Unlocking Financial Truth: Why Forensic Accounting Is a Strategic Imperative

In today’s complex financial environment, forensic accounting is no longer just a response to wrongdoing — it is a strategic imperative. Whether protecting against fraud, navigating litigation, resolving family conflicts, or validating insurance claims, forensic accounting professionals bring clarity, credibility, and control to high-stakes situations.

What Is Forensic Accounting?

Forensic accounting is the integration of investigative, financial, and analytical skills to examine financial records in support of legal, corporate, or personal matters. It provides transparency, ensures compliance, and supports informed decision-making.

The Power of Collaboration: Forensic Accountants & Internal Auditors

Forensic accountants and internal auditors often operate in distinct roles—but together, they’re a powerful defense against fraud, risk, and inefficiency.

Internal Auditors focus on:

• Risk management
• Internal controls evaluation
• Governance and compliance monitoring

Forensic Accountants contribute by:

• Investigating financial irregularities
• Detecting and preventing fraud
• Supporting litigation and insurance claims
• Strengthening post-incident controls

This collaboration leads to:

Strategic Applications of Forensic Accounting

1. Civil Litigation and Economic Damages

In legal disputes involving lost profits, business value, or personal injury, forensic accountants serve as expert witnesses who analyze, quantify, and testify on economic damages.

Key capabilities:

• Lost profits analysis: Projecting potential earnings based on historical performance and market trends
• Business valuation: Utilizing methods like discounted cash flow (DCF) to calculate fair market value
• Personal injury and wrongful death: Estimating lost earnings, medical costs, and future economic impact
• Rebutting opposing experts: Identifying flawed methodologies, unsupported assumptions, or inflated claims

Forensic accountants ensure the economic truth is presented clearly, credibly, and convincingly in court.

2. Estate and Trust Disputes

Emotional and financial conflicts in estate or trust matters require objective analysis. Forensic accountants ensure fair distribution and uncover any financial mismanagement.

Services provided:

• Tracing hidden or misappropriated assets
• Business and asset valuation
• Analysis of trustee actions
• Litigation support

3. Divorce Proceedings

Forensic accountants assist attorneys and individuals in uncovering the true financial picture during divorce.

How we help:

• Tracing marital vs. non-marital assets
• Marital balance sheets
• Child and spousal support calculations
• Hidden asset investigations
• Business valuation

By uncovering financial facts, forensic accountants help attorneys negotiate fair outcomes and protect client interests.

4. Insurance Claims

Forensic accountants support fair, evidence-based insurance settlements across various types of claims.

Common claims include:

• Business interruption
• Property damage
• Personal injury
• Fraudulent or inflated claims

They evaluate financial impact, verify accuracy, and present findings in a way that supports negotiation or litigation.

5. Financial Transparency and Accountability

Beyond dispute resolution, forensic accounting strengthens financial governance and stakeholder confidence.

Why it matters:

• Detects financial irregularities
• Promotes ethical conduct
• Enhances compliance and governance
• Supports transparency in decision-making

Stakeholder benefits:

• Informed decisions
• Increased trust
• Risk mitigation
• Enhanced corporate reputation

Forensic Accounting in Action: Industry Use Cases

Forensic Accounting in Construction Dispute Resolution

In the construction industry, the complexity and scale of projects often lead to financial disputes, including cost overruns, delays, and contract disagreements. Forensic accountants play a pivotal role in resolving these issues by providing expert financial analysis and investigative services.

• Evaluating financial impact
• Tracing funds
• Analyzing contracts
• Verifying costs
• Providing expert testimony
• Supporting negotiations

Strengthening Fraud Prevention in Financial Institutions

By leveraging forensic accounting expertise, financial institutions can detect and prevent fraud, safeguard assets, and maintain customer trust.

In 2024, the financial services sector experienced the highest incidence of occupational fraud among all industries, with asset misappropriation accounting for 89% of cases.

One notable case involved a senior bank employee who embezzled $340,000 from 45 customer accounts by exploiting her sole control over these accounts and the customers' infrequent balance monitoring.

Our forensic accounting team conducted a thorough investigation, uncovering the fraudulent activities and implementing enhanced internal controls. This included segregating duties, enforcing mandatory vacations, and conducting regular audits to prevent future occurrences.

Combating Fraud in the Manufacturing Industry

A mid-sized manufacturing firm discovered discrepancies in vendor payments that raised internal concerns. Eide Bailly's forensic accounting team was brought in to investigate. Through transactional analysis and interviews, the team uncovered a billing scheme involving inflated invoices from a long-time supplier, resulting in over $250,000 in fraudulent payments over two years.

In response, forensic accountants not only quantified the loss and supported legal action but also recommended internal control improvements such as surprise audits, vendor management protocols, and staff training. These measures significantly reduced future fraud risk.

Impact:

Ready to uncover the truth and move forward?

Let Eide Bailly’s Fraud & Forensic Advisory Services team be your trusted advisor in navigating financial complexity. Our team of forensic professionals brings deep industry experience, proven methodologies, and courtroom-ready insights to every engagement.