“Forensic accounting” (cf. financial forensics) is a phrase commonly understood to denote a practice dominated by management consultants steeped in public accounting knowledge and skills. This is incomplete and inaccurate. “Forensic accounting” is similar (but not identical) to performance (aka operational) audits practiced by individuals with knowledge and skills beyond those of the common CPA, though the CPA may provide invaluable assistance. The heart of “forensic accounting” is the ability to develop measures of conduct and discover data and other evidence to weigh and interpret the conduct. This ability is neither predicated on predefined principles such as generally accepted accounting principles (GAAP) nor on predefined standards such as generally accepted auditing standards (GAAS).
The “forensic” part of the phrase indicates that the gatekeepers may be judicially controlling to prevent junk “forensic accounting” from reaching the fact-finder, the upshot of which is to categorize “forensic accounting” opinion as expert and not lay. The “accounting” part of the phrase indicates that the unit of analysis is the account, which is commonly understood to mean financial accounts (e.g., taxes receivable).
A more accurate and complete interpretation of “forensic accounting” includes the creative activity (viz., developing measures beyond the predefined imperatives commonly relied upon and noted above) and the analysis of the non-financial account (e.g., qualitative human resources evaluations).
In brief, forensic accountants should liberate themselves from the “forensic” limitation. Preexisting gatekeepers are as prone to error and fraud as predefined rules and regulations are vulnerable to improper gaming. Corruption trumps method of operation. The individuals performing “forensic accounting” need to recognize that which the judiciary accepts and that which conventionally passes as compliance, however these recognitions are not sufficient. The informal domain (i.e., outside the courts of law, trade associations, state boards, etc.) is where decisions are made and power is exercised notwithstanding the refinement process that results in public domain presentations and disclosures, which are more or less characterized by the uncertainty of having embedded materially misleading statements.
Perhaps, “forensic accounting” should be renamed fact-finding of accounts.