Knowing what your business competitors are up to is an important part of strategy, but when it comes to litigation forensic accounting is indispensible. Forensic literally means used in a court of law or for public debate. When we combine accounting skills with legal knowledge, it is called forensic accounting.
The Elements of Business Litigation
The underlying cause of most business litigation is money and finance. The claims and counter-claims in a court have to be justified by facts and figures. Since the main element of business litigation is primarily finance, it is essential that one is aware of the opponent’s true financial position. For this, we need a professional accountant who can analyze the balance sheets and accounts which are made public. Through this analysis process, you can understand the exact nature of financial transactions of a business.
Another important element, in addition to accounting knowledge, is to present data and financial figures acceptable to a court. Not only should the information be clear and precise, it must also meet basic court requirements. Forensic accounting is therefore your secret weapon in financial litigations. One more vital aspect which you must bear in mind is the liability of different parties. The assessment of financial loss a business incurs due to the financial transactions between each other can only be assessed by a professional accountant by auditing the financial statements of both the litigants. The court will base its judgment on the facts and figures presented. Forensic accounting is therefore a specialized field which combines the financial, auditing and investigative aspects of a business entity and gives a legal framework to the entire process.
Forensic accounting in business litigation not only covers litigation between two businesses but also within organizations. Financial frauds and misappropriation of funds by employees forms an important part of forensic accounting. Identity thefts have become rampant in this modern digital era. Credit card frauds and impersonation, Phishing and other online crimes have increased over the years. Forensic accounting can help significantly in such litigations.
Business litigation essentially involves financial accounting. A deep understanding of financial documents, balance sheets, business accounting and auditing is required to expose frauds and misappropriation. Presenting accounting information in format which appeals to a court of law is an important part of forensic accounting. A professional CPA can uncover details which can prove to be your secret weapon in business litigations.
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