Fraud and Forensic Accounting

In: Business and Management

Submitted By iamvenusdaphne
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Fraud and Forensic Accounting

Forensic Services → are directed to delivering solutions to clients for issues where there is disagreement about facts, or where business-related behavior is not in accordance with expectations or standards. → Forensic means "suitable for use in a court of law"

Forensic Accountants → are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activities from occurring.

HISTORY OF FORENSIC SERVICES • Northern Hemisphere (North America and UK) evolved during late eighties and early nineties. • Australia evolved only during 1998. Before 1998, forensic services were provided by accounting practitioners on an ad hoc basis.

*Note: Forensic Services have been reactive rather than proactive. • Reactive → Tending to be responsive or to react to a stimulus. • Proactive → Acting in advance to deal with an expected difficulty; anticipatory


o Expert Witness Services

→ Forensic accountant’s role may be in the capacity of the expert witness.

→ Expert witness will produce a report that will be filed in court and upon which they will give evidence and be cross-examined.

o Valuation Services

→ Determines the fair value of the asset, interest, based on the amount a hypothetical purchaser who is willing but not anxious to buy, is prepared to pay a vendor who is not anxious to sell.

Valuation Techniques:

• Discounted Cash Flow Method

• Maintainable Earnings

• Maintainable Dividends

• Orderly Realization of Assets

o Economic Loss

→ Determines the…...

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