Introduction
In the recent years, forensic accounting has acquired a great deal of attention from scholars belonging to several countries. Forensic accounting is a specialty in the field of accounting, which involves professional accounting skills for resolving potential civil or criminal litigation, such as lost profit and loss accounts, income statements, assessment of internal controls, assets, fraud and other finance-related transactions (Ozkul & Pamukcu, 2012, p. 23). The word ‘forensic’ refers to any information meant for use in the courts as evidence. Forensic accounting has become a limelight due to an increase in white-collar crimes as law enforcement institutions have failed to uncover frauds due to insufficient expertise (Carpenter et al., 2011, p. 16). Although forensic accounting is a potentially new field, various insurance agencies, banks, police and even corporate organizations have inclined towards this area as it one of the most effective methods of controlling financial fraud, misappropriation of accounting, corruption, illegal taxation and many others (Hlavica et al., 2011). While traditional accountants look at numbers during their audits, forensic accountants look beyond numbers, which makes forensic accounting an ideal tool for the investigation and control of financial fraud (Patil, 2011, p. 2).
Rationale of Forensic Accounting
The rationale of using forensic accounting over traditional accounting lies in the fact that forensic accounting necessitates the integration of investigative auditing skills for analyzing accounting data in a critical way for identifying suspicious and fraudulent transactions (Gray, 2011, p. 117). Furthermore, forensic accounting plays a vital role in tracing theft activities occurring across organizations, including money laundering and tax evasion. When dealing with fraud cases, forensic accountants transform the nature and extent of audit tests, thereby proposing unique procedures that help in determining the fraud (Huber, 2012). It is necessary to consider the rationale of forensic accounting when management fails to sustain an efficient internal control of its audit system (Ramesh, 2013, p. 226). Forensic accounting enables a deeper understanding of detecting fraud in financial activities on the basis of sophisticated analytical procedures.
Need for the Research
Irrespective of a serious crime or offense, the need for forensic accounting is visible across organizations and institutions as it enables them to take necessary measures in the event of suspicious fraud. The need for forensic accounting rose when traditional accounting procedures failed to identify potential loopholes in financial activities. Since fraudulent financial activities are possible in any organization, forensic accounting ensures early planning for the detection of fraud. Forensic accounting is essential for recovering accounting data in a meaningful way, which enables forensic accountants to report critical accounting information, including deleted files, file alterations and log attempts. Furthermore, this forensic accounting helps to investigate the financial facts of an organization after thorough testification, which is not possible through traditional accounting procedures.
Significance of the Research
The significance of the research extends to various aspects. Most importantly, forensic accounting helps in the detection of fraudulent activities committed by an organization or an individual. Secondly, it plays a significant role in the settlement of claims and disputes related to financial transactions (Yadav, 2013, p. 4). Moreover, forensic accounting is important for rendering mediation and arbitration services through the intricacies of relevant laws. Therefore, the research explores the possible methods and techniques of identifying unauthorized financial transactions, which helps to minimize white-collar crimes that involve millions and billions of dollars. Even in the case of matrimonial dispute cases, forensic accounting plays an important role in tracing and evaluating financial assets (Enofe et al., 2013, p. 55). It facilitates a forensic accountant to reduce the financial components involved in a dispute, claim or a continuing debate. Hence, the significance of the research is to analyze existing procedures and propose new procedures for resolving the allegations caused by the defalcation of assets, income or other financial values (Yadav, 2013, p. 7). In the absence of forensic accounting, individuals and organizations could conceal potential transactions, thereby misleading the financial institutions.
Objectives of the Research
The major objective of the research is to understand the use of forensic accounting across organizations. The paper explicitly defines major concepts in the field of forensic accounting and reviews significant literature. Another significant objective is gaining insights about controlling financial fraudulent activities in organizations through the techniques employed in forensic accounting (Enofe et al., 2013, p. 53). The objective of forensic accounting extends to determining financial misstatements rising from a company’s either human error or intentional conduct. Other objectives include gathering evidence in support of issues relevant to the courts, identifying when and how a financial fraud had taken place, suspecting an individual’s motive of committing fraud and attempts for destroying evidence and many others (Ren-zhou, 2011, p. 10).
Scope of the Research
The scope of the research extends to exploring various topics and procedures used in the field of forensic accounting with a major emphasis on research published in renowned academic journals. One of the major limitations of this research is the absence of diverse concepts in forensic accounting. Due to this reason, the research compromises the contribution of forensic accounting altogether. The paper identifies potential gaps in research methods and methodologies of forensic accounting, and promotes the use of diverse methods that would prove valuable to forensic accountants (Ren-zhou, 2011, p. 2150). The research is descriptive in nature and hence limited to accounting and forensic accounting journals only.
Research Methodology
The research is dependent on secondary data with major focus on discussion about significant concepts in forensic accounting. It involves analysis, testing, inquiry and examination of civil and criminal issues related to accounting. The paper would give an unbiased report about the use of forensic accounting in recovering fraudulent financial activities. Furthermore, the research methodology investigates into how the field has become an indispensible tool for the identification of fraud (Ailong, 2011, p. 12). The paper presents specific examples of renowned fraud that have been detected through the techniques of forensic accounting. It explains the role of forensic accounting for identifying tax fraud and focuses on the regulation of this field (Huber, 2013, p. 125). The paper further explores the codes of ethics and legal procedures involved in forensic accounting (Huber, 2011). It also addresses recommendations for future research, which would help to take forensic accounting to the next level.
Conclusion
References
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