INVESTIGATIVE / FORENSIC AUDIT
Investigation / Forensic Audit
Whenever a company suspects any malicious activities in the organization, it is an absolute necessity to do a thorough investigation into the state of affairs, books of accounts, financial statements and business procedures. This is when the role of investigative auditors comes into picture that can stand independent to the organization and do a detailed and unbiased investigation.
The term ‘Forensic’ means suitable for use in the court of law. It is derived from a Latin word forensic meaning “of or before the forum”.
Forensic audit is the examination of documents and the interviewing of people to extract evidence. It involves investigation into the financial affairs of an entity to obtain evidences purporting to any fraudulent activity. It is normally conducted in order to prosecute a party for fraud, embezzlement or other financial claims.
Audit V/s Forensic Audit
There is a widely upheld belief that a financial auditor would detect a fraud if it so happened during the relevant financial period. The truth however is that the procedures followed for a financial audit is designed to detect material misstatements not frauds. It aims to obtain reasonable assurance that the financial statements are free of material misstatements.
Whereas a Forensic Audit is done in response to a specific event to determine whether the fraud has actually taken place. It involves independent verification of suspected or selected items where misappropriation is suspected.
Role of a Forensic Auditor
A forensic auditor performs the following during the course of a forensic audit:
- Identifying documents and records to be reopened.
- Evaluating the produced documentation and information for completeness and accuracy.
- Identifying individuals who are most knowledgeable of facts.
- Conducting specific research relevant to the facts of the case.
- Identifying alternative means to obtain key facts and information.
- Cross examination of facts and witness expert.
This stage involves meeting the client to obtain an understanding of the background, important facts, concerned persons and issues at hand. It is often useful to carry out a preliminary investigation prior to the development of a detailed plan.
Development of plan
This plan will take into account the relevant information obtained during the initial meetings and sets out the objectives to be achieved and methodology to be utilized to acknowledge them.
Obtain relevant evidence
Depending on the nature of the case this involves obtaining documents, tracing relevant persons and identifying suspicious instances. In order to gather detailed evidence, the investigator should understand the specific type of fraud that has been carried out and how the fraud has been committed.
This involves calculating economic damages, summarizing the transactions, performing tracing of assets, performing sensitivity analysis thus analyzing all the information and evidences collected.
After the investigation is complete, a forensic auditor is expected to issue a Forensic Audit Report on the findings of the investigation and also a summary of the evidence and conclusion about the loss suffered due to such fraud.
Have you or your company ever faced situations of fraud? We can help you by investigating the relevant facts that will enable you to present it to a court of law.
Our experience include investigating the embezzlement of cash or funds and such various other assets of the company.