IN INDIA FORENSIC ACCOUNTING & INVESTIGATION

Forensic  Accounting is the use of accounting principles and investigation techniques to ferret out fraud and theft .

The world of Forensic  Accounting involves grasping the seriousness of a situation and looking way beyond mere numbers . Forensic  Accounting is long , but the field came into its own just in the last century .

Forensic  Accounting  is an orderly analysis , investigation , inquiry , test , inspection or examination along a “paper trail “ in the search for fraud , embezzlement . or hidden assets . It relies on the fraud triangle to find out weak points in business processes and identify possible suspects in cases of fraud . It consists of three core concepts that together create a situation ripe for fraud ; incentive , opportunity and rationalization .

It includes two parts :-

ð  Investigative accounting

ð  Litigation support

 Investigative accounting - Investigative accounting is concerned with investigations of a criminal nature , which includes employee fraud , securities fraud insurance fraud etc .

  

       Litigation support – It is primarily focused on the issues relating to the quantification of economic damages , economic loss , which includes contract disputes , insolvency litigation , Insurance claims etc .

Forensic  Accounting is done by Forensic  Accountant only . So , Forensic  Accountant do –

ð  Sniff out corruption .

ð  Solve a large puzzle .

ð  Pore over financial documents .

ð  Attempt to obtain the truth and develop expert opinion .

In 1931 , forensic accounting introduced by Frank I Wilson who was the agent charged with finding proof of tax evasion . Wilson sifted through millions of financial documents and found enough evidence for a conviction , Then forensic accounting was introduced .

Forensic  Accounting : PROS AND CONS

Why ?

ð  Innovation in the industry .

ð  Serve a cause , help to fight organized crime .

ð  Gratification .

Why Not ?

ð  Verbal attacks by lawyers in deposition and on the witness stand .

ð  Dealing with lawyer as regular basis .

ð  Attention to detail .

Case Regarding Investigative accounting

ð  Satyam Scandal

ð  India’s 4^th Largest I.T Company

ð  India’s Largest Corporate Fraud

Satyam Case : Basic Facts

ð  Raju confessed  that satyam’s balance sheet on 30 September 2008 contained :-

ð  Inflated figures for cash and bank balances of 5,040 crore as against 5,361 crore reflected in the books .

ð  An accrued interest of 376 crore  ( US $ 85.35 million ) which was not existent .

ð  An understated liability of 1,230 crore  ( US $ 279.21 million ) on accounts of funds which was arranged by himself .

ð  An overstated debtors position of 490 crore as against 2,651 crore in the books .

Here ,   Forensic  Accounting  is applicable which sniff out that corruption and solve large puzzle of fraud , so that the credibility of I.T industry should not be allowed to suffer . Here , Forensic  Accountant sought the problem instead of   internal auditor and management team ; as the management itself is involved in the fraud .

Forensic  Accounting is more than just regular accounting or basic detective work . As Forensic  Accounting is the best ever growing area of accounting that enables in enhancing the chances of success in day to day life of a corporate firm by surmounting all the critical problems of corporate  field as panacea .