Financial Statement Audit Vs. Forensic Accounting
For many employees, dealing with auditors or forensic accountants means the same thing. The auditor or forensic accountant requests specific information that the employee provides. On the surface, these two fields appear similar. Yet financial statement auditors work toward very different goals than forensic accountants.
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Financial Statement Audit Objective
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Companies hire auditors to examine their financial statements and determine whether or not these statements fairly represent the financial results of the company and are prepared following generally accepted accounting principles (GAAP). Companies employ internal auditors and hire external auditors to review financial statements. Internal auditors work for company management. External auditors report to an audit committee, which is a subset of the board of directors. Ultimately, the auditors provide a written opinion of the financial statements and determine whether the statements were prepared according to GAAP.
Financial Statement Audit Procedure
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Financial statement auditors work through a series of steps to complete the audit. These include planning the audit, assessing risk potential in the organization, determining which audit procedures to incorporate, performing the audit procedures and reviewing the results. The auditors may ask questions to determine risk potential and request paper copies to back up recorded transactions. If the documentation provided to the auditors satisfies their questions, the auditors move on to the next task.
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Forensic Accounting Objective
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Companies or individuals hire forensic accountants to investigate a particular issue of concern to the client. The client communicates exactly which information it needs to the forensic accountant. This information may include determining the value of a loss, locating fraudulent transactions or calculating the value of a pension plan. The results facilitate the processing of legal action against the company or an employee of the company. In achieving the goals of the client, the forensic accountant examines the internal controls, identifies weaknesses and determines whether employees have taken advantage of any internal control weaknesses.
Forensic Accounting Procedure
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The forensic accountant reviews the issue he is hired to investigate to determine the best approach to use. He plans the approach but allows flexibility to investigate deeper into questionable areas that develop during the investigation. The forensic accountant also meets with employees, asks questions and requests paper copies of financial transactions. After considering all of the evidence, the forensic accountant reports his findings to the client.
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