What is the Meaning of Forensic Audit?
A forensic audit is an analysis and review of the financial records of a company or person to extract facts, which can be used in a court of law. Forensic auditing is a speciality in the accounting industry, and most major accounting firms have a department forensic auditing. Forensic audits include the experience in accounting and auditing practices as well as expert knowledge of forensic audit's legal framework.
Forensic audits cover a large spectrum of investigative activities. There may be a forensic audit to prosecute a party for fraud, embezzlement or other financial crimes. The auditor may be called in during the process of a forensic audit to serve as an expert witness during trial proceedings. Forensic audits could also include situations that do not involve financial fraud, such as bankruptcy filing disputes, closures of businesses, and divorces.
What are the Reasons for Conducting a Forensic Audit?
Forensic audit investigations may expose, or confirm, various kinds of illegal activities. Normally, instead of a normal audit, a forensic audit is used if there is a possibility that the evidence gathered would be used in court.
The forensic audit process is similar to a traditional financial audit — planning, gathering evidence, and writing a report — with the additional step of a possible appearance in court. The lawyers on both sides offer evidence that the crime is either discovered or disproved, which decides the harm sustained. They explain their conclusions to the defendant should the case go to trial before the judge.
How Does a Forensic Audit Function?
A forensic audit comprises the following steps:
Planning the Investigation: The forensic auditor and the team will plan their investigation in order to meet their objectives.
Collecting Evidence: The evidence gathered should be sufficient to prove in court the identity of the fraudster(s), reveal the details of the fraud scheme and document the financial loss suffered and the parties affected by the fraud.
*Reporting: *A forensic audit will need a written report on the crime to be given to the client, so that if they desire, they can continue to file a legal case.
*Court Proceedings: *During court proceedings, the forensic investigator must be present to clarify the evidence collected and how the suspect(s) were found by the team.
