Forensic Auditing

What Is Forensic Auditing?

Forensic auditing is the investigation of fraud or manipulation by performing extremely detailed research and analysis of financial information. Forensic auditors are often hired to prepare for litigation related to insurance claims, insolvency, embezzlement, fraud, skimming, and any type of financial theft.The work of a forensic accountant is generally performed by persons with financial or accounting training, who specialize in acquiring, analyzing, and reporting on financial events for the purpose of the decision-making body or a person. The forensic Auditing field can be concluded to be based upon two concepts, perception and reality. Subfields of forensic Auditing include securities and tax fraud, business valuation, computer forensics and electronic discovery, economic damages, bankruptcy and insolvency, and due diligence, which all can be framed as the intersection of perception and reality.

Forensic auditing utilizes accounting, auditing, and investigative skills to conduct an examination into the finances of an individual or business. Forensic Auditing is frequently used in fraud and embezzlement cases to explain the nature of a financial crime in court.

The Need Of The Business World

The scope of forensic Auditing has been developing for the last 50 years across the business world. The concept of fraud triangle, which made its way to the auditing standards is pervasive in the auditing standards and governs much of the work that is required to be performed by auditors. Laws have also been established around this basic understanding of fraud, with variations related to various legal environments prevailing in different geographies.

Relevance of forensic Auditing in an organisation

Assessing working transactions for compliance with basic operating processes and agreement.

Performing thorough scrutiny and examination of financial payment dealings in the accounting system to decide if they are standard or beyond company policy.

Assessing standard ledger and financial reporting system transactions for likely unlawful tampering or falsification of information or accounts and its consequences.

Analysing warranty requests or returns for practices of fraudulence or misuse.

Assisting in estimating the economic damages and the ensuing insurance demands that arise from catastrophes such as fires or other natural setbacks.

Assessing or affirming business rating in consolidations and accomplishments.

The scope of forensic auditing :

Obtaining evidence of unusual developments in the business with focus on financial transactions

Design the Auditing processes for verifying important premises and data

Exhibiting thorough professional skills in identifying possible fraud

Performing audit type processes on a routine basis aiming to reduce the risks

Covering broad range of businesses and geographies which requires continuous surveillance of various transactions on ongoing basis.

Types of Forensic Auditing

The work of a forensic accountant is generally performed by persons with financial or accounting training, who specialize in acquiring, analyzing, and There are various types of forensic auditing that can take place, and they are typically grouped by the types of legal proceedings that they fall under. Below are some of the most common examples:

Divasprik Intelligence has specialized in Forensic Auditing and we do have experts who have more than 25+ years of experience in the Accounting field.

Financial Theft

Securities Fraud

Bankruptcy

Defaulting on debt

Economic Damages

Money laundering

Tax evasion or fraud

Privacy information

Professional negligence claims

M & A related lawsuits

Corporate valuation disputes

Divorce proceedings

Forensic Auditors: Scope of work

Although the focus is fundamentally on accounting concerns, the function of a forensic accountant may also cover a more generic investigation including collection of evidence. Almost every accounting firm in the country today has forensic accounting sections. Some forensic accounting experts may specialise in insurance applications, and fraudulence construction. Forensic accountants may also offer their services in retrieving profits from crime. In India the forensic accountants known as Certified Forensic Accounting Professionals.

Forensic Auditing in India

Given the nature and types of fraud in India, the Reserve Bank of India (RBI) has compulsorily made forensic accounting audit mandatory for all banks within the country. The establishment of Serious Fraud Investigation Office (SFIO) in India has become the turning point for forensic accountants in the country. The indications of the growing demand for the field are:

The online criminal offences which grows continuously in the country

Cyber security fraud which is sky high in the current world

The dominant fraudulent practices observed as part of the operations of co-operative banks which are going bust

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