Contact Neumeister & Associates, Forensic Accounting Firm In Los Angeles
Forensic accounting involves investigating business embezzlement or possible instances of fraud in a company in Los Angeles or for any other major city for that matter. The legal proceedings and financial information are dissected, and the investigators will see where the business went wrong.
Some of the standard applications of this fiend of accounting involve a restructuring of an entire financial record from the start of the company up to a point when it declared bankruptcy. There are criminal investigations, civil litigations, damage quantifications, and other losses that affected many people as a whole.
The practice of this diverges from the traditional paths that accountants usually make. There are firms like Neumeister & Associates that specialize in these kinds of things, and you can contact Forensic Accounting in Los Angeles through the link provided for more information. There are several differences that these experts do from the traditional accountants, but they are more thorough.
Generally, accounting may involve storage, records, sorting the reports, and managing financial transactions every day. Many professionals who want to work as an accountant are encouraged to complete a degree for this.
However, some may even go so far and obtain a Master of Accountancy degree that involves a concentration in forensic accounting in Los Angeles. Others want a higher level of expertise and business knowledge that can help them excel in their careers. Although others wanted to have more options, some genuinely wanted to investigate and help entrepreneurs.
An Introduction to Forensic Accounting
The process of forensic accounting involves a thorough look at an individual's financial records or the company that they have. The experts are trying to track the transactions and the assets. The work involves a lot of education, skills, and experience, and there is a range of tools used for these. The patterns and trends are carefully analyzed on each dataset to look for suspicious activities.
One of the tenets of this field is the coursework done by Benford's Law. Learn more about this law on this site here. It was a theory that was developed by Frank Benford, physicist, in 1938. The theory states that in statistics tables or listings, the digit "1" tends to occur with a probability of about 30%.
The other nine digits that exist can be expected to show a probability of 11.1%. When the financial data does not reflect Benford's Law, the experts will have reason to believe that there was a manipulation that happened, and the numbers are not what they seemed to be.
A full-blown investigation can be launched whenever a council deems it necessary. The analytics using the tools are going to start, and the financial datasets are organized accordingly. There are classifications and combing involved, and the transactions are explored more carefully. The forensic accountants' employers can gain insights into the assets and the numbers that were entered in each account.
Famous Examples to Know About
History is full of people who have committed serious misconduct against the companies that they were working for. The field provided light to the fraudulent transactions that were happening during the time, and some were even considered high-profile cases. Their discoveries led countries like the USA to change their rules and regulations about company operations on its soil. Some of the examples that you may want to know about are the following:
Enron Corporation was a company in the US that was even considered one of the most innovative companies of its time. It offers various services and products to its customers, and many acknowledged that it was destined to do great.
However, upon retracing the transactions and accounts, the associates discovered that the business would produce an asset with an inflated price. This is where the company is getting its false claims of earning revenues and getting boosts to its overall valuation.
The Securities and Exchange Commission has launched an investigation about this, and the value plummeted in 2001. When December came in the same year, it was found out that Enron had built a house of cards that quickly crashed down.
With nothing left, the business finally filed for bankruptcy. Its impact on the law made Congress pass a law called Sarbanes-Oxley Act. This has increased the fines for companies that are aiming to defraud their investors and shareholders.
Bernie Madoff was very popular and well-known. He was responsible for defrauding over $6o billion when he tried to acquire funds from various investors. He delivered manipulated numbers and reports to the investors while he illicitly used their money to purchase the luxuries that he wanted in life. He became famous as one of the forerunners of the "pyramid schemes" that are also rampant today.
He paid his old investors with the money that the new ones paid to him. This is one of the largest schemes of its type in his time. The Ponzi scheme made Madoff one of the most notorious criminals in business and of the century. The crimes have impacted the lives and relationships of thousands of individuals.
People who invested in his so-called stocks and securities have discovered too late that they were scammed. The loss of life savings and shame was too much for many people that they have ruined themselves by drinking and divorce.
Even several decades later, there are still specialists on the case who wanted to know about the money that Madoff was able to hide. As of the moment, only over $13 billion have been found out of the $65 billion. Know more news about Bernie Madoff here: https://www.cnbc.com/2020/02/05/bernie-madoff-says-he-is-dying-seeks-early-release-from-prison.html.
Stanford Financial Group
James Davis and Allen Stanford headed the company of Stanford Financial Group. In essence, they have perpetrated another Ponzi scheme similar to Madoff but on a smaller scale. The head of the company misappropriated an approximate $1.6 billion in funds that were trusted to them.
Specialists working for the SEC have discovered that the reports were false, and the financial statements were not genuine. The income that the two had claimed their investors have earned is not what it seems to be. The company operated for more than a decade, and its analysts have believed that people inside are willing to go to any lengths and deceive over 30,000 members worldwide.
Where Can You Find the Specialists?
Some many businesses and organizations employ these experts. They can be law firms, governmental organizations, and accounting companies.
The government, especially in cities like Los Angeles, may employ specialized forensic accountants to investigate suspicious organizations and individuals. Some of them work to collect more than enough evidence to start a warrant of arrest. Some are working with the Internal Revenue Service to look at the records of a business and other entities when filing taxes. Any discrepancy discovered may warrant an investigation from the IRS.
Many firms want to provide impeccable service to their clients, and there's no room for errors in these processes. Uncovering a possible misappropriation of funds or fraudulent spending can be something that the experts handle as well. They are hiring the best experts for extra preventive measures against entities who plan to commit fraud.
Sometimes, lawyers would want the help of forensic accountants to know more about audit investigation. They help with translating financial discoveries and try to read them in a layperson term for better understanding.