Forensic accounting services use accounting, research, and document interpretation to quantify financial data, draw conclusions, and produce results “fit for the court.” Insurance companies, lawyers, firms, and other organizations use their services to convert complex financial information into clear, succinct information and, if necessary, convincing evidence.
When Accounting Services Become a Necessity?
- Asset Thefts: Insurance companies frequently contact forensic accounting services in conjunction with an insured’s property theft claim, much like they do in fidelity cases. Contrary to fidelity claims, however, claims for commercial property theft typically include wrongdoers from outside the business, like someone breaking in via a roof. While determining the value of the stolen goods may appear simple, forensic accountants take into account several different factors to arrive at a fair estimate. In one instance, a company had a sizable amount of merchandise stolen, and it took the company two whole weeks to replace the missing stock. In other cases, the stolen goods may have been sitting on a shelf at the end of a production line with finished goods, ready for sale.
Whether the stolen goods were outmoded and hence had decreased value is another element that may have an impact on how much damage is considered to be fair. When calculating a damage estimate, we will consider balance sheets, relevant general ledger entries, manufacturing and purchase logs, balance sheets, and other financial data to establish replacement prices.
- Claims for Business Interruption: Insurance companies or their attorneys typically refer business interruption (BI) claims to forensic accounting services. The policyholder may, however, also hire forensic accountants to help them with their insurance-related claims. Natural catastrophes like hurricanes, tornadoes, or wildfires are the cause of a significant percentage of BI claims. Others result from commonplace occurrences like equipment failures, product recalls, workplace fires, or explosions. The goal of forensic accountants is to determine how much money the company lost as a result of the disruption. The fact that so many variables affect that number makes the task difficult. The goal is to understand what revenues and expenses would have been if the business had not been disrupted.
- Litigation Solutions: In circumstances involving litigation, forensic accounting services frequently estimate losses and/or offer expert witness testimony. They must therefore be knowledgeable about civil and criminal laws, rules governing the preservation and retention of documents, rules governing the admissibility of certain types of evidence, and other legal issues. In other instances, they might take part in mediation or other forms of alternative dispute resolution, or they might be employed as consultants by lawyers. Most frequently, insurance companies, in connection with a direct event or a subrogation matter, as well as lawyers for other non-insurance scenarios, including product recalls or divorce processes, may approach them.
The Unifying Thread
Independent forensic accountants work alone. They seek to determine any loss accurately. Whatever the subject, the goal of every investigation is to ascertain the truth and what makes sense. Secure your future now, invest in reliable forensic accounting services today,