About Investigative Accounting

Investigative accounting is also known as forensic accounting. The word "forensic" means "belonging to, used in or suitable in courts of judicature or to public discussion and debate." So, that would make investigative accounting as the process of providing evidence that is suitable for court by using accounting analysis. By providing investigative and accounting skills combined with litigation support, investigative accountants have become a cornerstone in the adherence of tax and accounting laws. In this article, we will look at the procedures the investigative accountants carry out to perform their job.

History

Over the past several years, investigative accountants have found their roles significantly expanded. This was due to the Sarbanes-Oxley Act of 2002. This act brought definite changes to how financial fraud in the business world was investigated and punished. Investigative accountants is obtained to assist in the investigations and to help find anyone violating the Sarbanes-Oxley act.
To accommodate the new tax laws and their roles in them, investigative accountants developed several procedures that made sure they were doing their jobs correctly.

Significance

The procedures that investigative accountants follow are greatly significant to the outcome they are trying to accomplish. During any investigation, certain rights must be respected and followed in order to secure a conviction. The slightest mistake can be the difference in someone walking away or punished for embezzling millions of dollars.
An investigative accountant's primary role is to collect evidence. That evidence must be collected and secured accurately and according to the law. Investigative accountants ensure that no mishaps happen by following well-defined procedures.

Function

The procedures that investigative accounts follow are simple, but they are not necessarily quick and easy. They have to go through thousands of transactions to determine if a law was broken. Meeting with the client to get information is the first step in the procedure. Before any documents are seen, a conflict check is conducted to ensure no conflicts of interest are present. Once the first two steps are completed, the initial investigation is conducted. During this investigation, a detailed action plan is developed based on the preliminary findings from the paperwork. Using the action plan, all of the financial transactions are analyzed and evidence is collected and tagged. This evidence is presented to the client in reports and charts.

Effects

Every step in the process has its own effects; this is the reason why investigative accountants perform this procedures. Take a look at the steps that a investigative accountant carry out in the procedures and what affects that are desired.
Meet the client. The purpose of this is to gather information. The client may be a government official conducting an investigation or a small business owner who is noticing funds missing. In this meeting, the investigative accountant wants a clear understanding of what is suspected and what the client expects him/her to accomplish.
Conduct a conflict check. As with any hired individual, a conflict of interest will jeopardize the investigation. After meeting with the client, the investigative accountant examines all of the individuals involved and make sure no conflict of interest is present.
Perform initial investigation. No evidence is expected to be uncovered in this step of the process. The investigative accountant takes a look at the documentation situation to develop an action plan. For instance, if the client has both paper and electronic records, the investigator may decide to go through the paper first and then match it with the electronic records. The initial investigation is just to look at the situation, not the paperwork.
Develop the action plan. After accessing the situation, an action plan is developed. During the initial client meeting, a time frame may have been put on the investigation. The action plan will ensure that all work is completed within the time frame.
Gather all relevant evidence. Using the action plan, the investigator then requests all of the documents from the client. If it is a criminal investigation, a subpoena may be required for this information.
Perform the analysis. This is where the majority of the time is served. Every document is accessed carefully to support or deny any wrongdoing. The analysis includes collecting evidence, calculating damages, summarizing the transactions, tracing assets and creating charts and computer models to support finding.
Report findings. The last step in the process is to report all findings to client. From there, the client decides on what to do with the information that they current have.

Time Frame

Based on the nature of the case, the time frame for a investigative accountant to do their work can be very limited. During litigation, if a quick conviction is desired, a investigative accountant will only have the matter of days to go through thousands of pieces of paper and electronic documents to gather evidence. Ideally, several investigative accountants will work together to get this done. This is a very rare occurrence; typically, there will be months of investigation before a case are prosecuted.
For proactive regular audits, investigative accounts will only take weeks to get the work done. Because these checks are done regularly, they are not as extensive and don't require as much time.