A forensic accountant is
said to be one who has mastered the science of accounting and is able to assist
lawyers and the courts to understand and supply accounting issues to the law
and to disputed matters. Forensic accountants investigate financial crimes in
accounting. A crime is an offence, an illegal activity as defined by law,
punishable by law. There are 7 conditions that form the legal basis or the
acknowledgement of crime. All must be present for an action to be considered
criminal. They are as follows:
· The act requirement: There must be a conscious
intention between mind and body – a physical movement that results from the
determination or effort of the actor.
· The legality requirement: The act/action must be
prohibited by law.
· The harm requirement: Harm must be created as a result
of the crime/offence, without which the crime is incomplete.
· The causation requirement: The harm caused by the
actor must result from his/her conduct, without interference from someone else.
· The guilty mind requirement: The actor must know that
s/he is going against the law by committing the act, and must be aware of the
negative consequences of his actions.
· The concurrence requirement: The criminal act must be
accompanied by a likewise criminal mind.
The
punishment requirement: The act must be subject to punishment. Note the
difference here between crimes (actions subject to punishment) and torts and
civil wrongs for which the law does not prescribe
punishment, but gives the right to recover damages.
Crime could be categorized
by severity/nature and by type. The punishment differs with the severity of the
crime. Felonies, which are the most severe are subject to capital punishment
(execution). Misdemeanor is a less severe crime, for which fines can be imposed
as punishment. Violations are even less severe offences, subject to fines as
well.
According to type, crime can
be categorized as either violent crime, crime against property, or white-collar
and corporate crime. An instance of white-collar crime is the absence of quality
and transparency in financial reporting. Examples of white-collar crimes are:
insurance fraud, tax fraud, insider-related fraud, bribery, corruption and
political fraud. Crime against property could be in any of the following forms:
larceny (theft, fraud forgery), cybercrime (high-tech crime), and arson
(setting fire to property). Violent crime is characterized by the exertion of
extreme force. Such include: homicide, assault, family-related crimes like
child and spouse abuse, rape, kidnapping, robbery, terrorism (organized crime).
Investigation and
reconstruction are key processes in forensics. Investigation is done thoroughly
and systematically to ascertain the occurrence of crime. Reconstruction is a
narration of the probable manner in which crime was committed. The
intelligence/analytical cycle is used by the forensic accountant in deriving
the information requested by their clients. The intelligence cycle has six main
stages:
·
Stage 1: Law enforcement planning, decision making and
action (crime is acknowledged);
·
Stage 2: Planning and direction;
·
Stage 3: Collection of data for analysis;
·
Stage 4: Data processing;
·
Stage 5: Analysis and reporting;
·
Stage 6: Dissemination of intelligence report.
Indicators
of financial difficulty at the business level include: increased borrowing,
delinquent loan payments and bankruptcy proceedings. Personal indicators
include bounced cheques and inability
to pay current bills. There is warrant for forensic investigation if a company
suspects any fraudulent operations within the company, e.g. huge deficits,
large-scale inventory losses. Fraud is the use of deception to dispossess
someone of his property to have unlawful gain of the dispossessed item. There
are 3 main challenges faced when carrying out a forensic investigation:
·
The length of the past time period needed to be
investigated, which could be as brief as a few days or as long as a year and
above;
· The scope of the investigation – could be a whole
company, a department, or just an individual;
· The painstaking nature of the questioning process. 
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