How Forensic Accountants Conduct Fraud Investigations

How Forensic Accountants Conduct Fraud Investigations

Fraud is one of the most pervasive and expensive issues faces by businesses in this complex landscape. In fact, according to the Association of Fraud Examienrs (ACFE) 2022 report, organizations lose an estimated 5% of thei annual revenues to fraud. This amounts to a medium loss of $117000 per case. 

Recent statistics and cases and their investigations have underscored the importance of forensic accountants in detecting and inevstigatign financial discrepancies in organzations. This is because a forensic accountant blends the skills of accounting, auditing, and investigating to uncover complex fraud schemes and extract crucial evidence for legal proceedings.Read more.

How Forensic Accountants conduct Fraud Investgations

1. Fraud Risk Assessment and Identification

Forensic accountants while conducting fraud investigations may target any vertical of the organisation, on a small or large scale. They focusse on the steps involved in assessing fraud risk for operations, transactions, and the entire business model, policies, and processes used by the respective organisations. Forensic accountants study and scrutinise activities to determine the core cause of fraud, malfeasance, or embezzlement in an organisation.

2. Estimating the Fraud Risk Level

In order to account for this critical component in the organizational fraud investigation environment, risk levels are divided into two categories utilising an impact matrix by forensic accountants. The risk matrix categorises the level into High, Medium, and Low categories based on the respective organisations’ risk exposures. Once the categorisation is complete, the control gaps are mapped to provide independent insights to management.

3. Fraud Risk Mitigation

The proper completion of the preceding phase enables accurate identification of fraud risks and mitigation methods in corporate fraud investigations. 

4. Review and monitoring of fraud risks

This part of a fraud investigation by forensic accountants focusses on developing long-term processes to combat fraud risk through exceptionally collaborative models and initiatives that encourage the transfer of skills and information to the organization’s team members. 

This systematic approach to fraud investigation by forensic accountants also provides a complete picture of the organisation, allowing it to prevent costly mistakes in the future. The entire process of investigating corporate fraud saves the organisation time, effort, money, and, most importantly, reputation.

Netrika, with its worldwide vision of understanding and reducing risks across business sectors, goes a step further in the domain with a comprehensive set of training programs. Our certificate in fraud investigation (CFE), the only ACFE authorized course in India, educates professionals through an instructor-led course on the need of leveraging latest trends, technology, tools, and skills to prioritise their security programs, budgets, and resources.