Looking back at 2015 and heading into 2016, it’s can be helpful to review the forensic accounting trends that have shaped the industry. There have been many developments over the last few months that can help us prepare for the New Year, but one central theme has become clear: The demand for forensic accountants and related professionals continues to grow. A number of factors have contributed to the increased need for experts in forensic accounting, but here’s a closer look at a few of the more common factors.
Sarbanes-Oxley (“SOX”) Enforcement
SOX was enacted in 2002 as a response to such scandals as Enron and Worldcom, with the intent to protect shareholders and the public from fraudulent practices in accounting and reporting. The Securities and Exchange Commission administers SOX and enforces the requirements of the law. Tighter scrutiny of business practices has increased the demand for forensic accountants.
Criminal Investigations
Detection of highly sophisticated crimes like embezzlement, bribery and money laundering is another reason for the recent trends in forensic accounting.
- Securities Fraud: This fraudulent activity involves making deceptive statements or incorporating deceitful practices that induce an investor to purchase stocks.
- Money Laundering: Fraudsters often conceal the origins of illegally obtained funds by conducting complex transactions and transfers under the guise of legitimate companies.
- Embezzlement: Misappropriating funds belonging to a person’s employer falls under the crime of embezzlement.
All of these financial crimes – and more – usually involve scrutiny of the documents and transactions involved. Forensic accountants are trained to detect anomalies and point out criminal activity, making their role vital to investigations.
Litigation Support
Forensic accountants are often involved in criminal cases after the investigation phase because their skills are needed to either help prove or defend against allegations. Financial transactions and reports must be analyzed, and their complexity creates a unique problem: turning the findings of a forensic accountant into language that a judge or jury can understand in the courtroom.
These trends in forensic accounting can help professionals plan for 2016. Legislation and fraud prevention efforts will continue to impact the industry, which may make the role of the forensic accountant firm essential.
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- Forensic Accounting Investigation: 4 Most Common Types
- Using A Forensic Accounting Expert In A Fraud Investigation
- What is Forensic Accounting & How Can It Help You?