Forensic Accounting
Definition
The application of accounting, auditing, and investigative skills to matters likely to be disputed in a legal or regulatory forum. The word forensic comes from the Latin forensis (belonging to the forum or court).
- Core disciplines
- Accounting, auditing, and investigative technique combined
- Etymology
- Latin forensis, belonging to the forum or court
- Typical work
- Fraud investigation, asset tracing, damages calculation, litigation support
- Output
- Reports and testimony usable in litigation or regulatory proceedings
Common questions
How does forensic accounting differ from a standard financial audit?+
A standard audit tests whether financial statements are fairly presented and relies on sampling. Forensic accounting starts from a specific allegation or dispute, follows individual transactions to their source, and is built to produce evidence that can withstand cross-examination in court.
Does a forensic accountant need to be a qualified auditor?+
Most practitioners hold a core accounting qualification such as CPA or chartered accountant status, often combined with a fraud-specific credential like Certified Fraud Examiner. The investigative and courtroom-reporting skills are usually built through additional training and case experience beyond audit qualification alone.
Related terms
- Fraud Examination
- The process of resolving an allegation of fraud, from initial fact-finding through evidence collection to a conclusion about what happened and who...
- Asset Misappropriation
- The largest Fraud Tree branch, covering schemes in which an employee steals or misuses the organisation's assets. Subcategories include cash schemes (skimming,...
- Forensic Audit
- An examination of an organisation's financial records and systems conducted specifically to gather evidence for legal proceedings. Distinguished from a regular audit...
- Fraud Triangle
- A model, developed by criminologist Donald Cressey, proposing that occupational fraud requires three converging conditions: pressure (financial need or incentive), opportunity (a...
- Litigation Support
- Work done by a forensic accountant to assist counsel in civil or commercial disputes: calculating damages, modelling lost profits, or reviewing opposing...
- Net-Worth Method
- An indirect method of proving unreported income. The investigator establishes opening and closing net worth, adds known expenditures, subtracts documented income, and...
- Predication
- The reasonable basis that justifies opening a fraud examination. The ACFE holds that no examination should begin without adequate predication, meaning a...
- Sarbanes-Oxley Act (SOX)
- US federal legislation enacted in July 2002 in direct response to Enron and WorldCom. Its key provisions include CEO/CFO certification of financial...
- Treadway Commission (COSO)
- The Committee of Sponsoring Organizations of the Treadway Commission, whose 1992 Internal Control framework became the global baseline for evaluating internal controls...
Explained in these topics
- Forensic Auditing: Definition and ScopeThe broader discipline that applies accounting, auditing, and investigative skills to legal disputes. Encompasses forensic auditing, valuation, asset tracing,...
- Scope and History of Forensic Accounting