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
The scope of forensic auditing :
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:
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Defaulting on debt
Tax evasion or fraud
Professional negligence claims
M & A related lawsuits
Corporate valuation disputes
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:
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