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A forensic audit inspects and evaluates a firm’s or an individual’s financial records to utilize them as proof in the court of law or and legal suits. It serves as a backing to prove fraud in the business in an apparent risk-prone environment. Forensic audits need the expertise of accounting and auditing procedures and expert knowledge about the legal framework of such an audit. A forensic audit can be directed to prosecute a party for fraud, embezzlement, or other financial allegations to make the financial records more reliable. Forensic auditing is a forte in the accounting industry, and most major accounting firms have a department of forensic auditing.
Forensic audits cover a wide variety of investigative activities to decrease corporate fraud. For example, the auditor may be called in during the procedure of a forensic audit to serve as an expert witness during trial proceedings. Forensic audits could also have circumstances that do not require financial fraud, namely disputes related to bankruptcy filings, business closures and divorces. It includes detailed planning of tasks aimed at documenting, determining and calculative analysis.
Types of forensic auditing
Various types of forensic auditing can occur, and they are typically grouped by the types of legal proceedings they fall under. Below are some of the most typical examples:
Why conduct a forensic audit
In selecting timely detection, prevention and regulation over corporate fraud and favour to the due investigation, the forensic audit has an imperative role in assisting the corporates for sustaining efficiency and excellence. The forensic audit procedure is similar to a traditional financial audit- planning, gathering evidence and writing a report- with the additional step of a possible appearance in court.
Forensic audit as a combined effort of both accounting and investigation serves all the five E’s of good governance on the more extensive parameters. It makes the corporates cultivate and ripen on being practical, efficient, accessible, empowered, and equitable. Forensic audit investigations can discover or confirm multiple types of illegal tasks. Generally, a forensic audit is selected instead of a regular audit if there’s a possibility that the proof collected would be utilized in court.
Grounds where forensic audit is obligatory to conduct:
Following are the grounds where forensic audit is mandatory to achieve:
Sources of the forensic audit
The precise position of laws and regulations addressing corporate fraud and also aids in achieving forensic audit would be considered under the following heads:
How to conduct a forensic audit
The process of conducting a forensic audit is similar to other audits. A forensic audit comprises of the following steps:
The following points should be considered while collecting evidence:
At AJSH, we assist our clients in dealing with forensic/ risk audits, internal audits, stock audits, tax & GST audits, government audits, various corporate matters (Company incorporations, statutory audits, ROC Compliance, company winding-up) in India by providing them adequate support and guidance from our end. If you have any questions or wish to know more about using the work of an auditor, kindly contact us.
