Financial fraud does damage on many levels. As far as fraud that targets businesses goes, it eats into margins, it undermines the ability to invest and grow, and it has a destabilizing effect across the whole economy.
It’s not easy to put exact numbers on the damage fraud causes, because it takes so many forms. Embezzlement schemes, manipulation of financial statements, tax fraud, invoice fraud, hacking, outright theft – around half of all businesses in Ireland suffer one or more of these in any given year, with average losses of €10,000 and €20,000. One in 10 companies report losses in excess of €500,000 due to fraud.
The half-a-million-Euro question, then, is what can businesses do to protect themselves? That’s not an easy question to answer given all the different forms fraud can take. Increasingly, it involves having the most robust cybersecurity protocols possible. But another, more traditional defence comes in the form of forensic accounting.
Forensic accountants are the financial world’s detectives. Combining accounting expertise, investigative skills, and prowess in data analysis, forensic accountancy is all about meticulously dissecting financial records to search for anomalies and inconsistencies. Often, given the great lengths fraudsters employ to hide their crimes, it takes the expertise of a forensic accountant to unearth hidden patterns in financial records that might indicate fraudulent activity.
Forensic accountants are often brought in once it has been established that something has gone awry to get to the root cause, or else to build a legal case when fraud is alleged. However, the benefits of forensic accounting in the fight against fraud extend much further. Here are some examples:
Proactive Defence
Having a forensic accountant look through your books can act as an early warning system. Accountants spot irregularities in records all the time and often put them down to clerical errors. But by working with an accountancy partner that offers forensic accounting services, you have access to expertise that delves a little further. Forensic accountants will be able to quickly identify red flags like unusual transactions, unexplained variances in accounts, or inconsistencies in vendor payments that suggest something suspicious is going on. This proactive approach allows you to address potential issues before they escalate into significant financial losses.
Strengthening Internal Controls
If you imagine your financial system as being like a fortress, strong internal controls are the walls and gates that deter intruders. Forensic accountants can assess the effectiveness of your existing controls and identify weaknesses that fraudsters might exploit. They can then recommend improvements, such as segregation of duties, robust approval processes, and enhanced data security measures, effectively fortifying your financial defences.
Litigation Support
In the unfortunate event that fraud occurs, forensic accounting can prove invaluable. Forensic accountants can meticulously analyse financial evidence, reconstruct financial transactions, and quantify losses. Their detailed reports and expert testimony in court play a crucial role in legal proceedings, helping to hold perpetrators to account and recover stolen assets.
Beyond businesses, forensic accounting safeguards individuals as well. Imagine a situation where you suspect a financial irregularity in an inheritance or that an elderly relative is being exploited financially. Forensic accountants can investigate these matters, uncovering hidden assets or misappropriation of funds, and ensuring a fair and just resolution.
The peace of mind gained through robust forensic accounting practices is invaluable. By proactively implementing these measures, you empower yourself to focus on your financial goals with greater confidence, knowing you have a powerful shield against the ever-present threat of fraud.
Speak to an expert
Contact our forensic accounting team to take the next step in protecting yourself and your business.