Forensic accountants utilize their expertise and knowledge of economics and finances to identify, quantify and affix responsibility for financial improprieties.The term forensic accounting was coined by Maurice Peloubet during 1946 in an essay entitled “Forensic Accounting: Its Place in Today’s Economy.” The forensic accountant may be known as either a fraud auditor or investigative accountant; however, these monikers don’t fully describe the main function of forensic accounting, which is fact finding.
As fact-finders, forensic accountants search through financial records to determine the actual course of events and/or amount of economic damages. Documents used to conduct a forensic accounting investigation include:
- Internal documentation like general ledgers, financial statements, bank reconciliations and reports prepared for regulatory bodies, such as tax returns.
- External documentation in the form of bank statements and accompanying transactional documents (deposit tickets, cancelled checks), brokerage statements, customer purchase orders, or vendor invoices which should be consistent with internally generated documentation.
- Control documentation for use in corroborating recorded financial information, such as industry statistics, economic indicators, consumer price indexes, productive labor hours, customer payments received and raw materials utilized in production.