Forensic Audit

To gather and extract evidence against a crime or fraud that can be utilized in a court of law or for legal procedures, a forensic audit involves a thorough assessment of records and documents. According to the meaning of the term “forensic,” refers to the use of scientific procedures and methodologies in the investigation process. Forensic accounting and forensic auditing are extremely dissimilar.

Forensic accounting is similar to a fraud investigation in which the business is the victim of fraud by its workers, suppliers, and clients. While a forensic audit is necessary when a business is the victim of fraud or another crime. This could entail partners, owners, managers, or shareholders committing fraud on their own.

Typically, forensic audit services focus on financial fraud. The highest level of experience and understanding in the field of accounting and auditing is necessary. To acquire the proof, outside parties order forensic audits. For instance, banks may request a forensic audit of non-performing assets or accounts where money is not being used by borrowers for the intended purpose.

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Steps to take while performing a forensic audit

A Forensic Audit will follow similar procedures to a Regular Financial Audit, with the added and crucial step of representation or presence in the Court of Law or Legal Proceeding. It would be necessary to present the acquired evidence in a court of law. The steps in forensic auditing generally are:

  1. Organizing the audit review
  • Careful planning to achieve the investigation’s goals.
  • Structuring techniques and methods.
  • Determining the time frame in which the fraud happened.
  • Calculation of monetary loss sustained.
  • Finding controls and system flaws that contribute to fraud.

 

  1. Obtaining Evidence
  • The investigating team’s evidence must reveal the identity of the fraudster.
  • The order of the evidence should be sequential so that the court may easily understand it.
  • It ought to assist in exposing the specifics of the scam and associated monetary loss.
  • Concrete, unaltered, and unmodified evidence is required.
  • Evidence needs to be protected from harm and assault so that it can be maintained.

 

  1. Reporting
  • The report should specify the scope of the study.
  • Detailed information on the detected fraud.
  • A careful analysis of the data obtained.
  • A flowchart or explanation of how the fraud was conceived and carried out
  • Recommendations & ideas to steer clear of such frauds

 

  1. Presentation in a Law Court
  • The forensic auditor must present the evidence to the court and explain how the suspects were found.
  • to succinctly convey difficult accounting concepts.
  • Give the court all the help it needs for the completed inquiry.

Generally, it is ordered by Stakeholders, Banks, Regulatory Authority, Financial Institutions, Court. A forensic Audit is to confirm and evaluate the fraud with concrete evidence and documents.

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