Understanding Forensic Accounting and Its Role in Companies?

Understanding Forensic Accounting, this term began to be discussed in Indonesia around 1997. When Indonesia experienced a very severe economic crisis and the solution at that time was to ask for help from the IMF (International Monetary Fund) and the world bank.

However, both of them put forward the condition that Indonesia must undertake Agreed Upon Due Diligence (ADPP). The process is carried out by foreign accountants and assisted by Indonesian accountants. 

However, the results obtained were not good enough, so it had created a panic in the market and the government which led to the liquidation of 16 private banks. This massive liquidation resulted in a massive withdrawal of funds. Both savings funds and deposits in private banks.

This is due to the declining level of public confidence in banks. Agreed Upon Due Diligence is one of the applications of the Understanding of Forensic Accounting.

The following is the definition of forensic accounting according to several experts:

According to D. Larry Crumbley. He is an editor-in-chief of the Journal of Forensic Accounting, revealing that forensic accounting is an accounting science that is compatible with law. Therefore, forensic accounting is considered to be able to survive in the arena of court disputes.

According to Merriam Webster's Collegiate Dictionary. Forensic accounting is concerned with courts. Or interpreted with regard to scientific knowledge on legal matters. So this forensic accounting is an embodiment of the use of accounting science for legal purposes.

According to Wikipedia, forensics is something suitable for courts of law. A forensic accountant is also referred to as a forensic auditor or an investigative auditor.

From some of the opinions above, it can be concluded that the definition of forensic accounting is the use of expertise, especially in the fields of accounting and auditing. Both are combined with investigative capabilities that aim to resolve financial disputes. Forensic accountants are also good at uncovering fraud which will later be decided in court. For example, the corruption case is essentially a process of financial dispute by the state. These types of cases need to be investigated by state institutions such as the KPK. In addition, the KPK is also assisted by members of the BPK and BPKP, who are called forensic accountants.

We already know what a forensic accountant is, so what are his duties? In general, the duties of a forensic accountant are divided into two, the following are their duties:

Research services

This service is more directed to fraud checks. An easier term is as a fraud auditor. Those who work in this field have several capabilities including detecting, preventing, and controlling fraud. They also excel at misinterpretation

Litigation Services

The main task of this litigation service is to identify testimonies from fraud examiners. In addition, those who provide these services also work to solve evaluation issues.

Basically, forensic accountants are tasked with providing legal opinions in court and out of court. One of them is resolving cases in dispute as well as efforts to calculate the impact of contract violations. As a forensic accountant who deepens the understanding of Forensic Accounting whose job is to examine data by knowing all forms of money theft and solutions.

This understanding of Forensic Accounting can also present a report of financial findings as evidence during a trial, with the accountant testifying as an expert witness. Some other duties such as handling a wider range of fraud cases such as working in law enforcement agencies or law firms. While accountants who work in specific fields usually deal with fraud in public accounting or insurance.

The Role and Definition of Forensic Accounting in Fraud Disclosure

Understanding Forensic Accounting in Indonesia is better known in the public sector than in the private sector. This can be seen from the large role of forensic accountants from the Financial and Development Supervisory Agency (BPKP), BPK, and government internal control apparatus who are members of the Government Internal Supervisory Apparatus (APIP).

Especially after the reforms in the management of state finances, as the issuance of several laws in the field of state finance, namely Law no. 17 of 2003 concerning State Finance, Law no. 1 of 2004 concerning the State Treasury and Law no. 15 of 2004 concerning Audit of State Finance Management and Responsibility.

As the use of expertise in auditing and accounting combined with investigative abilities to solve a financial problem or dispute, Forensic Accounting Understanding can also be useful as a deterrent and limiting the scope of fraud, as a result of the study. In the public sector, the definition of forensic accounting has a role in revealing the facts that occur that can be used as a basis for evidence in various forms of crime, including fraud.

In disclosing fraud, the definition of forensic accounting is not only to find evidence but continues to trace to the point of meeting the suspect who is the perpetrator of fraud and brings him to court with the evidence obtained during the application of the definition of forensic accounting.

There is an important need to combat fraudulent practices, both in the business and government world, it is necessary to prevent and handle these cases with concrete actions through proficient knowledge in these fields. One of the cases of fraud that is most often found and has recently been widely discussed is the case of illegal levies (extortion).

While in the private sector, fraud or fraud auditing can be useful for most cases of financial crimes such as: embezzlement, misrepresentation of financial facts, arson for profit, bank fraud, commercial bribery and bribery, computer fraud, and so on.

Many studies have described the methods and techniques of investigating the Understanding of Forensic Accounting. Regarding the examination of financial statements, the most frequently used tools for examining client data are Excel, CaseWare IDEA, and ACL Software. Certain data mining tools can reveal fraudulent transaction data patterns such as unusual entries for transactions, high or low values ​​of variables, and various accounting transaction files or unexplained values ​​from records.

Fraud examination through Forensic Accounting Understanding is carried out by collecting accounting evidence from records, systems, networks, and reports. The forensic accountant will then try to gather other evidence from other sources such as crime investigators, video monitoring systems and eyewitnesses, to reconstruct the fraud incident. In the next step, the forensic accountant mounts the suspected computer forensics image or other relevant data from the investigation process to the cyber forensic machine.

In proving a fraud, a forensic accountant can work with a digital forensic expert to help collect data and evidence recorded in a computer system.

Training on Understanding Forensic Accounting and Auditing Investigations in Corporate Financial Reporting will discuss steps to collect evidence to determine the validity of complex accounting transactions in order to solve a financial problem or dispute or suspected fraud which will ultimately be decided by a court/arbitration/other case settlement.

By pursuing this profession as a forensic accountant, we can save various cases based on honesty, thoroughness, and being able to think wisely. Are you ready to become a forensic accountant?