I am often asked “what is a forensic accountant?” The term tends to conjure up images of the financial detective pouring over business records searching for evidence to convict a rogue employee who suddenly is driving a better car than their employer and living in a mansion at the beach. At times, that can be the case, however the reality is often not so much fun.
Rarely are we appointed in a proactive fashion to conduct a review of the controls a business has in place to ensure that the profits of that business remain with the owners and are not used to provide an employee with a standard of living they would otherwise not be able to achieve. A business only needs to have one employee for there to be potential for embezzlement.
The appointment of a forensic accountant is usually reactive – in response to an event. The event may be that you notice some anomalies in cash flow, or strange behaviour by a trusted employee who has access to the businesses books. The event may also be any number of less mysterious things:
· a dispute between partners of a business
· loss of business profits due to the actions of another party
· family law disputes
All of these types of engagements involve a review of the financial records of the business or the parties to the matrimonial dispute, usually with the consent and knowledge of all parties. At times, if litigation has been commenced, we will have the backing of a court order to enable us to seek access to information and records which otherwise we may be unable to obtain. This can be particularly useful (and often essential) where one party holds all the cards i.e. the records of the business or the family finances.
In a case I was involved in some years ago, I was appointed as a single expert by the Family Court. In the course of valuing the matrimonial asset pool, the wife was determined that I locate every last dollar of alleged joint funds that her ex-husband had spent travelling interstate to visit the lady who had since become his new spouse. The husband was not particularly forthcoming in providing copies of documents, so with the backing of the order evidencing my appointment by the Court, I was able to obtain credit card statements directly from the bank. I am not too sure what that actually achieved for the wife except personal satisfaction.
In a nutshell, a day in the life of a forensic accountant involves reviewing and analysing the financial records of an entity and interpreting those records in a concise form able to be used as evidence in a Court of Law. I guess a bit like CSI where the detective gathers the evidence and presents a report to the prosecutor to pursue charges ……. but is accounting as interesting as a conventional crime scene??? Sharlene and I think so.