What is Financial Forensics?

The term Financial Forensics is a relatively new term used to describe expert witnesses that possess a much broader set of skills and capabilities than have traditionally been associated with Forensic Accounting.  Black’s Law Dictionary defines Forensic Accounting as the “application of accountancy principles to monetary issues that arise in courts, as in the apportionment of funds and of financial responsibilities upon a divorce or dissolution of a partnership.” (10^thed. 2014).  

According to Black’s, this definition first appeared in 1946 and the scope of services for the financial expert has expanded significantly since that time. Black’s also defines an expert witness by summarizing the Rule 702 of the Federal Rules of Evidence as someone “qualified by knowledge, skill, experience, training, or education to provide a scientific, technical, or other specialized opinion about the evidence or a fact issue.”

Financial Forensics has evolved into a science itself, along with other evidence-based sciences, such as toxicology or ballistics.  This science is based upon data, quantitative data including large data sets from corporate records, from databases of companies or assets that have sold, from actuarial tables, from stock and bond market data, and a variety of other sources. It also includes qualitative data that may be gathered from case law or statutory research, depositions, from conducting interviews of the owners, managers, and employees of a company, or from discussions with the family of a victim. 

A qualified Financial Forensics expert needs the skills of a private investigator to be able to properly investigate people, companies, industries, and money. The traditional CPA, whose background involves spend the majority of their career preparing tax returns or performing financial statement audits background is not well suited to perform these services without a great deal of additional training and experience.

Understanding the capabilities and of a well-qualified financial forensic expert can provide advantages in helping your clients solve their problems successfully, whether it involves litigation, internal corporate issues, or determining appropriate damages to pay or receive to avoid litigation.

If you think you might need a Financial Forensics expert, please call us at 918-814-2309.