From the President

We have had some inquiries recently from members asking about how fraud examination differs from “forensic accounting” and “fraud auditing.” The discipline of fraud examination shares common elements with both of these, but there are important distinctions.

First, the term forensic accounting is used more often wrong than right. The word “forensic” is defined by Black’s Law Dictionary as “used in or suitable to courts of law or public debate.” Therefore, “forensic accounting” is actually accounting work done for or in support of litigation. I often hear people use the terms “forensic” and “fraud” interchangeably in this context, and that is incorrect.

Forensic accounting is any kind of accounting work that can be used in the courtroom. Now, in some cases, that does involve fraud. But it may also involve valuations, damage calculations, securities, bankruptcies, and a whole host of other accounting related matters.

Accordingly, many fraud examinations could be considered forensic accounting, but not all forensic accounting is fraud examination. For example, the valuation of a property in a minority shareholder derivative suit would be included under forensic accounting but may not necessarily involve fraud.