Forensic accounting’s adequate role in corporate governance. Initially, government agencies used forensic accountants to uncover and investigate leading frauds. They became a financial detective to uncover fraudulent financial reporting and misappropriated assets. Forensic accountants are in great demand for their accounting, auditing, legal, and investigative skills in the current reporting environment. They can play a major role in coordinating company efforts to achieve a cohesive policy of ethical behavior within an organization.
Forensic Accounting’s Adequate Role In Corporate Governance
The definition of the forensic accountant is changing in response to the growing needs of corporations. As an emerging discipline, it encompasses financial expertise, fraud knowledge, and understanding of business reality and the working of the legal system. Forensic accounting involves the application of special skills in accounting, auditing, finance, quantitative methods, the law, and research. It also requires investigative skills to collect, analyze, and evaluate financial evidence and the ability to interpret and communicate findings.
Forensic accounting encompasses litigation support, investigation, and dispute resolution and, therefore, is the intersection between accounting, investigation, and the law. Forensic accounting includes the use of accounting, auditing, and investigative skills to assist in legal matters. It consists of two major components: litigation services that recognize the role of an accountant as an expert consultant and investigative services that use a forensic accountant’s skills and may require possible courtroom testimony.
This implies that the forensic accountant should be skilled in financial accounting and internal control systems, the law, other institutional requirements, investigative proficiency, and interpersonal skills. Corporations can rely on these skills for developing a consistent system of corporate governance, disseminating such information within and outside the company, ensuring that government policies and objectives are interwoven into the internal control system, setting up fraud prevention systems, and investigating any existing fraud.
A growing number of researchers are discovering that poor corporate governance is a major contributor to poor performance, manipulated financial reports, and dissatisfied stakeholders. Corporations and regulatory bodies are currently attempting to analyze and correct any flaws in their reporting system. Forensic accountants are in high demand for their accounting, auditing, legal, and investigative skills in today’s reporting environment. Forensic accountants can investigate the design of corporate governance systems, the role of the financial reporting system in corporate governance, the impact of the governance board on employee and managerial behavior, and the effectiveness of internal control systems.
Forensic Accountants can make significant contributions to corporate governance, fraud prevention and investigation, fostering a positive work environment, establishing effective lines of communication, and providing vigilant oversight. In addition, an attempt is made here to depict the global regulatory action scenario undertaken by leading bodies to prevent corporate fraud and improve corporate governance through accounting reforms. In a nutshell, the Forensic Accountant is “a book-keeping bloodhound.”
Final Thoughts
Accounting fraud, fraud, and financial crime are becoming increasingly serious worldwide. Incorrect financial statements paint an inaccurate picture of the company’s earnings and financial situation. Decisions made by investors and other users of financial statements based on incorrect financial information cause significant harm not only to information users but also to the general public. To successfully combat fraud and restore trust in financial statements, the development of forensic accounting as a new accounting discipline entails examining and interpreting evidence and facts, as well as providing an opinion. Forensic accounting is a subset of accounting that focuses solely on legal and professional recording and reporting assessments.
