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Worldwide we consider Sherlock Holmes to be the first forensic accountant; however contribution of some of historic characters in India cannot be ignore. In India, Kautilya was the first person to mention the famous “40 ways of embezzlement” in his famous Kautilya Arthashastra during the ancient Mauryan times. Another famous historic character who used various tricks to investigate crime stories is none other than Birbal, a scholar in the time of King Akbar. Some of his stories give the fraud examiner a brief idea about the litmus test of investigation.
When we think of accounting, we picture of mundane desk job with very little or no excitement. We rarely see accountants stealing the spotlight on shows like CSI or CID but in reality criminal minds like AL Capone have been bring to justice by accountants. Though criminals may lie, numbers never do and this paper trail can often lead to the truth. Forensic accountants use their skills in numbers to solve and prevent financial crimes.
There was a time when practice of forensic accounting was not recognized as a separate practice area distinct from auditing. However with increasing cases like Enron, Tyco, Worldcom etc. has given a boost to the need of separate area of forensic accounting and fraud examination. Need of forensic accountant was confirmed by some big ticket bankruptcies in corporate America.
[button color=”” size=”” type=”round” target=”” link=””]INTRODUCTION TO FORENSIC ACCOUNTING AND FRAUD EXAMINATION[/button]
Let us have a brief look at forensic accounting and fraud examination.
If you are concerned about financial discrepancies and financial fraud, you need more than an accountant. Forensic accounting is combination of Accounting, Auditing and Investigation skills. Broadly forensic accounting can be classified into 3 categories namely:
- Economic damages
- Assurance as to fraud in accounts or inventories or the presentation thereof
- Business valuation
Forensic accounting is gross area of which fraud examination is small part.
Fraud examination is divided into three basic aspects
above points are the basic aspects of fraud examination.
There is a very thin line between fraud detection and fraud investigation. To explain this in simple manner, the detection process is carry out by the auditor (or the employees performing the similar supervision functions). Fraud investigation is the work of the law enforcement officials like police department and the prevention is the work of the management.
As forensic practices followed their own separate path, the services provided changed into those of an investigative nature. Today where cybercrimes being committed against every business connect to internet, nature of forensic practice is expanding to new territory.
The field is still changing today and it is worthwhile to speculate how much it will change in future. Seeing the brief history of forensic accounting, we can predict what the future holds for practice un this area.
CA Purvi Shah