. An auditor usually sets a confidence interval, such as 90% or 95%, as the "threshold" level to pass the client's financial statement as truthfully representing the client's financial condition. The purpose of auditing is to make sure the client does not fall outside the confidence interval range. An auditor's examination usually is a periodical, yearly event.
Forensic accountants are usually paid by a third party because forensic accounting is usually initiated by a third party. The purpose of the forensic accounting is to discover "irregular", fraudulent activities and items in income, expenses, and/or financial transactions. By the time forensic accountants are called into an engagement, the subject matter is usually heading toward the Court, if not already in court litigation proess.
Even the skills and techniques adopted by the forensic accountants sometimes are similar to the ones used by auditors, the two types of examination are used for very different purpose. Forensic accounting, or sometimes called, "Forensic Auditing", aims at the remaining 10% or 5% outside the confidence interval of that same financial data population. It does not look to accept the behavior as the norm. It aims to look for the outliers of irregular behaviors. Forensic accounting is usually conducted for particular purposes and, hopefully, not a regular event in an organization's life cycle.
When an auditor examines a client, the auditor starts by assuming the client is in compliance. The auditor tests to see whether within set percentile confidence interval range, the client is in compliance. The auditor examines to verify whether proper Generally Acceptable Accounting Principles and the related rules and regulations are followed.
When a forensic accountant examines the subject entity, individual or business, the forensic accountant needs to assume the financial data are incorrect. By the time the matter is raised to the forensic accountant's level, usually, the situation could have already been "very wrong" or at least doubtful. Vigorous steps and systematic procedures need to be taken aiming at the portion outside of the set interval range.
If an auditors is similar to a police performing safety prevenction and protecting activities, a forensic ccountant, on the other hand, is more similar to detectives looking for suspects in criminal activities.