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Forensic accounting involves the use of accounting and auditing skills to investigate fraud or misappropriation. This practice routinely involves a diligent analysis of financial information, which when disseminated, can in due course be applied for the purposes of legal proceedings or otherwise.

According to Merriam-Webster, the term ‘forensic’ means belonging to, used in, or suitable to courts of judicature or to public discussion and debate. Therefore, forensic accountants must prepare their analysis while applying strict attention to detail, with the implied assumption that such analysis may be subject to the scrutiny of a courtroom.

You discover a suspected fraud – Why is timing is of the essence?

When fraud is suspected, how quickly you act and the manner in which you respond will determine the potential financial impact of the fraud on your organization.

Toronto-based forensic accounting firm nagel + associates has the expertise to help its clients deal with fraud allegations expeditiously and effectively. We prepare and deliver an independent and objective analysis uncovers the obvious illicit acts in addition to probing on a deeper level in order to reveal obscure behaviour which unmasks the deepest and darkest intents of the perpetrators.

Our experience has shown that fraudsters go to great lengths to cover their tracks by destroying incriminating evidence when the discovery of a suspected financial crime event is brought to light. As such, obtaining and safely securing the evidence in a forensically sound manner while developing an investigation plan that is specific to the details of each particular case is of paramount importance. Finally, the implementation and execution of that plan as quickly and efficiently as possible, will lend itself to a desirable outcome for all involved.

Given the proliferation of technology, an overwhelming percentage of evidence which will implicate wrongdoers invariably resides on electronic devices, such as computers, iPhones, Blackberrys, other Smartphones and USB memory sticks. The eventual success or failure of each investigation is contingent upon not only having the knowledge of where this incriminating evidence lies, but also how to properly secure the data from those devices in a manner that will be legally admissible. nagel + associates has the requisite experience to secure evidence in a manner that can be relied upon in court.

Why involve an independent forensic accounting firm?

When the occurrence of allegations surface and fraudulent behaviour is suspected within an organization, the most common initial response is one of confusion, since the culprits are often unknown, what losses have been incurred and if the alleged fraud is ongoing, leaving the organization vulnerable to assume even greater losses at a later date.

Understandably, an organization’s instinctual reaction is to involve internal resources to conduct the investigation in order to confirm or dispel these allegations. This will often include in-house professionals from the financial, legal, IT departments as well as countless others.

While it may be most practical –and seemingly cost effective–to commence the investigation internally, there are several potential challenges that an organization would not encounter should they opt to employ an external forensic accountant, including:

Key Considerations

  • Do the internal employees assigned to probe into a suspected fraud possess the requisite knowledge, background and experience to conduct such investigations? For example, it would be poor judgement to assume that an IT specialist is well-equipped to forensically acquire electronic evidence that may be critical to the successful resolution of an investigation.
  • Can an employee objectively gather and assess evidence when investigating a fellow colleague?
  • Will crucial evidence remain intact and in its original state if the suspected fraudster is involved in the investigation? To the extent that the matter proceeds to court, will the individual(s) involved in the investigation be qualified as an expert to provide testimony?

Forensic Investigations – What’s Typically Involved?

The scope and path of a forensic or fraud investigation is determined on the facts and evidence of each specific case. At nagel + associates we believe and insist that by placing a high priority on our clients and their respective agents (such as legal counsel), the end result will be an honest, transparent and efficient investigation, ensuring that there is an open dialogue to discuss the facts of the case, objectives of the investigation and the most prudent course of action.

While the facts of each case are specific to the circumstances giving rise to the investigation, a typical forensic investigation involves some or all of the following procedures:

Steps to a Typical Forensic Investigation

  • Meeting with clients and other stakeholders to obtain background information relating to the allegations
  • The identification of, and the securement of potentially relevant hardcopy and electronic evidence
  • Conducting witness interviews – internal and external to the organization, as deemed to be most effective
  • Obtaining information external to the company to help with asset identification and recovery, including corporate profiles, land registry documents and lien registration records
  • Conducting a detailed analysis of the secured evidence
  • Efficiently preparing reporting that will be suitable for civil or criminal court, to support insurance claims or otherwise
  • Providing expert testimony in court or presenting results of the investigation to the client, their board/audit committee, and/or other stakeholders

Our firm and its professionals have extensive experience conducting fraud investigations, as well as assisting clients and their legal counsel with disputes and litigation support.

To determine whether your organization may require a forensic investigation, take the following brief survey: