The BNET business dictionary defines forensic accounting as, “the use of accounting records and documents in order to determine the legality or otherwise of past activities.”
These activities can be tied to a government investigation, client inquiry, employee dispute, vendor issue, or just about any other challenge activity you can imagine.
In a basic sense, anyone who’s culled receipts and other documents out of one or more shoeboxes for an IRS audit is doing forensic accounting. Now, imagine multiplying the challenges by thousands or millions of accounting software transactions; and multiply the complexity to include in-depth analysis as well as review of data.
Plus, you’re now looking at zealous auditors anxious to find fault in the coming era of re-regulation and “cleaning up of America.” Newly appointed Illinois governor Pat Quinn already has announced that he wants to “fumigate” his state’s government.
So, would you rather defend yourself with shoeboxes full of financial records, or bring robust accounting services to the table?
Depending on the size, shape and sophistication of your company, you may feel you can “get by” with entry-level accounting solutions. Here are some reasons to rethink that position:
1. A security breach is only a keystroke away. An employee or hacker intent on stealing accounting software-based information is going to have a much easier time getting through one layer of security (typical of entry-level applications) versus eight (Microsoft Dynamics® GP accounting system software, for example).
Besides investigations, data theft can destroy public confidence in a company. And, there are the expensive and potentially ruinous steps needed to remediate such a breach (e.g., the company notifying holders of all compromised records, offering free fraud notification subscriptions, and the like).
The cost of many mid-market accounting solutions is justified by this one issue alone.
2. Data mining deters threats, identifies inconsistencies. Price Waterhouse Coopers addresses this issue very intelligently in a document entitled, “The DNA of a forensic accountant.” Excerpting from their writing, “Data mining is the art of analyzing large amounts of data in a manner that detects obscure facts, trends, or inconsistencies in a complete and efficient manner utilizing ‘intelligent’ computer applications. Conducted properly, data mining can be used to proactively detect fraud before a company becomes a victim experiencing material losses making them the next headline scandal. Once data such as journal entries, employee, customer and vendors master file data, as well as check registers are obtained in electronic form, a series of procedures can be performed to identify high-risk and suspicious transactions.”
Mid-market accounting system software generally will provide highly accurate and robust data repositories, which can be more efficiently mined than entry-level accounting solutions, which tend to bog down with too many concurrent users, data demands or report requirements.
3. Mid-market accounting solutions can be a deterrent to frivolous lawsuits. Sometimes, sue-happy litigants target companies where they think the consequent disruption and cost to the defendant will force settlement. Or, they seek out firms that will have difficulty defending their accounting software services. The better your accounting software reporting and accuracy, the less you will spend if sued, the less you will be disrupted, the faster you will be able to generate appropriate data in response—and the less you may be targeted in the first place.
Mid-market accounting software services such as Microsoft Dynamics give you a “built-in” protective edge over companies using entry level accounting solutions.
