History

• It was 1946 when the term "forensic accounting" was first created. It was a partner in an accounting firm based out of New York by the name of Maurice E. Peloubet who first wrote an article on the subject, even if New York lawyer Max Lourie claimed to have coined the phrase in 1953. Forensic accounting formed out of a much needed collaboration between accountants and the legal system. Lawyers counted on forensic accounts to find evidence in white-collar crime cases that they were unable to obtain. This evidence would lead to many successful convictions.
  
  

Methods

• Forensic accountants have several methods they use to find evidence. What these professionals do is find statistical correlation between numerical data found in paper and electronic documents. One technique that has been used, and proven successful in the past is Link Discovery (LD). This is when the forensic accountant use statistical and practical tasks to develop deterministic graphical evidence. Using Bayesian probabilistic and other techniques, investigators are able to find hidden links amongst documents to put together to form evidence. A new approach has been raved about is the Hybrid Evidence Correlation (HEC). Still relatively new, this technique uses first-order logic with probabilistic semantic inference to find suspicious patterns that aren't easily noticed.
  
  

Benefits

• The evidence forensic accountants find are beneficial in criminal and civil courts. Evidence can either prove or disprove the presence of wrongdoing. After combing through thousands of transactions and finding patterns or links, forensic accounts put their finding in reports and charts. These reports and charts accompany the correlated documentation to create evidence that would be allowed in court. This evidence can be used to solve shareholder disputes, find employee fraud, assist in matrimonial disputes, determine damages and losses in insurance claims and help litigation in obtaining a conviction.
  
  

Process

• While conducting an audit, a forensic accountant has only one goal in mind; to find evidence of fraud. Their job is to look for fraud; it is what they were hired to do. In order to do this, they follow certain procedures to complete their task. The first thing that they must do is to meet with the client. Most people that hire forensic accountants are business owners, lawyers or government officials. After the meeting, the forensic accountant starts to collect records--credit card statements, journals, bank statements, databases, emails, memos and ledgers are all types of records that are considered as records. Not only do they go over the records with the intent on discovering fraud, but they also conduct interviews just like any other type of investigator. They thoroughly go over the information they have (interview taps and records) to find holes in it. Then they decipher patterns and find hidden links between the documentation and interviews. After completing the investigation, the client is presented with a report that verifies whether fraud was committed or not.
  
  

Warning

• The evidence that is collected by forensic accountants is valued and fragile information. The reality is that the evidence is only as valid as the investigator that collected it. Because of this, forensic accountants must adhere to the same laws as police detectives during an investigation. The information is sensitive and the reputations of everyone involved are at jeopardy. The forensic accountant must protect the rights of everyone by being discreet during and after the investigation. If the evidence was collected illegally, or individuals feel as if their rights were violated, the forensic accountant will have to face the repercussions and the evidence will be discredited, thus making it useless in court.