Forensic Accounting – How Can it Help Prevent Fraud?

Do you own a business where other people have access to it’s income receipts or funds? For example, these people may be accountants or employees. If the answer is yes, then fraud is a concern for your business. Examples of fraud can be in the form of embezzlement or skimming. However, forensic accounting and forensic audits can help.

Forensic Accounting and Forensic Audits – What Are They?

Firstly, the identification or prevention of fraud in a business setting is known as forensic accounting. Forensic accountants carry out forensic audits whereby a focus is placed on examining how a business may be at risk of fraud or identifying where fraud is being committed.

How Can Fraud Be Detected Through Forensic Auditing?

The activity and history of a company’s finance is investigated thoroughly.

For example, a restaurant owner suspects that a member of waiting staff is skimming cash from the tables. Solid proof is needed before action can be taken against the staff member. A forensic accountant may hire a trained professional to dine at the restaurant. They will observe the staff member as he/she takes orders etc. The hired diner might find that the employee completed credit card transactions normally, but voided the sale whenever dinner was paid in cash, pocketing the cash.

By itemizing all voided receipts, the forensic accountant could determine exactly how much money the employee was skimming, providing the restaurant owner with the evidence needed to press charges.

Forensic Auditing and Fraud Prevention

Forensic audits are not only used for detecting fraud. A forensic accountant may also investigate a company to find any areas in which the company may be vulnerable to fraud. By identifying these areas with a thorough forensic audit, companies can take action to prevent fraud by following recommendations such as using video camera monitoring, increasing management involvement, segregating duties or performing random spot audits.

For more advice, contact Kilcoyne Accountants today. You can also find us on Facebook.

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