In regular financial auditing process, the focus is on a sample of transactions, accuracy and reliability of the financial statements, and making remark in auditing report in case of any deviation, error, unusual exaggeration, etc. The forensic accounting process differs from regular financial auditing, searching only for suspicious transactions, and using a strict digital forensic process. The accountants and auditors have to look for different type of fraud throughout the internal control and audit processes. In digital environment context, forensic accounting plays an important role in detecting these frauds (financial and non-financial) that are not discovered in accounting and internal auditing process. However, forensic accounting is a great challenge for regular accountants and accounting auditors due to the lack of knowledge and experiences in digital forensic investigation. Therefore, there is a practical need for combined work of the accountants, auditors and digital forensic investigators in the complex Internet environment. In the forensic accounting approach (forensic accounting is sometimes called forensic analytic), meaning the analysis of digital data in order to detect, recover and reconstruct them or otherwise support or deny a claim of financial fraud. The main steps in forensic accounting are data collection, preparation, analysis and reporting. On the other side, prevailing definition of public (law enforcement) forensic investigation includes the following steps: forensic imaging, data acquisition (preparation and extraction), data identification and analysis, reporting and case analysis. Personally I prefer integrated forensic accounting model, which uses a synergy approach of accountants, auditors and digital forensic analysts.

Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation.

"Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial.

I guess by forensic accounting you understand accounting expertise demanded within a law suit, either by the judge, prosecutor, public attorney (criminal law) or by parts (civil law).

I guess the whole point of such expertise is to provide an accurate answer to a question within the law-suit.

-Continuation- Audit and Forensic accounting are in my opinion two different things. Audit should provide reasonable assurance, while forensic accounting should provide accurate evidence.

Please consider the following definitions:

“The integration of accounting, auditing and investigative skills yields a specialty known as Forensic Accounting” (Alan Zysman).

"Forensic Accounting is the application of accounting principles, theories and discipline to fact or hypotheses at issues in a legal dispute and encompasses every branch of accounting knowledge" (AICPA).

“Belonging to, used in or suitable to courts of judicature or to public discussion and debate” (Webster’s Dictionary).

With respect to the scope of forensic accounting please consider the following:

“Forensic Accounting provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution” (Alan Zysman).

Forensic Accounting vs Traditional Auditing:

It is not an assurance engagement.

The scope is not an error identification or prevention.

Provides conclusions on a subject matter, which is always related to fraud.

The use of materiality may not be appropriate.

The quality of documentation could tend to be conclusive rather than persuasive (e.g. interviews are very close to testimonies).

Evidence gathering procedures and audit tests.

The application of sampling may be inappropriate.

The type of the report is not standardized and always tailored to subject matter and the type of fraud.

Forensic Accountants do not apply professional standards on auditing.

One of the more reliable sources of information about forensic accounting and fraud examination is the official website of the Association of Certified Fraud Examiners (ACFE) in Texas, USA. Several universities in USA offer courses on forensic accounting (University of Washington Tacoma is one of them). It is an emerging field with enormous potential for growth in developed and developing countries.

Forensic accounting relates to the application of accounting concepts and techniques to legal problems. Forensic accountants mainly investigate and document financial fraud and white-collar crimes. The outcome of the forensic investigation, including estimates of losses, damages, and assets would be used as litigation support to attorneys and law enforcement personnel. Forensic accounting offers vital assistance for legal cases in many areas of the law such as stock market manipulations, price fixing schemes, product liability, shareholder disputes, and breaches of contract.

In many cases, forensic auditing is similar to conduct an investigation for achieving a specific purpose or report. This could be meant for an investigation on fraudulent transactions, accounting manipulations, cheating and even overriding internal control systems.