Forensic accounting is the use of professional accounting skills in matters involving potential or actual civil or criminal litigation, including, but not limited to, generally acceptable accounting and audit principles; the determination of lost profits, income, assets, or damages; evaluation of internal controls; fraud; and any other matter involving accounting expertise in the legal system.

The word “forensic” is defined by Black’s Law Dictionary as “used in or suitable to courts of law or public debate.” Therefore, “forensic accounting” is actually litigation support involving accounting.

Accordingly, most fraud examinations are forensic accounting but not all forensic accounting is fraud examination. For example, the valuation of a property in a minority shareholder derivative suit would be included under forensic accounting but may not necessarily involve fraud.

Fraud examinations will generally fall under the category of forensic accounting because the majority of examinations, investigations, and reports involving fraud are all done with “an eye toward litigation.” In other words, fraud examiners are taught to conduct their examination with the assumption that the case may end in litigation.