Forensic Accounting and the Law

Law is the system of rules which a particular country or community recognizes as regulating the actions of its members and which it may enforce by the imposition of penalties. A forensic accountant operates with guiding principles and law. Knowledge of the law is crucial to forensic accountants, as they are to investigate only on matters related to the statutory elements of crime.

An overwhelming number of laws relate to financial crime. Remembering that the law in a larger sense, consists of all the formal means of societal control available in a society is thus helpful. Law could be classified into: criminal law, civil law and administrative law. Civil law is the system of law concerned with private relations between members of a community rather than criminal, military, or religious affairs. Administrative law, according to Wikipedia is the body of law that governs the activities of administrative agencies of government. Criminal law on the other hand is a system of law concerned with the punishment of offenders.

The Prima Facie standard assumes nothing was left out in the investigation of a case. Upon any examiner of financial-related documentation, is incumbent, the responsibility of factually supporting a prima facie conclusion of the obviousness. In determining obviousness, the examiner must consider whether the alleged offender had the motivation to do what they did, and whether they had some reasonable expectation of success.

Intent can be defined as ‘having a firm intention, having one’s attention concentrated.’ Six forms of intent exist: general intent (Mens Rea), specific intent, strict liability intent, transferred liability intent, constructive intent, and negligence. Mens rea, or general criminal intent is all that is required in most criminal offenses. All that is to be proven is that the defendant acted with a bad purpose/intention and was conscious of his wrongdoing.

Specific intent is used to designate a special state of mind that is required, along with a physical act, to constitute certain crimes or torts. Specific intent usually requires a particular result beyond the act itself, such as ‘with purpose to defraud a mortgage company’.

Strict liability intent exists when a defendant is in legal jeopardy by virtue of a wrongful act, without any accompanying intent or mental state. It is immaterial whether the accused acted in good faith or knew they were violating the law. Examples are possession crimes and statutory rape.