Forensic Accounting Key Terms

As you explore forensic accounting you'll discover some terms you might not know

Forensic accountants are highly specialized in the areas of finance and law to objectively review financial information when a financial crime is suspected. Forensic accountants combine knowledge of standard accounting and audit principles with investigative methods to conduct financial analysis that is admissible in a court of law. They can investigate anything from employee theft to securities fraud. As you explore this topic, you will find some terms that need clarification.

 

Money laundering

Money laundering is the practice of acquiring funds illegally and then disguising the identity, source or destination of the money. It can also involve activities such as tax evasion or false accounting to conceal how the money was acquired or where it was sent. Forensic accounting firms can help with determining whether or not money laundering has occurred in a business.
Try: Farlex has a comprehensive discussion.

Fraud detection

A fraud is a crime or offense that comes about because of someone deliberately deceiving someone else in order to damage them or to acquire services or property. Forensic Accounting firms can help detect whether or not fraud has occurred.
Try: Syfact International describes how they can assist with fraud detection.

Expert witness

An expert witness is an individual who has been educated and trained or who has experience or knowledge of forensic accounting beyond the average person. The individual's expertise is sufficient enough for others to legally rely upon their specialized opinion about evidence. Forensic accountants can be expert witnesses in legal proceedings where illegal financial activities have occurred.
Try: Go to Lectric Law Library for more information. Expert Law expands on the various fields, and industries, that might use the services of an expert forensic accountant.

Breach of fiduciary duty

Breach of fiduciary duty is referred to as constructive fraud when acts, omissions or concealments are considered fraudulent and that give one party advantage over another because of the conduct. Insider trading is another type of breach of fiduciary duty and is deemed such when an insider or related party makes trades in a company's securities because they have access to non-public information. Forensic Accounting firms can help investigate claims of breach of fiduciary duty.
Try: USLegal has a detailed definition.

Embezzlement

Embezzlement is exploiting, secreting or misappropriating financial assets by someone within a company to whom the assets have been entrusted. It is a type of financial fraud. Types of embezzlement include clerks handling money can embezzle cash from an employer or lawyer can embezzle funds from trust accounts. Forensic accountants can investigate and identify when embezzlement has occurred.
Try: Einstein Law defines the term and explains some of the warning signs to look for.

Product liability

Product liability is a specific area of the law that relates to the way in which manufacturers, distributors, retailers or suppliers who make or sell products are held responsible for any injuring the products cause. Forensic Accounting firms can help investigate claims of product liability.
Try: See CBS Interactive for a more descriptive definition.

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