Forensic accounting is the investigation into a company's accounting in order to make sure that everything is accurately reported and that there is no fraud. This is very important because finding fraud can help companies save thousands of dollars. For example, if an insurance company suspects that a hospital is making up bills and charging them for procedures that were not necessary or not actually performed, hiring a forensic accountant to find the issue can help save the insurance company from having to pay for these fraudulent charges. There are two main services that a forensic accountant can provide for a company.
1. Can Develop Computer Models to Analyze Large Amounts of Data
It can be extremely difficult to tell if a person is lying in an accounting statement because all of the information is numbers, unlike when you might be trying to catch someone in real life. A forensic accountant will be able to use computer analysis in order to aid him or her in the search to make sure that the bookkeeping is accurate. One form of computer analysis that might work is one that depends on Benford's Law.
Benford's law states that in any collection of numbers, the number one is most likely to occur as the first digit in any of the numbers. The number two is the second most likely to occur, and so on, until you reach nine, which is the least likely to occur. A tendency of many people who are trying to commit fraud is to have an even distribution of numbers so that they all appear relatively equally. This is not what happens in real life. A forensic accountant can check if the frequencies of the first digits in each of the numbers matches their normal frequencies using a computer fairly quickly, making it easier to detect fraud.
2. Presentation of Evidence
The evidence that fraud has been committed can be fairly complicated. This means that in order for a forensic accountant to successfully convince a company or judge that someone committed fraud, all of the evidence has to be easy to understand. A forensic accountant will be sure to use visuals, such as graphs and charts, and simple explanations for whatever evidence is found.
If you hire a forensic accountant, you can be sure to expect these two services. Contact an accounting firm, like http://www.eppsforensics.com, for more details on the other services.