DIFFERENCE BETWEEN A FORENSIC ACCOUNTANT AND AN AUDITOR

1.      Timing –forensic accounting are only conducted with sufficient predication while an auditor is conducted on a regular basis.

2.      Scope –forensic accounting are conducted to resolve specific allegations while audits are general examination of financial data.

3.      Objective –forensic accounting is to determine whether fraud has/is occurring and to determine who is responsible while audits are conducted to express an opinion of the financial data.

4.      Relationship –forensic accounting is adversarial as the forensic accountant efforts are to affix blame while audit by nature is non adversarial.

5.      Methodology-forensic accounting uses techniques to collect evidence, review outside data (ie public records) and interviewing while audits examine financial data.

6.      Presumption –forensic accounting approach the resolution of a fraud to establish sufficient proof to support or refute an allegation of fraud while auditors are required to approach. The audit with professional skepticism.

7.      Forensic accountants need to possess skills and expertise in two fields namely private investigation and accounting but no such sill is needed in auditing.

8.      Forensic accounting is expected to recognize financial fraud and scrutinize on that because of their quality of investigative  intuition  while an auditor only reviews transactions which needs no special intuition before it is done.

9.      Forensic accounting covers money laundering, property damage, business purchase, tax avoidance, loss profits due to misuse and illegal activities and divorce asset evaluation while auditors centres on error detection, rectifying those erros and preventing such errors in future.

10. Forensic accounting produces an opinion used for legal purposes while an auditor produces audit opinion or a review opinion not used in court of law.

11. Forensic accounting is the process of reconstruction. Often times it is necessary to create or recreate a set of records from a variety of data, not necessarily form the routine documents. Forensic accountants may need to employ many detection techniques in order to rebuild the history using correlative analysis because his far more skilled thand have a strong background in transactional accounting as well. Their goal is to determine what happened, where the money went, how much money was involved or a myriad of other unknowns while auditing is the verification (attestation) that the transactions are valid and that the underlying documentation and other sources of verification can support the reported amounts. It is used to provide credibility to financial activities. Their goal is to verify whether the financial statements show a true and fair view of the business. There is no special techniques needed in auditing since their skills is not up to the forensic accountants skills

12. Forensic accountants reports to a corporation’s general counsel while the auditor reports to a corporation’s auditor committee.

13. Forensic accountants has background in accounting, criminology and law while an auditor generally have backgrounds in accounting only.

14. Forensic accountants who is hired to review financial statements if there are concerns about management fraud, may also targets a smaller fraud that is not material to a company’s financial statement while an auditor are tasked with ensuring that financial statements are free from material misstatement. To the extent they are interested in any individual transaction, they want to know whether that transactions and its treatment by a company conforms with generally accepted accounting principles and how that transaction relates to the company’s financial statements.

In conclusion, forensic accounting could be defined as the application of auditing and accounting skills to situation that have legal consequences, with evidence usable in a court of law. It is using accounting skills to investigate and analyze financial information for use in legal proceedings example fraud, embezzlement, or other financial crimes while auditing is what is done by auditors, which includes checking the work of the accounting department, but usually involves much more than the accounting work, it also includes other activities of an enterprise, whose actions are reflected in the accounting records.