“ A Specific Study of FORENSIC ACCOUNTING – An Essential & Modern Outlook Towards AccountabIlity & Fraud Investigation "

PROPOSAL PRESENTED BY:

Prof. ABHISHEK K. GANDHI[ M.Com (MUMBAI UNIVERSITY) ; CHARTERED ACCOUNTANT (ICAI); COMPANY SECRETARY (ICSI) ]

INTRODUCTION RAPID CHANGES IN THE

ACCOUNTING PROFESSION > Operations of Day to day task of

debiting and crediting.

> Reports on internets (Technology)

> Demand of Global Economy and International market.

OVER VIEW Forensic accounting have been around for nearly 200 years Found in 1824 First institutions to use the services IRS (International Financial

Statistics) GAAP ( General Accepted Accounting Principles) and tax laws

became widespread and mandatory. Companies that manipulated accounting rules to boost their

earnings in a stock market gone wild. The year 2002 the annals of accounting history as

the Year of Truth when companies disclosed billions of dollars of financial fraud. SEC issued earnings restatements between the years 1997

and 2002. The FASB (Financial Accounting Standard Board) and the

SEC(Security and Exchange Commission) scrambled to find solutions to the problem of such ubiquitous financial fraud.

FORENSIC ACCOUNTING Forensic accounting is hardly a new field in

accountancy. Forensic accountants as preventative measures

as the demand for trustworthy financial statements increases in the wake of the recent accounting scandals.

Forensic accounting", provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution.

Forensic Accounting encompasses both Litigation Support and Investigative Accounting

ASSISTANCEFORENSIC ACCOUNT Litigation Support It deals primarily

with issues related to the quantification of economic damages.  A typical litigation support assignment would be calculating the economic loss resulting from a breach of contract.

Investigation Support “Investigative

accounting", is often associated with investigations of criminal matters.  A typical investigative accounting assignment would be an investigation of employee theft.  Other examples include securities fraud, insurance fraud, and proceeds of crime investigations.”

FORENSIC ACCOUNTING ENCOMPASSES A WIDE RANGE OF ACTIVITIES :

The expert witness – preparation of formal reports for filing in Court and giving evidence as an Expert

Fraud Detection – assisting clients in detecting financial fraud by employees and others and tracing misappropriated funds. This section provides information for fraud-related engagements

•Computer Forensics –

assisting in electronic data recovery and enforcement of IP rights etc.

FORENSIC ACTIVITIES PROCESS 1.Preparation (of the

investigator, not the data)

2. Collection (the data)3. Examination4. Analysis5. Reporting6. Comparison to Physical

Forensics

NEED FOR FORENSIC ACCOUNTANTShareholder/partnership disputes•Personal injury claims/accidents•Business interruption/insurance claims•Employee fraud•Divorce/bankruptcy•Professional negligence•Financial statement fraud•Retained by lawyers, law enforcement, banks and companies

FORENSIC ACCOUNTING TECHNIQUES

FORENSIC ACCOUNTING TECHNIQUES

Direct Method Indirect Method

The Direct Method, also known as the Transaction Method, is similar to traditional auditing procedures. In this method, the appraiser commonly examines: 

 Cancelled checks & invoices 

 Contracts & agreements 

 Public records & notices  Interview management

& staff (multi levels)

Indirect Method is commonly employed when the conventional Direct Method is not productive. The most widely used techniques under the Indirect Method are the: 

Cash T Method  Source & Application of

Funds Method  Net Worth Method  Bank Deposit Method

WHO RETAINS A FORENSIC ACCOUNTANT? Forensic Accountants are often retained by the following groups:•Lawyers; •Police Forces; •Insurance Companies; •Government Regulatory Bodies and Agencies; •Banks; •Courts; and•Business Community.

“Auditor should be watchdog ”. It’s a good quote that every auditor should know. This quote makes the definition of Forensic accountants even more simple.”

Growing cyber crimes, failure of regulators to track the security scams,

Satyam scandal

Conclusion:……………………….The importance of the forensic

accountant’s role in the detection of fraud is continuously growing. Armed with combination of skills, these financial detectives are today important assets to modern legal teams. In the backdrop of increasing levels of frauds, the demand for forensic accountants is bound to substantially increase in the future.

End of Satyam Empire

?

And Hence

; bette

r to g

o for:

“FORENSIC A

CCOUNTING