Istanbul Bye

In order to master accounting theory and practice, it is essential to learn and understand main accounting terms. One of the most important is Balance Sheet, essence of which is described further.

Concept

Balance Sheet is one of the three main financial statements, including in addition Income Statement and Cash Flow Statement. This financial statement is a reflection of the basic accounting equation, where Assets=Liabilities+Equity. This means that Balance Sheet includes assets, liabilities and equity and reflects structure of the assets as of particular date together with the structure of the financial means how these assets are being financed, either by the own means, or by the borrowed means.

From the name of this financial statement it is obvious that total value of the assets is equal to total value of liabilities and equity.

Items Included

Considering the structure of Balance Sheet, this financial statement has to provide specification of the main categories of assets, liabilities and equity in order for the users of it to be able to judge on the financial position of the entity and make adequate decisions. The following items are included:

Current Assets: items to be consumed in the operations of the business within the period less than one year. Include cash, accounts receivable, inventory Long-term Assets: items to be used by the business for the period longer than one year Total Assets: sum of current and long-term items Current Liabilities: amounts to be paid back to creditors within the period of one year or shorter Long-term Liabilities: amounts to be paid back to creditors within the period longer than one year Total Liabilities: sum of current and long-term items Equity: amounts belonging to the shareholders, including share capital (amounts invested) and retained earnings (amounts earned, but not yet distributed as dividends) Total Liabilities & Equity: sum of borrowed and own financial means. So these items must be included into the Balance Sheet to reflect financial position of the business as of particular date and indicate liquidity, i.e. ability of the business to pay its debts on time.

By: Ana Orwel

About the Author:

Caffeinated Content – Members-Only Content for WordPress

Basic church accounting is knowledge every financial staff member in your church should have in deciding which accounting system to use.

Most small churches rely on volunteers, some of which have little or no accounting experience…just obedient hearts to help their church in any way they can.

My advice to these wonderful people is to research, research, and research some more; especially church staff here in the United States that have to follow the guidelines of the IRS in order to keep their tax exempt status.

So here is some basic church accounting concepts to help you better understand your church’s bookkeeping.
The very basic definition of accounting is the documentation of a transaction. There are two basic accounting practices: single entry bookkeeping and double or dual entry bookkeeping. Single entry bookkeeping is an accounting practice that can be employed by small organizations where a profit and loss statement or balance sheet is not required for financial control or tax purposes.

Double entry bookkeeping is an accounting technique to record the financial transactions of an organization where every transaction is entered twice, equal and opposite transactions. Double entry is required for all organizations that must produce both a profit and loss account and a balance sheet.

Double Entry Bookkeeping:

Understanding of debits and credits is the foundation of understanding accounting systems. Because every business transaction affects at least two accounts, each transaction is recorded using a double entry system of debits and credits.

In accounting, accounts are set up to look like a “T” and are actually called T accounts, very imaginative huh? In this “T” account, amounts entered on the debit side (left hand side) are called debits and amounts on the credit side (right-hand side) are called credits. “To debit” means to make an entity in the left-hand side of an account’ and “To credit”‘ means to make an entry in the right-hand side of an account.

Important point! The words debit and credit have no other meaning in accounting. Most people think a debit and credit as a positive or a negative. They are not either.

Basic points for double entry bookkeeping:
A debit or credit will either increase or decrease the account balance…depending on what type of account you are working with. For every increase in one account, there is an opposite (and equal) decrease in another. That’s what keeps the entry in balance.
Remember…debits always go on the left and credits on the right.

Single Entry Bookkeeping:

There are advantages and disadvantages of using a single entry bookkeeping system.
The main advantage is the simplicity. It involves the simplest form of keeping records of financial transactions. Essentially the organization makes two lists, one of income received and one of expenses incurred. This is beneficial for organizations with volunteers with virtually zero accounting or bookkeeping knowledge. It is essentially like a check register. You credit (right side) your increases and debit (left side) your expenses…all the while keeping a running daily balance. I know this is opposite of your checking account, so think of it as a mirror image of your checking account. I could go into detail here how come it is opposite but I would probably confuse you even more than I already have. Just know that your checking account is opposite because it is a liability account for your bank. The main disadvantage of single entry bookkeeping is the absence of financial control due to limited detailed records of asset and liability accounts. It is also easier to make errors with. With double entry bookkeeping everything must balance.

Whether you use a double entry or single entry accounting, understanding basic church accounting concepts are knowledge anyone doing the bookkeeping for your church should have.

By: Vickey Boatright

About the Author:

Create a video blog…instantly.

Accounting is very important in the day to day life for the business to grow and flourish. It is the backbone of the developing countries in the business financial world. In the medieval times it was created for the development of trade and commerce all over the worlds. Lots of things will come to our mind to figure out the need of the accounting companies. Before hiring the particular accounting company we must do the detailed survey of the market status. Ask our friends, partners and colleagues to make a list of the best freelance accounting firms. There are various advantages of hiring a freelance accounting firm. It is better to have the team of accountants and Bookkeepers in the company. It can save organizational cost and overhead expenditure of the company for long run up. Large sector of people are not excellent in their numbers and financial details and taxes.

Always it has good to hire an accountant than to do it on your own. It is the safest way for the accounting companies’ improvement. Due to the development of technology and communicational facilitates everywhere; we can get best people all over the country. Apart from all things the precious data and monetary of the accounting company will keep secret. They will have the safest software to safeguard the security of the company we shared with them. Most of the freelance accounting companies provide multiple services. As we think they not only help in the finances and bookkeeping but also in the tax returns make our profit and loss statements.

By: Sundari Sumathi

About the Author:

Create a video blog

An important element to consider when selecting an accounting service for your business is to match the expertise and experience of the accounting practitioner to the requirements of your business. For example if you have a large business then the experience and approach of a small suburban accounting firm, whilst being top notch, may not be the best choice for you.

The broad categories of accountants are describes below.

Bookkeepers

Wikipedia defines bookkeeping as the process of recording financial transactions. This indicates that bookkeepers are not really accountants but do play an important role in the process. Without an accurate and detailed bookkeeper the accountants job can be much more difficult. An accountants hourly rate will usually be much higher than that of a bookkeeper so using a bookkeeper for the daily assembling and recording of transactions and financial information can be very cost effective. For small businesses bookkeeping should be one of the first tasks that is outsourced. Without effective bookkeeping it is going to be very difficult for the accountant to provide accurate analysis and advice.

Tax Agents

This is the first area of specialty. Tax agents provide accountancy services that are focussed on tax issues. At the lower end, companies like H&R Block in Australia can provide cost effective service to complete tax returns for simple situations. For companies that have anything more than basic requirements it is best to find a tax agent that is familiar with your industry and is familiar with the various corporate and financial structures that many businesses use.

Chartered Accountant (CA)

Chartered Accountants are qualified and experienced professionals. The difference between a CA and a CPA is the particular recognised body that they are members of. Although there may be some differences to a CPA, they are very similar. A CA is held to high standards and has undergone extensive and continuing training.

CPA

A Certified Public Accountant or Certified Practicing Accountant is also an experienced and qualified professional who belongs to a recognised accounting body. A CPA is required to fulfil continuous training and development obligations and to adhere to codes and standards to ensure that they offer the best possible service to their customers. A CPA has undergone extensive training.

By: Stephen Neander

About the Author:

Website content

OBJECTIVES OF WRITING THIS ARTICLE: Forensic accounting(F.A.) has come into limelight due to rapid increase in financial frauds and white-collar crimes. But it is largely untrodden area in India.The integration of accounting, auditing and investigative skills creates the speciality know as F.A.The opportunities for the Forensic Accountants are growing fast;they are being engaged in public practice and are being employed by insurance companies, banks, police forces, government agencies etc.This article seeks to examine the meaning and nature, activities and services rendered, core knowledge and personal skills required for forensic accounting as a specialized field in accountancy profession. Indeed there is a future in F.A. as a separate niche consulting.

The lack of respect and belief in India’s law enforcement agencies and the rate at which white-collar crimes have increased has prompted the development of Forensic Accounting in India. The fraud detecting agencies seems to lack time and devotion needed for detecting and prevention of errors and fraud. According to a large global accounting firm, the market is sufficiently big enough to maintain an unit devoted entirely towards “forensic accounting”. Many large as well as small accounting firms as well as the tiny firms have inculcated or rather developed separate forensic accounting departments.

We were of the belief that detection and prevention of frauds or white-collar crimes is part of conventional accounting function. It was thought that the frauds, both internal as well as external has be to detected by the auditors through their periodic audit. Now it is crystal clear that auditors can only check for the compliance of a company’s books to generally accepted accounting principles, auditing standards and company policies. Hence the need was felt to detect the frauds in companies that are suspected to be engaged in fraudulent transactions. This field of accounting is known as “forensic accounting”.

The litmus test of investigation, first introduced by the ever great Sherlock-Homes(considered by many as the father of Forensic Accounting) is perhaps the first ever application of forensic accounting. Though, the contribution of the other few great historians to the field of forensic accounting cannot be overlooked. They used various tricks to investigate various crimes.

F.A. is a specialized a area of accounting practice that describes engagements which result from actual or anticipated disputes or litigation. The word “forensic” means “suitable for use in court”. The forensic accountants have to keep in mind this statement while they have to work or chalk out their programme. The F.A. work is tailor made according to the situation and need. The gathering of information and evidences is done according to the need and situation. We can say, it is customized according to the situation. The forensic-accountants give expert evidence at the ultimate trial. All the modern medium-sized as well as the large-sized accounting firms have specialized forensic accounting departments. Within these firms there may be specialized forensic accounting departments. Within these groups their may be further sub-specializations. Various sub-specializations include insurance claims, personal injury claims, fraud detection, construction or royalty audits. Nearly 40 percent of the top 100 US accounting firms are expanding their forensic and fraud services, according to Accounting Today. Now if we consider this data as significant then we can say that the total contribution of forensic accounting to the total revenue of the C.A. firms would be highly significant in the years to come. Under rising instances of frauds and litigation and flourishing businesses these services are considered to be very significant as they are rendered at a very competitive price.

The forensic accountants utilize the various information relating the business, utilizes financial reporting systems, various accounting and auditing standards and procedures, investigative techniques and litigation processes and procedure to perform their work. By acting as advisors to audit committees and assisting in investment analyst research, they are playing more “proactive” risk reduction roles.This is possible by designing and performing extended procedures as part of the statutory audit. The objectives of such an accounting include measurement of losses caused by an auditor due to his negligence, to look into the matter whether their has been any embezzlement of cash, the amount, necessity of criminal proceedings, computation of asset values in a divorced proceeding.

The primary approach technique of forensic accounting is explanatory analysis(cause and effect)of the phenomena-including the discovery of deception(if any), and its effects -introduced into an accounting system field. The primary methodology employed by the forensic accountants is the verification of the objective. They are trained to deal with real world business and do have the sufficient expertise to look beyond(behind) the numbers. The scope of the forensic accountants are growing at a rapid pace. The increase in their work opportunities have been accelerated due to the fall of the Enron corporation and the collapse of the American Twin Towers.

This has led to increase in the demand for American forensic accountants. So as far India is concerned, formation of Serious Fraud Investigation Office(SIFO) is a landmark creation so far as forensic accountants are concerned. Failure of regulators to track security scams, increasing cyber crimes, chain of cooperative banks bursting -all point to the ever increasing need for forensic accountants. Our understanding of the need for forensic accountants is immaterial here. In India due to the growing number of frauds the need for forensic accountants is ever increasing. The regulatory and administrative agencies will put pressure for greater demand of forensic practices. This has been initiated due to the changing nature of Indian and International accounting.Auditing and assurance standards also confirm this. A change in the curriculum can be initiated if the written exams and practical industrial training are boosted to show the “new knowledge base and skill-set” required by the professional accountants in the new era. It is therefore recommended that the “forensic accounting and auditing” be introduced as a paper in the various professional examinations conducted by the various accounting bodies in India. Unfortunately forensic accounting is largely an unexplored area as far as India is concerned. The chartered Accountants(CAs) deal with such cases in an irregular fashion. In the western counter-part(countries), the Lawyers, police, insurance companies, government and regulatory bodies, banks, courts and business communities are increasingly utilizing the services of the forensic accountants.The accountants and the auditors must have the skills and expertise to venture into the emerging field of forensic accounting.

What Is Forensic Accounting? The growing needs of corporations has changed the definition of forensic accounting. As per Bologna and Indquist, “the application of financial skills and an investigative mentality to unresolved issues, conducted within the context of rules of evidence.It is a new emerging field that encompasses financial expertise, fraud knowledge, and a sound knowledge and understanding of business reality and the working of the legal sytem.”It means that the forensic accounting should be skilled not only in financial accounting but also internal control systems, the legal matters, other institutional requirements, investigative blend of mind and interpersonal skills.

According to AICPA: “Forensic accounting is the application of accounting principles, theories, and discipline to facts or hypotheses at issues in a legal dispute and encompasses every branch of accounting knowledge: ‘ Similarly, forensic accounting is defined by Horty as:
“The science that deals with the relation and application of finance, accounting, tax and auditing knowledge to analyze, investigate, inquire, test and examine matters in civil law, criminal law and jurisprudence in an attempt to obtain the truth from which to render an expert opinion.”
In simple words, forensic accounting includes the use of accounting, auditing as well as investigative skills to assist in legal matters.It comprises of two major components: litigation services, that recognizes the role of an accountant as an expert consultant and investigative services, that uses a forensic accountant, s skills and may require possible court-room testimony.
Investigation of theft and defalcation of corporate and individual assets are part of legal matters.They use their education as well as experience to discuss the facts, patterns of the theft or misappropriation.Business accounting systems are reviewed by the forensic accountants.They suggest ways and means to solve and improve the internal control and internal accounting system.This is adopted to prevent theft and fraud. Because of their expert knowledge and educational background and experience their(forensic accountants) work is elevated to a new height.

Forensic accountants do not contest in cases.They act as fact finding devices, try trt to seek the real truth from the hidden facts.They conduct their work in an unbiased and objective manner.They need legal knowledge, expertise, training and experience to perform their work in an effective and real manner.Extensive knowledge in the field of commerce, legal, accounting as well an investigative blend of mind is needed to perform the work in a proper fashion.Expertise in litigation support and testimony in courts of law are also prerequisites of the forensic accountants.This is due to the fact that their work would many times be used in a court of law.The valuation of damages due to criminal and civil wrong-doings need to be done with perfection and for that reason knowledge of business valuation theory is the most essential.

What exactly do the Forensic Accountants perform? Answer: They are trained to deal with real life business situations and are trained to look beyond the numbers.
Analysis, interpretation and summarization of complex financial and business related issues are prominent characteristics of this accounting/auditing profession. Familiarity with legal concepts and procedures is a must.Insurance companies, public practice, banks, police forces and government agencies are major employers of forensic accountants.
The various field of work encompassing the arena of a forensic accountant can be stated in points format as follows:

1) Financial evidence investigation and analysis.
2) Development of computerized software to help in the analysis and presentation of financial evidence.
3) Sharing their findings in the form of reports, slide shows or exhibits and documents collected.
4) To support trial evidence they prepare visual slides, assist in legal proceedings, including testifying in courts as an expert witness.
If we want to say or rather point out the role performed by the forensic accountants in a nutshell, we can say as follows:

Measurement or to quantify the impact of lost earnings. Such as construction delays, stolen trade secrets, insurance disputes, damage/loss estimates, malpractice claims, employee theft, loss of profit, financial solvency reports, disturbance damages, loss of goodwill, compensation losses suffered in expropriation determination, assessment of the potential business compensation costs and providing consultation on business defalcation minimization. Lease default damages, breach of contract, business interruptions, breaches of shareholders and partnership agreements, reconstruction of accounting records,
Investigation of misappropriation, assistance in establishing ownership and division of assets, commercial damages, professional negligence cases, partnership disputes, expert evidence, fair value or fair market value and personal injury damages are included in commercial damages. Tax advocacy, compliance and review of financial statements, tax reporting and tax planning in such areas as income as estate matters are included in tax matters. Analysis, interpretation, summarization, presentation of complex financial and issues relating to the business for investigation is the role of a forensic accountant.
They carry out investigative accounting and provide litigation support.

The services rendered by the forensic accountants are in great demand in the following areas:

1) Fraud detection where employees commit Fraud:
Where the employee indulges in fraudulent activities:
Where the employees are caught to have committed fraud the forensic accountant tries to locate any assets created by them out of the funds defalcated, then try interrogate them and try to find out the hidden truth.

2)Criminal Investigation: Matters relating to financial implications the services of the forensic accountants are availed of. The report of the accountants are considered in preparing and presentation as evidence.

3) Outgoing Partner’s settlement:
If the outgoing partner is not happy about his settlement he can employ a forensic accountant who will correctly assess his dues(assets) as well as his liabilities correctly.
4)Cases relating to professional negligence:
Professional negligence cases are taken up by the forensic accountants.
Non-conformation to Generally Accepted Accounting Standards(GAAS) or non compliance to auditing practices or ethical codes of any profession they are needed to measure the loss due to such professional negligence or shortage in services.

5) Arbitration service: Forensic accountants render arbitration and mediation services for the business community, since they undergo special training in the area of alternative dispute resolution.

6) Facilitating settlement regarding motor vehicle accident: As the forensic accountant is well acquainted with intricacies of laws relating to motor vehicles, and other relevant laws in force, his services become indispensable in measuring economic loss when a vehicle meets with an accident.

7) Settlement of insurance claims: Insurance companies engage forensic accountants to have an accurate assessment of claims to be settled. Similarly, policyholders seek the help of a forensic accountant when they need to challenge the claim settlement as worked out by the insurance companies. A forensic accountant handles the claims relating to consequential loss policy, property loss due to various risks, fidelity insurance and other types of insurance claims.

Dispute settlement: Business firms engage forensic accountants to handle contract disputes, construction claims, product liability claims, infringement of patent and trade marks cases, liability arising from breach of contracts and so on.

9) Matrimonial dispute cases: Forensic accountants entertain cases pertaining to matrimonial disputes wherein their role is merely confined to tracing, locating and evaluating any form of asset involved.

Core Knowledge Of Forensic Accountants:
A forensic accountant is expected to be a specialist in accounting and financial systems. Yet, as companies continue to grow in size and complexity, uncovering fraud requires a forensic accountant to become proficient in an ever- increasing number of professional skills and competencies. Here are some of the broad areas of useful expertise for a forensic accountant:

” An in-depth knowledge of financial statements and the ability to critically analyse them. These skills help forensic accountants to uncover abnormal patterns in accounting information and recognise their source.
” A thorough understanding of fraud schemes, including but not limited to asset misappropriations, money laundering, bribery, and corruption.
” The ability to comprehend the internal control systems of corporations, and to set up a control system that assesses risks, achieves management objectives, informs employees of their control responsibilities, and monitors the quality of the programme so that corrections and changes can be made.
” Proficiency in computer and knowledge of network systems. These skills help forensic accountants to conduct investigations in the area of e-banking and computerised accounting systems.
” Knowledge of psychology in order to understand the impulses behind criminal behaviour and to set up fraud prevention programmes that motivate and encourage employees.
” Interpersonal and communication skills, which aid in disseminating information about the company’s ethical policies and help forensic accountants to conduct interviews and obtain crucially needed information.
” Thorough knowledge of company.s governance policies and the laws that regulate these policies.
” Command of criminal and civil law, as well as, of the legal system and court procedures.

Personal Skills Required:
So what does it take to become a forensic accountant? In addition to the specialised knowledge about the techniques of finding out the frauds, one needs patience and an analytical mindset. One has to look beyond the numbers and grasp the substance of the situation. There is a need for the same basic accounting skills that it takes to become a good auditor plus the ability to pay attention to the smallest detail, analyse data thoroughly, think creatively, possess common business sense, be proficient with a computer, and have excellent communication skills. A “sixth”sense that can be used to reconstruct details of past accounting transactions is also beneficial. A photographic memory helps when trying to visualise and reconstruct these past events. The forensic accountant also needs the ability to maintain his composure when detailing these events on the witness stand. Finally, a forensic accountant should be insensitive to personal attacks on his professional credibility. A fraud accountant (as forensic accountants are sometimes called) should also observe and listen carefully. By this, you can improve your ability to detect lies whether they involve fraud or not. This is so because”not all liars are fraudsters, but all fraudsters are liars”(Wells).

According to a forensic accounting expert, “the traits of a forensic accountant could be compared to a well-baked pizza. The base of forensic accounting is accounting knowledge. Size and the extent of baking decide the quality of the pizza. A middle layer is a dispersed knowledge of auditing, internal controls, risk assessment and fraud detection. It is like the spread of the cheese in pizza. The toppings of this pizza area basic understanding of the legal environment. The legal environment is essential in order to support the litigations. The cherry on the toppings of the pizza is a strong set of communication skills, both written and oral. It is just the beautification part. Perfect combination of the pizza base, cheese spread and good toppings makes the pizza delicious and the of company’s the laws that Forensic Auditor perfects. It is a combination that will be in demand for as long as human nature exists.”

In addition to these personal characteristics, accountants must meet several additional requirements to become successful forensic accountants, say a Certification, acknowledging his competence. One can learn forensic accounting by obtaining a diploma given by Association of Certified Fraud Examiners (ACFE) in the US. Indian chapter of ACFE offers the course based on the white-collared crimes prevalent in US, based on their laws. However, there is no formal body that provides formal education of the frauds in India. Besides the formal certificate, one can deepen one’s knowledge and sharpen one’s skills in forensic accounting by undergoing training under an experienced forensic accountant, participating in various international conferences, reading relevant journals, books and other literature on forensic accounting.

To combat the frauds effectively one needs the active support of government at every stage. There are three-four such agencies in India, which are dedicated to the mission of combating frauds. Serious Fraud Office looks into violations of Income Tax, FEMA, RBI Act, etc.; CBI (Economic Office Wing) deals with big financial frauds; Central Vigilance Commission deals with corruption. These are the major government agencies that combat frauds of different types. Unfortunately, there is no specialised education provided by any of the Universities in the country. Recently, TCS has also come out with software to combat money laundering and Subex Systems have designed software to combat the telecom frauds. Thus, combating the frauds with software has started picking up in India, with few big companies like ACL and IDEA, joining the race.

The Need For Niche Consulting:
The CPA Vision Statement states: “The CPAs are trusted professionals who enable people and organisations to shape their future. Combining insight with integrity, CPAs deliver value by: (a) communicating the total picture with clarity and objectivity, (b) translating corn plex information into critical knowledge, (c) anticipating and creating opportunities, and (d) developing pathways that transform vision into reality1 It reflects the trend towards providing a broader range of assurance services. However, recent corporate accounting scandals and the resultant outcry for transparency and honesty in reporting have given rise to two disparate yet logical outcomes. First, forensic accounting skills have become crucial in untangling the complicated accounting manoeuvres that have obfuscated financial statements. Second, public demand for change and subsequent regulatory action has transformed corporate governance. Increasingly, company officers and directors are under ethical and legal scrutiny. Both trends have the common goal of responsibly addressing investors’ concerns about the financial reporting system. Indeed, there is a future in forensic accounting as a separate”niche” consulting area in India. The need to specialise, otherwise known as Niche Consulting, is imperative to practising accountants because the fast-paced developments in business thereby demand specialised knowledge and skills. While a majority of CAs have excellent analytical skills, they need to acknowledge that ‘forensic’ services require ‘specialised’ training as well as real-life ‘practical’ corporate experience. There is a need for specialised information, not just audit and tax service. What clients seem to want are people with unique sets of skills and experiences. With the maturing of the audit business, and the rapid development of technology that makes existing services low cost and cheap, it appears that it is the right time now to acquire those unique skills. To help practitioners move into ‘niche’ consulting, some professional organisations in the US have concluded that: “Future success for the profession depends, in part, on how the public perceives the ability of CPAs. New efforts in consulting, specialisation and understanding global business practices and strategies are considered crucial. We go out into the niche market, examining our strengths first. We go where the action is, only then we know we can adequately service our clients and make money doing it.” One area where ‘niche’ consulting is becoming the global trend is in “Forensic Accounting and Auditing’ But the major question facing the Indian accountancy profession is: Are we ready to plunge to where the challenging action is?

Forensic Accounting In India:
It is in an infancy state in India.It is still an untrodden area in India.But due to ever increasing cases of bank & cyber-frauds its growing importance cannot be denied.
One immediate landmark creation is “Forensic Research Foundation”.They provide support for investigation of fraud.They publish one bi-monthly journal named as “White Crimes”.It relates to forensic and economic crimes. Another international organization named as KPNG has set up investigation detection centre in India.. Networks Limited, a Delhi based organization, working in the similar field, they are also trying to innovate ways and means to detect financial irregularities and crimes in India.Serious Investigation Fraud Offices(SIFO), has been established in India for the same reason, i.e. detection and prevention of economic irregularities and crimes. The need for such bodies and the importance of Forensic Accountants have been highlighted by L.N.Roy Committee.Lenin Parekh Committee has also expressed the view that one “fraud detection committee”need to be established. The main aim of such boards should be to prevent the interest of the stakeholders.

Conclusion:
Forensic accounting in India has come to limelight only recently due to rapid increase in white-collar crimes and the belief that our law enforcement agencies do not have sufficient expertise or the time needed to uncover frauds. A large global accounting firm believes the market is sufficiently large to support an independent unit devoted strictly to ‘forensic’ accounting. All of the larger accounting firms, as well as, many medium-sized and boutique firms have recently created forensic accounting departments.

Forensic accounting, in fact, integrates accounting, auditing, and investigative skills to conduct an examination into a company’s financial statements. Broad-based knowledge (within the themes listed above) is crucial to the success of entry-level forensic accountants. Because forensic accounting is relatively a new area of study, a series of working definitions and sharing of corporate experiences should be undertaken and encouraged to ensure a common understanding. Indeed, there is great future in forensic accounting as a separate”niche” consulting.

While the forensic accounting and auditing practice had commenced in the US as early as ’1995, the seed of this specialisation has yet to take off in India. Forensic accountants are only dealing with financial implications of the cases entrusted to them and not engaging in auditing exercise. On account of global competition, the accounting profession must convince the marketplace that it has the “best-equipped” professionals to perform such services.

Forensic accountants are also increasingly playing more ‘proactive’ risk reduction roles by designing and performing extended procedures as part of the statutory audit, acting as advisors to audit committees, and assisting in investment analyst research.

While majority of CAs have excellent analytical skills, they need to acknowledge that ‘forensic’ services require ‘specialised’ training as well as real-life ‘practical’ corporate experience.
…………………………………………………………….
References: –
1)Journal Of Forensic Accounting: Editor-In Chief: Crumbley D. Larry, Publisher: Inc.Edwards. R.T.
2)Journal Of The Chartered Accountant 2007, Pages: 1000-1010.Dr. Madan Bhasin, The Author is Head, Accounting Department, Mazoon College, Muscat, Sultanate Of Oman.
3)Referential Notes Of Prof. Dutta Kr. Uttam, Reader Deaprtment Of Commerce, Reader, University Of Burdwan.
4)Website access: http://www.wikipedia.com, accessed on 4th, February, 2008.

By: Avik Ranjan Roy

About the Author:

Create a video blog

One of the accounting basic area is inventory accounting. Since inventory in a business is usually a quite complex account, having different items with various acquisition dates, certain accounting methods must be applied to properly calculate cost of inventory on hand and cost of goods sold. In this article we will be exploring FIFO (first-in-first-out) accounting method.

The Essence

First of all we need to understand that particular inventory accounting method is required when we have different items of goods acquired on different days and having different costs. Since the dates of acquisition and costs differ, it might be a tough task to calculate cost of goods sold and goods remaining in the balance sheet. One of the methods to do so is FIFO accounting method. Its essence is clear from its name, i.e. first in first out, which means that while calculating cost of goods sold we assume that first we sell those items which were acquired at the earliest time. So first items which came to inventory are being sold first.

This is only an assumption for the accounting purpose and you do not need to sell physically those items which were acquired at the earliest time. Often it might be even impossible, in particular if you have small items or liquid goods, like oil products or grains.

Practical Examples

The easiest way to understand this inventory accounting method is to analyze practical example. Let us assume the company has the following items in inventory:

10 items at $4.5 acquired as of May 10, 2009 15 items at $5.6 acquired as of June 15, 2009 6 items at $3.9 acquired as of July 25, 2009

On July 31, 2009 the company sold 12 items. Applying FIFO method cost of goods sold will be the following:

First we sell items acquired in May, i.e. 10*$4.5=$45, and the remaining 2 items sold are those which were acquired in June and their cost is 2*$5.6=$11.2. Total cots of goods sold is $45+$11.2=$56.2.

By: Ana Orwel

About the Author:

Website content