What typically triggers a forensic accounting investigation?

A forensic accounting investigation is typically initiated when there are suspicions of fraud or financial misconduct. This often arises from anomalies or irregularities in financial records that suggest that improper or illegal activities may have occurred. These suspicions can stem from various sources, such as tips from employees, discrepancies found in financial accounts, or other indicators that warrant a closer examination of the financial practices of an organization.

Unlike routine audits, which are conducted to ensure compliance with accounting standards and assess financial health, or financial statement deadlines and standard reporting practices, which focus on the regularity and accuracy of financial documents, forensic accounting is specifically aimed at uncovering illicit activities. The specialized nature of forensic accounting involves not only examining financial records but also often includes gathering evidence that can be used in legal proceedings. Therefore, the presence of strong suspicions regarding fraudulent activities is the most critical factor that triggers this specialized investigative process.