Over the years, your business is likely to have a range of accounting requirements. One of these is forensic accounting.
Unlike your ‘everyday’ accounting, financial forensics requires more complex investigations. Here’s how a forensic accountant differs from someone who helps manage your tax obligations:
What does a Forensic Accountant do?
Financial forensics is a specialised area of accounting that involves investigating monetary transactions and analysing data to uncover potential fraud or misconduct. Forensic accountants work with individuals, business owners, legal professionals, law enforcement agencies, and insurers to investigate financial irregularities and provide expert testimony in legal proceedings.
Your forensic accountant is skilled at looking into complex financial data and transactions and can provide valuable insights into the financial aspects of legal disputes. They may also take a proactive approach, helping you to prevent financial misconduct and manage risk by finding ways to flag issues as soon as they happen.
A forensic accountant can also help by conducting a forensic audit, which will figure out where every dollar in your business has been coming from and how it has been spent.
What does a Tax Accountant do?
Tax accounting is more focused on preparing and filing tax returns for individuals and businesses.
Your tax accountant will work with you to ensure you are in compliance with applicable tax laws and regulations and that you are taking advantage of all available tax deductions. While a forensic accountant may only complete a one-off job for you or your business, you tax accountant’s role is ongoing, helping with your Business Activity Statements (BAS) and end of year tax reporting, as well as showing you strategies to apply that will help you make better spending decisions and minimise the tax you pay.
Forensic Accounting vs Tax Accounting
While both forensic accountants and tax accountants work with financial data, they have different roles and responsibilities. One of the main differences between the two professions is their focus. Forensic accountants are focused on investigating potential financial fraud or misconduct, while tax accountants are focused on managing your business income and expenses in relation to tax.
Another key difference between the two professions is their client base. Forensic accountants typically work with legal professionals, law enforcement agencies, and other stakeholders to investigate potential financial fraud or misconduct. They may also be called in if a couple is separating to help both parties understand how much money the other has or where it has gone if there is a dispute.
Another instance where a forensic accountant’s help may be required is if someone has passed away and there is an anomaly in the will or confusion over where money is.
A tax and a forensic accountant may cross paths if a business needs help as the result of an audit or an in-depth tax review. A forensic accountant can conduct an audit that will help locate records and present data to the necessary parties.
While a tax accountant can help with tax planning, a forensic accountant may be able to assist with anti-fraud measures, so a business can prevent the loss of funds through theft or hacking.
Which type of accountant do you need?
Once you understand the difference between a tax accountant and a financial forensics specialist, you’ll know who you need to reach out to. Your tax accountant may even recommend you make a connection with a forensic accountant as a preemptive measure.
Often, a forensic accountant will have a background as a tax accountant. Having knowledge of the rules in this area can help them to understand their clients. However, they bring a more analytical, investigative and data-driven approach to help you keep your business finances on track.
If you are concerned about potential financial fraud or misconduct, enlisting the help of a forensic accountant or requesting a forensic audit may be the best way to investigate the issue.
If you need help preparing and filing tax returns, reach out to your tax accountant.
Need the help of a forensic accountant? Contact Crest Accountants for more information. We help clients in Brisbane and on the Gold Coast.
