Forensic audit

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Forensic Audit[A way to detectCorporate fraud]

Sandesh Mundra & Associates - Prepared by Bhavik Siddhapura - [email protected] - 9426024975

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A Forensic Audit is a comprehensive and systematic process involving a series of activities and tasks undertaken for establishing the accuracy and authenticity of the transactions under review.

It may include- Investigative techniques with an understanding of accounting principles, review of financial statements to determine if they are accurate and lawful, Application of accounting methods to the tracking and collection of forensic evidence.

Meaning of Forensic Audit



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Forensic Audit

Propriety audit

Regularity audit

Investigative audit

Financial audit

Examination of legalities



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Why Forensic Audit Required?

To find out whether or not true business value has been reflected in the financial statements

To find whether any fraud has taken place

To determine if there are suspicious practices hiding beneath company or individual financial records and statements



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When Forensic Audit Required ?

Wherever an entity’s finances present a legal concern, In cases of suspected fraud, To determine tax liability, To investigate allegations of bribery, To strengthen a company’s already good business practices To either determine the lost income as a result of a fraudulent

financial/ operational report, To determine the damage that falsified reports caused to

shareholders, clients or employees



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Types of frauds detected by Forensic auditors

1.Revenue related frauds

2. Falsified market position

3. Third party related frauds

4. Deceptive sales practices

5. Misrepresentation by Directors.



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Constituents of Forensic Audit

1. Assessment of fraud risk factors.

2. Comparison and contrast of various fraud scheme.

3. Developing off-setting internal controls.

4. Using data analysis techniques.

5. Evaluating internal controls.

Sandesh Mundra & Associates - Prepared by Bhavik

Siddhapura - [email protected] - 9426024975


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Constituents of Forensic Audit6. Evaluating financial and program risk for potential fraud.

7. Applying various evidence-gathering techniques used to detect fraud.

8. Justifying the auditor’s conclusion of fraud.

9. Documenting the evidence and data-gathering process.

10. Sharing the finding with agency and advise them on how to avoid the fraud in the future



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Distinction Between Financial Audit and Forensic audit

Financial Audit Forensic Audit

Examination of the financial statements in accordance with the applicable standards and norms.

Identifying and analyzing the possibility of fraudulent financial reporting and misappropriation of assets.

Audit opinion is on the whole set of financial statements being audited

The main concern is on raising of the awareness of the specific irregularities reported

Audit is the nature of public interest.

Audit is conducted considering the interest of specific person who have hired them.



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Distinction Between Financial Audit and Forensic audit

Financial Audit Forensic Audit

Auditors are concerned with errors and irregularities.

Forensic accountants are concerned with distinction between errors of judgement and deliberate misrepresentations.

Working without indemnification Work usually has both indemnification and hold correct protections

Auditor determines the nature , scope and extent of the audit.

Client determines the nature , scope and extent of the audit.



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How are frauds detected in the Forensic Audit ?

The forensic auditor specifically look for the financial misconduct taken place in the financial records and statements of the entity.

AS against the regular review or audit of financial statements , it focuses on the gathering of the evidence to be produced in court of law the proceedings taking place.

Various detecting techniques used by Forensic auditors may include the investigation, pro-active detection, identifying the absence of morals rules in organization, weaknesses in the line of defense such as ineffective internal control /audit.



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Conclusion of forensic Audit

Forensic Auditing not only identifies the factors or reasons adversely affecting the trust in mechanism of trade, finance and investment, but also helps in recognizing the destabilizing effect on commercial institutions and corporate houses directly affecting the national progress and putting strain on national resources.



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THANK Y

U



Forensic audit

Law

Transcript of Forensic audit