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Forensic Accounting is application of forensics to Accounting discipline. The word forensic is taken from the Latin word Forensis, which means – before forum. The crux of the matter here is that the documents, ideas or concepts should be capable of being presented before forum or court of law.
In Forensic accounting discipline the concepts of forensic is applied to Accounting to create missing records or to look beyond the obvious. Popular notion is that forensic accounting deals with embezzlement, fraud and misappropriation of money and assets however this is a narrow concept where forensic accounting means lot more than this. Forensic accounting has a positive side other than the known negative job of fraud examination.
Some of positive usage of Forensic Accounting can be for estimation of future profits based on existing data and situations. It can be like a positive activity of estimation of anticipated profit during closure of factory due to fire or lockout. It can also be used to calculate the income of other spouse in litigation support for divorce proceedings.
The most important aspect in any forensic examination is that the evidences discovered should be admissible in court of law. Maintaining sanctity of evidence and trail of custody of said evidences is pivotal in any forensic examination.
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