Forensic analysis involves a detailed evaluation of a company’s financial statements to detect red flags that could indicate accounting fraud or irregularities. This step is pivotal in identifying and avoiding potential accounting frauds well in advance, safeguarding investors from sudden losses. The study "Contribution of Forensic Accounting to Corporate Governance" by Bhasin (2013) underscores the effectiveness of such techniques in identifying financial irregularities and preventing corporate fraud.

Governance analysis focuses on the ethical standards and management practices that shape a company’s direction. A company with strong governance practices ensures transparency, accountability, and alignment of interests between management and shareholders. Research like "The Impact of Corporate Governance on Firm Performance" by Gompers, Ishii, and Metrick (2003) demonstrates how firms with robust governance outperform their peers in profitability and valuation.