When I hear the word ‘Forensic’ the idea and image of a homicide investigation in which evidence gathered is analyzed at a laboratory to determine ‘who done it’. Shows like CSI, Bones, Law and Order depicts the forensic aspect in their broadcast. Being a registered nurse, another thought comes to mind when hearing the term ‘forensic’. I like to watch Dr. G medical examiner on the Discovery channel. That is a reality show regarding investigative research on how a person died. This is done by performing an autopsy and analyzing the pathological reason for a death to determine if foul play was involved. However, I rarely placed the thought that accounting can have a forensic aspect, too. I was always under the impression that auditors were the forensic accountants. Internal Revenue Agents to audit income tax filings to make sure all income are reported, and deductions have receipts as supporting evidence. Certified Internal Auditors to look at business operations and financial statements within a corporation to make sure internal controls are in place, financial statements are properly recorded, and government regulations have been met. External auditors perform audits for SEC compliance and to attest that the company is in good standings to ensure protection of the public interest. These auditors, in essence, would be able to detect fraud in their job when reviewing audit trails and documentations. Needless to say, I my conception have been construed. There is a whole new field of accounting that is on the rise, which specifically deals with fraud detection. This is called Forensic Accounting. This area sparked my interest.
In this paper, I will elaborate on 1. What is a forensic accountant and the requirements to become one 2. What is their full function of their job besides digging for evidence of fraud? Do they interview or interrogate when interacting with business clients? 3. What aspect and training makes them good auditors and why?
Before I can start talking about the details of forensic accounting, let me provide you a synopsis as to how forensic accounting evolved. The famous accounting scandals of all time are Enron, WorldCom, Tyco, Arthur Anderson, and more. The Sarbanes Oxley Act of 2002 was introduced due to accounting scandals of these infamous publicly traded companies. In response to many fraudulent financial reports, the Act was intended to reform accounting, financial reporting, and auditing functions of a company to reinforce the importance of corporate ethics. The purpose of Sarbanes Oxley Act is to prevent publicly traded companies from financial deception and misleading their investors and shareholders. “Three important points of the SOX influence the management of company records. The first point restricts the destruction, alteration, and falsification of records or documents. If a person attempts these activities, he will face severe penalties and imprisonment. Second...