Tanvi Fal Dessai
A forensic audit reviews the accounting statements to collect facts used in a court of trial or civil practice.
Among municipal and federal law enforcement, corporate banking, and private investigators, it plays crucial positions. Forensic auditors are extremely valuable after a case has been constructed, from examining and evaluating records to aiding in court. Only with a professional forensic specialist’s intervention have some of the most significant and most interesting financial crime cases of all time been solved.
Following are the several reasons why the forensic audit is conducted.
When detecting fraud, in a forensic investigation, an auditor will search for:
The most prevalent and dominant form of fraud is asset misappropriation. A few examples of such asset misappropriation include:
To portray the company’s financial performance as better than it is, businesses get into this kind of scam. The aim of presenting false estimates could be to boost liquidity and ensure top management continues to collect compensation or cope with stock results pressure.
The deliberate forgery of accounting documents, omitting sales, including income or expenses, failing to reveal relevant information from the financial statements, or failure to enforce the appropriate financial reporting requirements are several examples of the type that financial statement fraud takes.
Special training in forensic audit methods and the legality of accounting matters is required for a forensic auditor.
In addition to standard audit processes, a forensic audit requires various actions that need to be completed.
The auditor is expected to consider the audit’s focus when the client employs a forensic auditor. E.g., in terms of the nature of raw materials supplied, the customer may be suspicious of potential fraud. The forensic auditor will schedule their investigation to accomplish goals such as:
The forensic auditor is expected at the end of the audit to consider the potential form of crime that has been carried out and how it has been committed. The proof obtained should be sufficient to show the fraudster’s identity in court, expose the fraud system’s specifics, and record the extent of financial damage suffered and the parties harmed by the fraud.
In understanding the fraud and the facts provided, a logical flow of evidence would support the judge. Forensic auditors are expected to ensure that nobody destroys or alters records and other gathered data.
In a forensic audit, typical procedures used to gather evidence include the following:
One of the most prominent securities fraud cases in history may be the Enron scandal. Enron’s accounting staff collaborated with executives between the mid-1980s and 2001 to cover millions of dollars in unfinished ventures and debt.
Since the firm’s shares plunged in the span of a year from over $90 to $1, the U.S. Securities and Exchange Commission (SEC) launched an investigation. Enron’s innovative accounting tactics, such as burying leverage in partnerships, inflating the stock price and debt value, and misrepresenting financial documents, were uncovered by the SEC’s forensic auditors’ close analysis of financial statements.
Read More about the Enron Scandal
To conclude, a forensic audit is a systematic engagement that needs accounting and auditing methods and regulatory system expertise. A forensic auditor is expected to know multiple frauds that can be committed and how to gather evidence.
Our UAE forensic audit and investigative team have considerable expertise in delivering high-quality, timely, and cost-effective financial and accounting audits, recommendations, expert analyses, and expert testimony.