How to Apply It

How Is Forensic Accounting Applied to Investment Research?

Internal documents cannot be used to directly analyze a company. That would be illegal. In addition, most forensic cases only reach litigation and discovery once a company has already imploded (which is far too late for investors).

Instead, forensic accountants build their expertise by examining numerous high-profile implosions from the inside out. By seeing how troublesome accounting issues work from the ground-up, forensic accountants learn to identify the red flags that existed in the public financial statements before the company experienced trouble. These red flags are constantly communicated to the investment team, which then searches for them in other public companies.

Because new accounting issues emerge continuously, forensic accountants need constant exposure to such cases. For an investment research firm to benefit from such forensic expertise, it needs to be partnered with an actual forensic firm that takes on litigation cases. ARC is the only firm in North America that has this unique relationship.

What are the benefits?