1242 Forensic Accounting

Forensic counting is a combination of auditing & investigating, and entails tracing funds, asset identification & recovery. The specialty was created to put Al Capone in Alcatraz but it has many uses in the world of business both legit & illegal. Uncovering fraud is forensic accounting’s most popular appeal; for example, Ponzi schemes such as Bernie Madoff’s. It’s also used less glamorously by insurance companies to establish damages from claims, and searching for hidden assets in divorce cases. Forensic accountants calculate economic damages from tort actions & breach of contract, post acquisition disputes such as earn-outs or breach of warranty, bankruptcy, reorganization, business evaluation, and in the computer age: e-discovery. There’s securities & tax fraud to find, and money laundering, of course. More esoteric pursuits include investigating construction claims, expropriations, product liability, trademark & patent infringement; even something as mundane as the breach of a nondisclosure or non-compete agreement. Forensic accounting has recently branched into psychology, incentive effects & behavioral characteristics, specifically defining the “fraud triangle,” which classifies the three elements of fraud as opportunity, need & rationalization. They use predictive factors like narcissism and adultery as common traits of fraud perpetrators. First there’s a suspect, usually a tip from disgruntled family member, government or criminal enterprise, then the forensic accountants are let loose.