FORENSIC AUDIT

Subject: Economy

Context: Growing importance of forensic audit in every sectors of the economy.

Concept :

Forensic audit

• A forensic audit is an examination and evaluation of a firm’s or individual’s financial information for use as evidence in court.
• Forensic auditing is a specialization within the field of accounting, and forensic auditors often provide expert testimony during trial proceedings.
• Most large accounting firms have a forensic auditing department.
• The audit covers a wide range of investigative activities performed by accountants.
• The process may also include serving as an expert witness in a fraud trial.
• A forensic audit could also cover situations that do not involve fraud or embezzlement, such as disputes related to a bankruptcy, business closures, and divorces.
• It helps detect diversion of funds, wilful defaults and window dressing of financial statements.

When Are Forensic Audits Used?

• Forensic audits are used wherever an entity’s finances present a legal concern. For instance, it is used in cases of suspected embezzlement or fraud, to determine tax liability, to investigate a spouse during divorce proceedings or to investigate allegations of bribery, etc.
• An audit may be conducted to determine negligence or even to determine how much spousal or child support an individual will have to pay.

Common Areas where forensic audit is used,

Asset Misappropriation

Financial statement fraud

Corruption.

Conflicts of interest