Introduction: What is Forensic Accounting?
Forensic Accounting is a synthesis of accounting, auditing, and investigative skills used to uncover financial discrepancies, fraud, and hidden transactions. This service goes beyond traditional auditing; while a regular auditor checks the accuracy of financial statements against standards, a forensic accountant looks for intentionally hidden information, manipulations, and criminal schemes. In Georgia, where business relationships are becoming increasingly complex, the need for forensic accounting is growing in both corporate disputes and internal investigations. This service is vital for company owners, investors, and lawyers who need irrefutable financial evidence to establish the truth.
What Does This Service Cover?
Forensic accounting specialists conduct deep and detailed financial research. The service covers a wide spectrum:
- Financial Fraud Investigation: Detecting suspicious transactions within the company, misappropriation of funds, or embezzlement.
- Asset Tracing and Recovery: Identifying the routes of illegally hidden or alienated property and cash funds.
- Reconstruction of Financial Documentation: Restoring damaged, destroyed, or incomplete accounting records to get a real picture.
- Damage Calculation: Determining the exact amount of financial losses caused by fraud, breach of contract, or other actions.
- Bankruptcy (Insolvency) Analysis: Determining the real causes of a company's financial collapse—whether it was a natural process or intentional bankruptcy.
- Conflict Situation Analysis: Objective assessment of financial status during disputes between partners.
Common Situations and Scenarios
A forensic accountant is often engaged when company owners have a well-founded suspicion regarding the integrity of management. For example, if a company's revenues are increasing but profits are decreasing for unexplained reasons, this may indicate so-called "kickbacks" or artificially inflated expenses. A second common scenario is a business partner split: when one partner leaves the business, it is necessary to accurately determine the company's real value and distribute assets to avoid deceiving the other party. Also, in divorce cases where one spouse tries to hide business assets to mask their real property status, a forensic accountant is essential. Additionally, during a company acquisition (M&A), an investor may require deep financial due diligence to ensure they are not buying a "pig in a poke."
Georgian Legal Framework
Forensic accounting is closely linked to Georgian legal norms. When detecting signs of a crime, the Criminal Code of Georgia is relevant, specifically articles regarding fraud, misappropriation, and embezzlement. In civil disputes, the demand for compensation of damages is based on the Civil Code of Georgia, where exact calculation is crucial for the court. The "Law on Entrepreneurs" defines the fiduciary duties of executives, the violation of which often becomes the subject of forensic accounting research. Furthermore, detecting violations of the Tax Code of Georgia can also be part of this process, especially if it concerns tax evasion schemes.
Process: How Does a Specialist Work?
The process begins with identifying the problem and defining goals. The specialist collects a large volume of financial and non-financial data: bank statements, invoices, electronic correspondence, and contracts. Then, deep data analysis is performed using special methodology, which implies studying trends, detecting anomalies, and establishing connections between various transactions. Interviews with employees are often necessary. At the end of the process, the forensic accountant prepares a detailed report reflecting the revealed facts, evidence, and conclusions. This document can subsequently be used as evidence during negotiations or legal dispute proceedings.
Why Choose a Specialist on Legal.ge?
Legal.ge is a platform gathering highly qualified forensic accountants and experts operating in Georgia. Our verified specialists possess both auditing and investigative skills, which is a guarantee of quality service. On Legal.ge, you can find professionals who have a high standard of confidentiality protection and experience in solving complex financial puzzles. Find your trusted specialist with us and protect your business interests from financial risks.
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