Forensic accounting analysis is incredibly useful for developing a more robust understanding of a company's performance and position. However, there are a number of myths surrounding the process which we should dispel before we proceed. The first myth is that we can use forensic accounting to identify fraudulent reporting, or that we will be able to predict corporate collapse with a high level of confidence. Such a scenario is extremely unlikely. Remember, the financial statements are audited by accountants with access to far more information than just the financial statements, and if auditors have failed to spot a fraud, then it's extremely rare that we would do this using just the information in the financial statements themselves. Instead, the reality is much more subtle than this. Our starting point is instead that we're looking for evidence of bias in the numbers and that bias conceals poor underlying performance, this helps us either to predict corporate distress or identify mispricing of the company's securities. The second myth is that we need to have a detailed understanding of all the accounting rules to spot areas of non-compliance. Although a robust understanding of accounting is important for forensic techniques, it is not essential to know every single accounting rule in detail. Instead, we'll focus our efforts on understanding whether most likely source of bias are in the financial statements and will refer to those areas as soft areas of accounting, and we look for evidence that there is bias in these soft areas of accounting. The third and final myth is that forensic accounting involves reading a company's entire set of financial statements to identify accounting red flags. The issue with financial statements is that they contain vast amounts of information, and it can be difficult to see the wood for the trees when turning through the pages. Instead, we can be much more targeted in our approach, starting off with high level ratio analysis and reviewing key elements of the financial statements to help focus our efforts and identify which footnotes or further disclosures in the financial statements require more detailed analysis.