It is generally said that the forensic accountant analyse 100% data as against the external auditors chosing the samples. But imagine as a certified forensic accounting professional you are required to analyze hundreds of thousands or even millions of line items of journal entries, invoice items, receipts and payments.
How would you identify items to further analyze for certain warning signals of frauds? Without the benefits of digital forensic analysis, the forensic accountant would be looking for a needle in a haystack. Today, with the sophistication of powerful software and the technological ability to extract large amounts of data, 100% of the population of information may be analyzed. Data can be retrieved from a company’s general ledger system, sales databases, time and expense systems, networks, user files, various types of logs such as web logs, building access logs, and essentially anywhere electronic data resides.
Benefits of Digital Forensics
Some of the benefits of incorporating digital forensic in the forensic accounting engagements include:
- The ability to reduce or even eliminate sampling risk – This is the biggest advantage of forensic accountants over the external auditors.
- The comparison of relevant types of data from different systems or sources to show a more complete picture
- The ability to easily trend relevant data over periods of time; fluctuations in trending lines can be analyzed further for false positives and potential risk factors
- The quick identification and extraction of certain risk criteria from the entire data population for further analysis
- The testing for effectiveness of the control environment and policies in place by identifying attributes that violate rules
- The identifying trends of which company personnel, consultants and forensic accountants were unaware