Introduction to Fraud Examination and Forensic Accounting

Must read

Madhura Phadtare
Madhura Phadtare
Madhura is a Certified Forensic Accounting Professional. She regularly contributes articles on the subjects of frauds, forensic accounting and investigation. She has rick experience of forensic accounting and fraud investigation research.

What is Fraud?

To grasp the ideas of Fraud Examination and Forensic Accounting, let’s start by understanding what fraud means.

Fraud happens when someone purposely makes another person lose money by tricking them. The trickster usually does this by fooling the victim to take their money or belongings. It’s like a planned, sneaky kind of stealing. Fraud can occur online or in the real world.

The offenses can either be civil or criminal in nature. In the case of civil fraud, the victim files a case against the accused in order to seek the recovery of their lost assets. In the case of criminal fraud, a law enforcement body files a case against the fraudster in order to enforce justice. This is usually in the case of large-scale fraud against companies or many individuals.

The different instances of fraud

Fraud can happen in many different ways. Let me give you a few examples of how fraud can happen:

Consumer Fraud

Bogus companies and fraudsters may defraud people in the name of reliable companies using Pyramid schemes, phishing, telemarketing, and other means. They may also target consumers online by emailing them links that can compromise their private information when opened. The consumers themselves are led to believe that they are taking part in business as usual. However, once they suffer the loss of their assets, they realize that they have been defrauded.

Financial Statement Fraud

Companies may manipulate their financial statements in order to polish their image in the public eye or receive bonuses for meeting certain targets when in reality they haven’t done so. They do this by overvaluing their assets, neglecting to mention expenses and liabilities, adding non-existent revenue, and skewing the timing of entries.


Company officials at high levels may engage in taking bribes to appease paying customers. They misuse their power and influence for their personal gain. The demands of the payee, in this case, are almost always unlawful, which is why these under-the-table transactions take place.

Asset Misappropriation

Employees of the company may be misusing the provided assets for their own personal gain. The most common malpractice regarding assets is swiping cash before it is recorded in the company’s systems. Detecting this type of fraud is often quite difficult, as no records exist to unmask the fraudster. Employees may also indulge in check tampering, payroll schemes, fake billing, and inventory manipulation. Asset misappropriation also includes the misuse of company machinery and software for one’s own gain. This means using it for reasons other than for its intended purpose.

Theft of trade secrets

This happens when employees use confidential information for their own gain. It is a form of stealing- robbing the company of its creativity and ideas and taking credit for it. If a person or company steals the intellectual property (such as a recipe, lyrics, or marketing idea) of another company, then it is a type of fraud.

So, now that know what fraud is, it’s time to move on to how to pinpoint it and prosecute the fraudsters. This is where Fraud Examination and Forensic Accounting come in.

Fraud Examination- how to pinpoint a fraudster

Fraud Examination refers to the investigation of potential fraud on the basis of complaints, tips, and other material gathered. A fraud examiner must thoroughly inspect all aspects of the case. He can do this by gathering clues, interviewing suspects, collecting data from witnesses, and going through related documents. He must also take efforts to prevent fraud from occurring in the case that it is yet to happen. Fraud Examiners are expected to both investigate as well as solve potential cases of fraud.

A Fraud Examiner is not the final verdict-taker- he must merely gather all the evidence and present it in a clear, unbiased manner for the judge to take the final decision. The court also expects the Fraud Examiner to present his findings in a comprehensive manner, and testify against the suspects.

Forensic Accounting- analyzing the fraud

On the other hand, Forensic Accounting refers to the investigation done by trained accountants after the fraud actually occurs.

A Forensic Accountant is like a financial detective. They carefully look at financial papers and records to figure out how a scam or trick affected the person who got tricked. These special accountants use their talents to help in catching the bad guys. They study the evidence to understand what exactly happened during the scam and what happened afterwards as a result of it. This helps in taking legal action against the wrongdoers.

Forensic Accountants play a similar role to Fraud Examiners, just on a more technical level.

How are Fraud Examination and Forensic Accounting different from one another?

Fraud Examination and Forensic Accounting are unique and similar in nature. However, there are a few key differences by which we can tell them apart.

The first and most important difference is the timing of the investigation. Fraud Examination is done to prove the occurrence of fraud, while on the other hand, Forensic Accounting takes place after the confirmation of fraud. Fraud Examiners work on the basis of speculation and prediction, while Forensic Accountants work with the guarantee that the fraud has already taken place.

The main goal of the Fraud Examination is to determine who is conducting the fraud and whether it is taking place or not. On the other hand, the job of Forensic Accountants is to determine to extent of the damage caused. They must also come to a conclusion about whether the fraud allegations are in good reason.

The methods used by both parties are also quite different. Fraud examiners use documents, interview eyewitnesses, and access public records to make their claims. Whereas, Forensic Accountants study all financial documents involved in-depth to come to a feasible conclusion.

Though both investigations usually end in litigation, the findings of the Fraud Examiner will determine whether there are to be any court hearings or not, while on the other hand, the evidence collected by Forensic Accountants acts as support in the case of litigation.

The “Certified Bank Forensic Accountant” course from Indiaforensic is a comprehensive training program. It teaches bankers about forensic accounting and fraud examination. This course is really important for those who want to help stop financial crimes happening in banks. It covers a range of topics from bank frauds to cryptocurrency investigations.


So, we can say that Fraud Examination and Forensic Accounting are two sides of the same coin. Both these professionals need to work in harmony with each other to successfully identify fraud and appropriately prosecute the fraudster. Fraud Examination may even be considered a branch of Forensic Accounting. The ultimate goal of the two is to deal swiftly with any instances of fraud and protect victims from it in the future, as well as stop any potential fraud from occurring.

More articles

Recommended Certifications

Certified Forensic Accounting Professional (CFAP)

5.00 out of 5
22,500.00 Excluding GST

Trending on Riskpro

Challenges in AML Investigation

Every organization needs AML Investigation. The people who are working in the financial service industry are aware of the Anti-Money Laundering Compliance and Investigation...


KYC and EDD plays a vital role in the AML domain. Know Your Customer is the due diligence and bank regulation which the financial...

Tackling the challenge of Crypto Currency Laundering

Crypto Currency Laundering plays a vital role. In the era where technological advancements the Fintech sector has found itself at the forefront of this...

AML In Bahrain

Introduction The AML in Bahrain is crucial aspect now a days. The battle against further money laundering ('AML') and terrorism funding ('CFT') is a...

CAMP Exam: 3 Tips to Effectively Prepare for Professional Exam

Riskpro Learning, in collaboration with Regtechtimes Academy, provides the Certified Anti-Money Laundering Professional (CAMP) Program, a comprehensive certification program designed to equip individuals with...
error: Content is protected !!