Forensic means suitable for use in a court of law which gives confidence and sound professional judgment and it is to that standard and potential outcome that forensic accountants generally have to work. It provides detailed oriented workings.
Forensic accounting can be described as it is a specialized field of accountancy that investigates fraud, investigative techniques, evidence gathering and analyzes financial information to be used in legal proceedings. Forensic accounting uses accounting, auditing, information technology, data analytics, legal, and investigative skills to conduct investigations into theft and fraud. It sounds like both litigation support and investigative accounting.
A forensic audit can be described as an examination of evidence regarding a declaration to determine its corresponding to established criteria carried out in such a manner that is suitable to the court.
Forensic accounting does involve detailed inquiry and investigation into the transactional complexity of typical things to the connected issues and events, the job of forensic audit is to provide a double-check or we can say an extra level of check on the consistency issues, the question that the counsel may ask in the context of arguing in courts.
Objectives of forensic accounting and Audit
- To use the forensic accountant’s conclusions to finalize a settlement, or settle a claim, or jury award by reducing the financial component as an area of continuing debate.
- To avoid fraud and theft.
- To restore the downgraded public confidence.
- To formulate and establish a comprehensive corporate governance policy
- To create a positive work environment.
A forensic accountant can ensure the integrity and transparency of financial statements by actively investigating fraud, identifying areas of risk and associated fraud symptoms, and a good fraud prevention program can help to create a positive working environment where employees do not indulge themselves to abuse their responsibilities.
Areas of the forensic audit
The forensic auditor is generally involved in the below-mentioned areas of work:
Fraud detection: Areas of fraud detection comprises investigating and analyzing financial evidence, detecting financial frauds, and tracing misappropriated funds.
Fraud prevention: Areas of fraud prevention comprises reviewing internal controls to verify their adequacy and providing consultation in the development and implementation of an internal control Framework aligned to an organizational risk profile.
Computer forensics: Area of computer forensics comprises developing computerized applications to assist in the recovery, analysis, and presentation of financial evidence.
Expert testimony: Area of expert testimony comprises an assistant in legal proceedings, testifying in courts as an expert witness, and preparing visual aids to support trial evidence.
Forensic audit vs other audits
Examination of evidence regarding an assertion to determine its correspondence to establish criteria carried out in a manner suitable to the court whereas in other financial audits it is an examination of financial information so as to express an onion on a true and fair view of the state of affairs and financial results.
In the forensic audit, the objective is to determine whether fraud has taken place whereas in other financial audits it is done to express an opinion on true and fair views.
There is no such specific period for forensic audit but other financial audits are generally carried out for a financial year.
The extent of forensic audit is investigative and substantive whereas in other financial audits it is risk-based with the help of compliance and substantive procedures.