The increase of the percentage related to the financial and corporate crimes influences the changes in the role of forensic accounting for businesses. Specific forensic accounting skills are necessary to control the situation within companies in order to avoid and predict financial crimes because of the spread of financial fraud as the negative tendency in business.
From this point, forensic accountants are professionals who are responsible for determining frauds and for predicting financial crimes or for resolving the problematic situations when it is necessary to investigate the definite financial case.
As a result, there is a range of skills which forensic accountants should possess as well as a set of responsibilities associated with the legal context of the work of a forensic accountant. That is why, it is important to focus on the most important skills necessary for realizing the internal control within the company in relation to financial issues and to determine the legal responsibility of forensic accountants when they investigate the cases in companies or discuss them in the courtroom.
The Forensic Accountants’ Most Important Skills
Forensic accountants should be skillful investigators in order to discuss the case in detail and find the problem as well as its causes. Furthermore, this kind of internal control is almost impossible without the effective auditing techniques used by forensic accountants in order to resolve the problems and focus on the financial frauds.
According to Davis, Farrell, and Ogilby, to discover and explore the evidences associated with fraud activities and misrepresentation, a successful forensic accountant needs to have such developed skills as the analytical thinking, the orientation on details and facts, effective communication skills, the ability to analyze and interpret the information, and auditing skills (Davis, Farrell, & Ogilby, 2009). The concentration on these five skills allows forensic accountants’ effective performance and investigation activity.
Analytical skills are important to help forensic accountants explore the case aspects and analyze them effectively in order to provide the report on the fact of frauds and financial crimes. Forensic accountants receive the access to the financial records of the company, and their task is to interpret and analyze this information with references to their analytical skills (Crumbley, Heitger, & Smith, 2007). Thus, the orientation on details and facts is important because this is a path to determining the problem and solution to it.
The next significant factor is effective oral communication which is necessary to find the information and examine the details of the case with the help of employees and managers as the subjects (Skalak, Golden, & Clayton, 2011). Forensic accountants work directly with financial records and reports that is why auditing skills are extremely necessary to perform the basic duties of an accountant and controller of the company’s financial activities.
The Role of a Forensic Accountant in a Courtroom
Working with such cases as bankruptcy, personal injury claims, and corporate crimes, forensic accountants often perform in a courtroom as witnesses in relation to those cases on which the financial investigation is necessary. If the case is discussed in the courtroom, the role of a forensic accountant is to provide the necessary evidences based on the investigative activities which were realized to determine frauds and problems in the company (Pagano & Buckhoff, 2005).
Forensic accountants can be discussed as experts in the cases of financial and corporate crimes because of their focus on investigation and analysis of the internal information, and this role of witnesses and experts can be used in the courtroom, depending on the case.
The Legal Responsibility of a Forensic Accountant
Forensic accountants are responsible for examining and analyzing a lot of cases and issues associated with business, depending on the needs of the company at the moment. Moreover, these responsibilities can be discussed as legal because forensic accountants must release any information about frauds and financial crimes which is discovered during the investigation without references to the company’s progress and status.
From this perspective, forensic accountants’ legal responsibility is closely associated with the concepts of objectivity and justice (Bressler, 2010). The role of forensic accountants is important in business because their participation in investigation should guarantee the transparency of information and the legal approach to resolving the problem.
Forensic Accounting Cases
The cases of Enron and WorldCom are two situations when forensic accountants provided the vital evidences in order to resolve the legal questions and uncover the fact of crimes. During the development of Enron scandal in 2001, it was found that the company’s managers hided the information about the company’s financial situation and provided shareholders with the false reports in order to attract more investments and cover the company’s bankruptcy. The price of shares increased irrelevantly to the real situation within Enron.
The collapse of Enron is closely connected with auditing and investigative activities realized by forensic accountants in order to examine the case in detail when the fraud was discussed as the fact. Focusing on Enron case, it is important to state that the significant role of forensic accountants is based on their investigation and found evidences which were presented in the courtroom. These evidences are necessary to prove the guilt of managers responsible for the collapse.
The case of WorldCom reflects the similar situation when managers of the company hided the information about the real earnings and profits in order to realize their fraud activities and avoid bankruptcy. The non-reported sums of money were used to conceal shortages in revenues within the company. Forensic accountants were responsible for investigating the case during a long period of time to present the most objective reports in the courtroom.
This situation affected the development of the opinion that forensic accountants should work with agencies as experts permanently in order to discover and prevent corporate and financial crimes and regulate the activities within the business world. The reflection of Enron situation in the case of WorldCom in 2002 emphasized the role of forensic accountants in the process of auditing and interpreting financial reports and records (Crumbley, Heitger, & Smith, 2007; Pagano & Buckhoff, 2005).
Thus, importance of forensic accountants in business is stated today as the well-known and admitted idea because the roles performed by forensic accountants allow the positive and fair progress of companies with references to the ethical principles and legal norms.
From this perspective, forensic accountants can be discussed as protectors of the companies and the business community’s interests and in relation to guaranteeing the fair business relations. They also provide the appropriate discussion and resolution of such cases as commercial damages and personal injury claims which are also examined by forensic accountants because of the involvement of legal and financial aspects.
References
Bressler, L. (2010). The role of forensic accountants in fraud investigations: Importance of attorney and judge’s perceptions. Web.
Crumbley, D. L., Heitger, L. E., & Smith, G. S. (2007). Forensic and investigative accounting. London: CCH.
Davis, C., Farrell, R., & Ogilby, S. (2009). Characteristics and skills of the forensic accountant. Web.
Pagano, W., & Buckhoff, T. (2005). Expert witnessing in forensic accounting. R.T. Edwards, Inc.
Skalak, S., Golden, T., & Clayton, M. (2011). A guide to forensic accounting investigation. USA: John Wiley & Sons.