Forensic accounting involves the use of accounting, auditing, and investigative skills to review financial activities for the purpose of uncovering fraud, misappropriation of funds, or financial irregularities. It is a specialized field within accounting that often assists in legal investigations or disputes, providing evidence and insight into financial discrepancies. Forensic accountants often work with lawyers, insurance companies, or government entities to analyze financial information in cases such as bankruptcies, fraud litigation, or insurance claims.

For example, a forensic accountant may be hired to investigate the financial records of a company suspected of embezzlement. They would examine the transactions, identify abnormal activities, and present findings that can be used in court. Another example might be in a divorce settlement, where forensic accountants help in determining accurate valuations of joint assets.

This practice is crucial in maintaining transparency and accountability in financial matters, ensuring that funds are accounted for and financial reports are true and fair.