Forensic accounting v. General accounting: demystifying the distinction
While most of us to some degree understand what a general accountant does, and will likely have had direct or indirect contact with one, it would appear that forensic accounting remains somewhat of a puzzle to many people. This article attempts to understand and examine the distinction.
Whilst the majority of us know at least something of what accountants do or have experienced some extent of exposure to one either directly or perhaps indirectly, generally people know somewhat less about forensic accounting. This article highlights several of the key differences between them.
The nature of general and forensic accounting work
Possibly the most important and most obvious distinction is in the overall nature of the work involved in the two types of role. General accounting is composed of a number of different roles: work ranges from keeping the books of accounts of a business in order to ensuring that companies are complying with laws and financial regulations expected of them, to publishing a company’s financial data and yearly or quarterly reports. General accountants might also make use of existing statistics from a corporation to help make estimations of how it may perform in the foreseeable future in order for instance to secure a loan or in order to attract investment.
Forensic accounting is a specific and specialised division of accounting. Forensic accountants perform work which covers a plethora of different areas and is of a somewhat different character to general accounting. Possibly the role men and women are most conscious of that they perform is to investigate whenever a company or an individual has committed a crime like fraud. Forensic accountants might be tasked by the authorities or the Crown Prosecution Service to investigate alleged wrongdoing by tracing bills, statements and other financial activity of companies, their directors, or everyday individuals. In performing this role forensic accountants see their work take them outside of the office environment in as much as they are often asked to work as expert witnesses in court in criminal cases, something a conventional accountant would unlikely see in his line of work. In this role therefore forensic accountants are helping discipline wrongdoing rather than a general accountant who helps people steer clear of wrongdoing.
Whilst assisting with criminal investigations and dealing with fraud stands out as the most commonly known part of the work of a forensic accountant they also work in areas such as divorce; whether it be valuing assets or tracing one particular partner’s financial interests in order that they get what is revealed ‘added to the pot’ that will be distributed in the settlement. Additionally, they play a role in commercial disputes, and even personal injury claims. With regards to the former it might be helping in lawsuits in demonstrating the other side’s wrongdoing, and in the case of the latter it may well involve helping to determine exactly how much financial loss has and will be experienced. After a little investigation, therefore, it seems that not only is forensic accounting different from general accounting, but it’s broader in scope than initially one might envision.
When is Forensic accounting used?
As can be noticed from the segment above explaining the nature of a general accountants work, they could be working with a corporation each and every day. For giant businesses especially general accountants will be put to use every day in order to keep on top of all of the companies’ fiscal issues along with to help them conform with legal requirements. It might be the case, therefore, that some companies even have ‘in house’ accountants who will be on call 24/7.
In contrast to general accounting forensic accountants are primarily called on and employed in response to the occurring of a specific event or series of events, as opposed to for a business or an individuals’ every day needs and enquires. As a result it is less likely that firms will have an ‘in house’ forensic accountant, and will most likely use the service of an independent accountancy firm.
Skills necessary for a forensic accountant
Whilst both general accounting and forensic accounting involve a good knowledge and comprehension of the fundamental principles of accountancy, a supplementary skill set is expected of the forensic accountant, namely investigation. Whist a general accountant starts working with pre-existing figures and endeavors to make sense of them to a variety of different ends, forensic accountants typically search for the fiscal information that isn’t right in front of them in order to meet their clients objectives. This will likely involve following paper trails, interviewing individuals and in some cases obtaining court orders to uncover information.
Conclusion
As the services of forensic accountants are not used or needed within the everyday living of an individual it is far from unusual fairly little is known about the occupation. Upon investigation forensic accounting is in fact broad in scope and covers many different roles. What is interesting to note is that in spite of the difference between general accounting and forensic accounting, the services related to each are often available from exactly the same company. In other words it will often be the case a chartered accountant can cater for not only your general accounting needs but also your forensic accounting requirements, in the event you so need them.
For both general accountancy and also forensic accounting solutions seek out the chartered accountancy company Price Bailey, who the writer works closely with from time to time.
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