It can happen to individuals and in large or small companies across various industries and geographic locations.
Fraud can result in huge personal and financial loss, legal costs, and ruined reputations that can ultimately lead to the downfall of an organization. It may occur in number of forms, as follows:
- Financial statement fraud
- Revenue and inventory related financial statement fraud
- Liability, assets and inadequate disclosure fraud
- Tax fraud
- Bankruptcy fraud
- E-commerce fraud
- Divorce fraud
- Consumer fraud
- Fraud against organizations.
Having the proper plans in place can significantly reduce fraudulent activities from occurring or cut losses if a fraud already occurred.
However, if fraud happens, in order to reduce losses, it is extremely important to properly quantify its material consequences.
Once damage is made, judiciary shall be responsible to deliver the justice and to punish the guilty party.
Forensic accounting or financial forensics is the specialty practice area of accountancy that encompasses engagements that detects fraud and may result from actual or anticipated disputes or litigation.
It provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution.
Forensic accounting encompasses both litigation support and investigative accounting.
Litigation support provides assistance of an accounting nature in a matter involving existing or pending litigation. It deals primarily with issues related to the quantification of economic damages.
A typical litigation support assignment would be calculating the economic loss resulting from a breach of contract.
Investigative accounting is often associated with investigations of white collar crimes.
A typical investigative accounting assignment would be an investigation of employee theft. Other examples include money laundering, securities fraud, insurance fraud, embezzlement, kickbacks, pyramiding schemes, syndicated estafa, economic sabotage and plunder.