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Journal of
Forensic Accounting
D. Larry Crumbley
Editor-in-Chief
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education
anticipation
investigation
verification
documentation
communication
anticipation
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"What the use of finger prints was to the 19th century and DNA analysis was to the 20th, forensic accounting will be to the 21st century."
- Gordon Brown, Chancellor of the Exchequer.
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FORENSIC ACCOUNTING: THE EVIDENTIARY NATURE OF ACCOUNTING DATA
Forensic accounting is focused upon the identification, interpretation, and communication of the evidence of economic transactions and reporting events. The ultimate goal of a forensic accountant is to communicate an analysis of this evidence, structured within some legal framework, so that it is understood and accepted as fact with "scientific certainty;" that is, to present "a legally accurate accounting."
Popularized since 1999 with the initiation of the Journal of Forensic Accounting, this conception is often mistakenly assumed to be exclusively associated with "negative" applications, such as bankruptcy, fraud, business disputes, or matrimonial divorce. More properly, however, the level of evidentiary detail and precision sustainable in an adversarial legal proceeding that forensic accountants employ may also be applied in "positive" assurance engagements such as due diligence reviews, business valuations, audit committee advisory services and enterprise risk management.
In short, forensic accountants are employed to seek, interpret, and communicate transactional and reporting event evidence in an objective, legally sustainable fashion, not only in situations where there are specific allegations of wrongdoing, but also in situations where interested parties judge that the risk of loss from wrongdoing is such that proper prudence requires legally sustainable evidence to support the conclusion that no wrongdoing is occurring. This latter type of engagement, known as a peremptory forensic accounting engagement, should not be confused with the more common review of internal controls or the like. Forensic accounting, whether peremptory or after-the-fact engagements, is applied to the evidence of first order activities, not secondary systems of controls.
The fundamental procedural protocols of forensic accounting relate to the discovery (identification), analysis (interpretation), and communication (presentation) of the evidence of economic transaction and reporting event occurrence and ownership (valuation and accountability) within the established evidentiary standards of the appropriate legal framework. Analysis includes the crucial aspect of recognizing the implications of evidence that has been obtained. The estimations inherent in certain economic transactions are subsumed within the general term "reporting events." Additional protocol extensions are employed to forecast or predict future conditions based on known past transactions or events.
See also: The Inside Track: Specialized Knowledge
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