Essays on Forensic Accounting Assignment

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The paper "Forensic Accounting" is an extraordinary example of an assignment on finance and accounting. This paper will take a cursory look at the phenomenon of forensic accounting and its implication is the existing business set up around the world. The paper has been formulated in a way that it will first go on to explain the concept of forensic accounting and what it actually entails. It will then move onto specific case examples which will shed some more light and provide deeper analysis into the topic at hand. Forensic Accounting: Now, forensic accounting is that specific area of specialty practice pertaining to the field of accountancy that caters to those specific appointments that ensue as a result of actual or anticipated disputes or matters of litigation.

Forensic, by simple means of literal definition denotes an item which is "suitable for use in a court of law", and the work of forensic accountants is geared towards the ascertainment of this specific standard or sometimes potential outcome. Forensic accounts, which are also referred to in the global business setup as forensic auditors or investigative auditors, hold a critical position not only in the financial spectrum but also in the legal spectrum as well as they most often are called upon to give expert evidence at a trail concerning those transgressions which these auditors had researched upon in the first place.

Most of the major accounting firms around the world in addition to a large number of medium-sized as well as boutique firms have created specialist forensic accounting departments for themselves. In addition to this, there are many intricate sub-specializations of these departments: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims, and fraud, construction, or royalty audits.

(Crumbley et al, 2005) Now, the paper will look at specific cases which relate to forensic accounting. Q1: Mergers and Acquisitions The most critical aspect of this specific case is the rationale that has been provided for the need for this specific acquisition. Cutting costs via the route of vertical integrations basically means that the organization wants to remove the margin of its suppliers by itself becoming a supplier to its major production process.

As an accountant, this would appear to be a sound investment strategy as despite not having previously operated in the market that they wish to permeate into with this acquisition, they at the very least have seen the tangible output that their suppliers have provided to them over the past. However, the case is not as simple as it seems to appear. As a forensic accountant, it is imperative that the first and foremost objective that is ascertained is the actual process of the acquisition takes place in an orderly manner which conforms to all the laws related to mergers and acquisitions.

Since this acquisition is taking place over three different geographical locations, there will be laws and regulations in these regions which might be averse or in conflict to each other; therefore, their harmonious resolution is the key goal of the forensic accountant who is handling this case. Furthermore, it is critically important that the forensic accountant determine all the possible costs and revenue streams that exist in the newly acquired market. Having not directly operated in the aforementioned markets i. e.

Africa and South East Asia, the job of the forensic accountant takes a new role after the acquisition is complete, which is more of an investigative role as opposed to the literally forensic role which is played at the time of the acquisition. To better understand this, lets take a simple example: if the input resources that were being purchased earlier for a $10 per unit and a margin of $2 per unit, then the job of the forensic accountant now is to ascertain the cost streams which sum together to form the $8 per unit cost of the input resource.

Here, a forensic accountants’ contribution is perhaps most significant as they have to determine whether the $8 itself could be shrunk even further giving that the market of operation is not the U. S anymore. These will critically hinge the decision to acquire or leave the business as the most critical goal of the organization is to cut costs as much as possible through vertical integration. (Bruner, 2004) Q2: Financial Failure In this specific case, the role of a forensic accountant comes to the fore as they look to ascertain the reasons that led to the demise of the large business which was supposed to be economically sound and financially stable in the not so distant past.

The critical aspect of the report that will be filed by the forensic accountant must deal with the most critical problem: what series of events led to the dramatic drop in share prices? Here, the forensic accountant would have to deal with the share trading activities and determine specious patterns of trading which could very well be related to improper trading of the stock.

Insider trading would have to be looked at with an increased degree of magnification as the allegation that has been levied in this case has been that officials at the business have ruined the share price for their personal benefit. This leads us to a second critically important section of the report: conformity to the international accounting standards and rules and regulations that have been put in place by the Securities and Exchange Commission in order to control stock trading.

Here a very important part of the investigation will be the determination of the business related parties of the large business which has failed as defined by the international accounting standards. This is very important as the forensic accountant needs to determine which business entities are related to the large business and/or the personnel working in the business and then determine any streams of payments or stock trading whereby the related parties could benefit at the expense of the large business which has failed.

Lastly, the report should look to determine the exact revenue streams of the family assistance payments that have been made to the business by the government and hence, determine exactly where they money has been employed by the business in order to be certain that these payments had been used for the purpose which the government made them. Q3: Authority Investigating Corruption This example looks at a different aspect of the job description of the forensic accountant; one that directly relates to the legal facet of their job.

Crime syndicates will be an entity with which forensic accountants would have to regularly deal with, therefore, this specific example becomes doubly important. Now, as a forensic accountant, the first and foremost action that can be taken is to have a close look at the books of the business that is being run by the drug dealer. In it, the most critical facet is ascertaining the revenue streams of this business which could very well point towards the issue of money-laundering. Money laundering, by definition is the process whereby cash that is created or raised through criminal activities is made to appear ‘ legitimate’ by its strategic re-integration into the global financial system.

(Bedi, 2004) Therefore, the forensic accountant should look for evidence of any stream of revenues which cannot be completely catered to i. e. whose whereabouts over a certain stretch are not properly identifiable. In addition, the forensic accountant should try to relate the streams of income from the drug trade with those that are used in the business in order to find any similarities that could attach these two together. This can be done by trading drugs with this specific drug dealer using numbered notes and then ascertaining whether those notes find their way into the business of the rug dealer; a practice which if successful would provide incriminating evidence against the drug dealer in a court of law in the form of those numbered notes which were used for the drug trade.

Other more innovative mechanisms are also used to achieve this same end in this case.  


Crumbley, D. Larry; Lester E. Heitger, G. Stevenson Smith (2005-08-05). Forensic and Investigative Accounting. CCH Group. ISBN 0808013653.

Rohan Bedi (2004). Money Laundering - Controls and Prevention, ISI Publications, ISBN 962-7762-87-3, 3.

Bruner, Robert F., (2004)” The Merger of Union Bank of Switzerland and Swiss Bank Corporation (A): The Proposed Merger”, Vol. 3, pp. 1-40, Available at SSRN:

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