What is Forensic Accounting and How Can it Help?

  • January 30th, 2021
  • Mitchell Ball

The use of forensic accounting is becoming more widespread in the insolvency industry as a result of its potential uses and benefits are being better understood.

What is Forensic Accounting?

Forensic accounting is the use of expert accounting skills to analyse financial information. For an extended period the term was closely associated with the aim of uncovering potential fraud or embezzlement. Forensic accountants would analyse financial information, identify any irregularities and provide comprehensive reports which could be used as evidence in any potential court proceedings.

How Can Forensic Accounting Help?

Over time, many individuals and organisations are now using forensic accounting services for additional purposes. Forensic accounting is now often used for the following:

Investigative Purposes

May include investigating financial records and accountant reports to potential misconduct and tax disputes. Forensic accountants are experts at identifying irregularities and extremely familiar with methods that are often used to disguise fraudulent behaviour.

Due Diligence

Buying or selling a business is not as simple as opening up the books. Forensic accounting in this aspect involves providing a holistic assessment of a business. Forensic accountants look to validate the authenticity of the reported numbers while assessing other key aspects including key suppliers, employees and customers. This approach allows the parties involved to make an informed decision leading into major transactions.

Valuation

In the event of a merger or acquisition, it is important for a fair economic value of a business to be determined. In order to establish an accurate value, a team of accounting experts will consider factors such as market capitalisation, business life cycle and liquidation value.

They will also utilise earnings multipliers or times revenue formulas to provide a clear assessment of the businesses ability to generate income. Once income streams are verified and related factors such as brand position assessed, an accurate valuation can be determined.

Where Can I Find a Forensic Accountant?

Australian Debt Solvers has an in-house forensic accounting team. This means that you can access professional advice instantly. Moreover, our forensic accounting team can work in conjunction with other departments where necessary to ensure that your matter is dealt with quickly and effectively. For instance, if fraudulent behaviour is impacting a particular area of your business, our forensic accounting team can work with our other in-house insolvency experts to determine the best course of action.

A unique asset of our team is its ability to translate findings in a manner that is easy to understand. We have found this to be useful when recommending appropriate solutions. In most cases there are millions of dollars on the line which is why it is essential to find the right forensic accounting team.

Our experts are on hand to provide professional advice. Contact Us today.

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