Signs That a Business Needs Forensic Accounting Services

Maintaining open financial records is not only a legal obligation but a moral responsibility for any entity dealing with the public. It is why every business needs the services of a financial accountant to help keep everything in check. However, everything does not go according to plan regarding financial accounting. For instance, you might suspect fraud, embezzlement, theft or improper financial controls in your business. In such cases, a business owner needs forensic accounting services. This article highlights signs that you need to hire a forensic accountant.

Missing Financial Records — A business needs accurate financial records to file for tax, make claims, forecast profitability/losses and make business decisions such as payroll. Therefore, if financial records go missing, an accountant will struggle to make informed decisions. For instance, if documents in accounts payable go missing, you cannot establish how much your business owes creditors, resulting in unexplained profits. Forensic accounting services can help reconstruct financial information — paper or electronic — in case of missing or damaged records. However, the process often involves numerous investigations and auditing to uncover all the missing data.

Personnel Living Beyond Their Means — No law prevents employees from living lavish lifestyles as long as their financial positions allow them. For example, a high-level manager earning a seven-figure salary can afford a couple of vacations every year. However, when you have a mid-level manager showing up with a luxury car every few months, it should be cause for worry. Of course, employees can have personal businesses that bring them extra income to accommodate their lavish lifestyle. However, it does not mean business owners should let their guards down. A forensic accountant can look at your books and determine whether an employee's lifestyle matches their current financial situation.

Unusual Transactions — Although business transactions vary in the amount transacted, it is easy to tell whether a transaction is unusual or standard. For instance, a small business might require employees to sign against a payroll schedule for accounting purposes. Therefore, it would be highly unusual for an accountant to notice employees not signing their payroll schedules for a couple of months. Similarly, petty cash payments made without an authorising personnel's authority qualify as unusual transactions. Such incidences could be tell-tale signs about ongoing fraudulent activities that should be investigated. Thus, you should hire a forensic accountant to examine all financial books and uncover unusual transactions, if any.

For more information on accounting services, contact a company near you.