Forensic Accounting

FORENSIC
ACCOUNTING
UKAM4023 INTEGRATED CASE STUDY
FORENSIC ACCOUNTING
FORENSIC
Relating to, used in, or appropriate
for courts of law or for public
discussion or argumentation
ACCOUNTING
a system that provides quantitative
information about finances
FORENSIC ACCOUNTING
FORENSIC
Forensic accounting
Relating to, is the
used in,action of identifying, recording,
or appropriate
settling, extracting,
for courts ofsorting,
law or forreporting,
public and verifying past
financial data or other
discussion accounting activities for settling
or argumentation
current or prospective legal disputes or using such past
financial data for projecting future financial data to settle
legal disputes.ACCOUNTING
a system that provides quantitative
information about finances
FORENSIC ACCOUNTING
The investigation of fraud or
Uses accounting, auditing,
financial manipulation by
and investigative skills to
performing extremely detailed
examine a company’s
research and analysis of financial
financial statements.
information.
Typically, an accounting firm will Attempt to piece together or

be engaged by a client either reconstruct a past events using
looking to defend themselves, or financial information creating
one looking to prosecute paper trail to be used in some
someone. judicial proceeding.
WHY FORENSIC ACCOUNTING
For litigation support
For criminal investigation
For expert witness statement
For support to the accounting profession

FORENSIC EVIDENCE
Evidence that can be presented in a court of
law.
Analysis of financial information that can

be used to support a case in a court of law.
The process of digging through financial

information can take months or even years
and requires a team of specialised
accountants that act like detectives trying
to solve a mystery.
FORENSIC ACCOUNTANT
An accountant who investigates potential financial
crime or fraud cases, typically those that involve
litigation or legal and criminal disputes
Usually, they are the main investigator analysing
the books and financial holdings that may become
evidence in a court case
Their analyses, documentation, and findings are
presented to lawyers, judges, and juries, and often,
the forensic accountant will testify as a subject
matter expert on the evidence
Forensic accountants are often hired to prepare for
litigation related to insurance claims, insolvency,
divorces, embezzlement, fraud, skimming, and any
type of financial theft.
FORENSIC INVESTIGATION
Consider how
the fraud
could have Interview Provide
taken place suspect advice
Determine Gather Produce

the type of evidence report
fraud
GATHERING INVESTIGATION
FINANCIAL NON-
TOOLS FINANCIAL
TOOLS
FINANCIAL RED FLAGS
Useful in identifying unusual changes that
occurred in the financial information and
statements and will serve as the start of
the investigations.
Usually involves overstating or

understating assets, revenues and profits
or liabilities, expenses and losses.
Obtain through financial statement

analysis or financial tools.
FINANCIAL ANALYSIS AND FRAUD TRIANGLE
Fraud triangle can be useful to detect fraud.
What are motives

for fraud?
What are the

opportunities for
fraud?
MOTIVE OPPORTUNITY
Look for the negative pressures that the What are the things that a company can
company may be facing manipulate?
Financial performance Assets?

Financial position Liabilities?
Revenue and profit?
Expenses and losses?
FINANCIAL TOOL
A trend analysis, a technique for evaluating a HORIZONTAL
series of financial statements over a period
of time.
Main purpose is to determine changes
(increase or decrease) that has taken place. VERTICAL
With regards to financial statement fraud,
the key is to look for irregularities - unusual
and unexplained increases or decreases. RATIO
Unusual changes in figures might signal
manipulation in the statement.
HORIZONTAL ANALYSIS
Analysing the
Comparing one The
% change
line item over comparison is
financial
multiple between two
statement
periods periods
items
The earlier The changes in Changes can

period in the subsequent use absolute
analysis is period comparisons
considered the computed as a or percentage
base % of the base comparisons
HORIZONTAL ANALYSIS
Absolute change:
Amount of item in comparison year – Amount of item in base year
Change in percentage:
Absolute change
x 100
Amount of item in base year
VERTICAL ANALYSIS
Relationships
Comparing
Also known as between
items in one
common-size components
reporting
analysis expressed as
period
percentages
Each item in a In SOFP, total

financial In SOCI, Net assets or
statement as a Sales is a liabilities and
percent of a common base equity are
base amount common bases
RATIO ANALYSIS
measuring the Debt-to-equity Net profit

relationship Debt ratio
ratio margin
between two
different items
Gross profit
Current ratio Quick Ratio
margin
Inventory Payables Receivables

turnover turnover turnover
END OF TOPIC
THANK YOU J
UKAM4023 INTEGRATED CASE STUDY

Forensic Accounting

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FORENSIC

Typically, an accounting firm will Attempt to piece together or

For litigation support

For criminal investigation

For expert witness statement

For support to the accounting profession

Analysis of financial information that can

The process of digging through financial

Determine Gather Produce

Usually involves overstating or

Obtain through financial statement

What are motives

What are the

Financial performance Assets?

The earlier The changes in Changes can

Each item in a In SOFP, total

measuring the Debt-to-equity Net profit

Inventory Payables Receivables

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