How Forensic Accounting Can Save Your Company
An audit is a frightening prospect, but they happen to every business. Furthermore, you may have cause to worry even if you’ve documented everything you should. A business that’s acted honestly at every opportunity can still fall suspect during an audit from simple calculation errors or suspicious-looking transactions.
If this has happened to your business, or you simply want to be better prepared for tax season, you need a forensic accountant. A forensic accountant is a bit like a forensic scientist, criminologist, or pathologist. He or she uses accounting facts and investigative techniques to look behind the numbers and see what’s really going on in your business. His or her presence can save you and your company plenty of pain.
One of the most important services a forensic accountant can provide is litigation support. If you are audited or accused of shady business dealings, he or she can help you form a case in your defense. The forensic accountant will make an initial case assessment and tell you what areas of potential loss exist. He or she will help you anticipate questions you may be asked during an audit or hearing and form calm, intelligent responses. A forensic accountant will also help you gather and maintain the documentation you need to support or refute a claim. Once your case is established, he or she will be a key player in settlements and negotiations.
Access to Professionals
Many times, business owners get into trouble because they try to handle all their accounting, including taxes, themselves. However, they may not have the necessary experience, leading to audits and even accusations of fraud or embezzlement. A forensic accountant can help you avoid these accusations and the consequences that come with them. The accountant will find evidence of fraudulent activity early, and point you to suspicious oversights or errors in your bookkeeping that may lead to fraud. Such thorough investigating also makes your forensic accountant an expert witness in court, should you find yourself under suspicion.
You don’t have to be under investigation or up for an audit to need a forensic accountant, either. Sometimes forensic accountants are called in for business validation. This refers to how much your business is worth and how viable it is. Your accountant helps you find weak areas in your financials, including areas such as expense reports and payroll. He or she can use the information found to pull your company out of financial trouble. He or she may advise you to update your bookkeeping system, trim expenses in certain areas, or change payroll to fit new employee needs.
Business validation also refers to the people that work for you. Remember, forensic accountants look behind the books to give you a full “diagnosis,” just like a doctor takes note of internal and external symptoms. For example, you and your business partner might want to dissolve your partnership, but may not be sure how or if to divide the business. A forensic accountant can give you advice based on what he or she sees in all the facets of your business.