Introduction to Forensic Audit Applicable Laws &

Transcript:Introduction to Forensic Audit Applicable Laws &:
Introduction to Forensic Audit Applicable Laws & Regulatory Environment Course Introduction, Business Fraud, Scenario, and Fraudster Profile. Forensic Audit A forensic audit is an analysis and review of the financial records of a company or person to extract facts, which can be used in a court of law. Forensic auditing is a speciality in the accounting industry, and most major accounting firms have a department forensic auditing. Reasons for Conducting a Forensic Audit Forensic audit investigations may expose, or confirm, various kinds of illegal activities. Normally, instead of a normal audit, a forensic audit is used if there is a possibility that the evidence gathered would be used in court. Functions of Forensic Audit Function A forensic audit comprises the following steps: Planning the Investigation Collecting Evidence Reporting Court Proceedings Need of Forensic Audit Function An entity should direct for forensic audit due to occurrence of following: Theft of business information or where business systems have been hacked. Issues identified by Whistle Blowers Reconciliations resulted in unidentified material differences Suspicious of fraud or illegal activity. Turnover has occurred and balances are showing negative results. Forensic Audit Procedures Since the forensic audit is more of investigation and collection of evidences, it is of great importance that the audit should be conducted with an attitude of professional scepticism. These procedures are more specific towards detecting possible material misstatements in the financial records that result into fraudulent activities. Investigation Methodology of Forensic Audit The forensic audit investigation is the utilization of specialized investigation skills to conduct the forensic audit engagements in such a manner that the outcome can be presented in court of law as evidence. An auditor can follow a nine-step methodology for fact finding in case of forensic audit engagements: Accept the forensic audit engagement. Evaluate the allegations or suspicions. Conduct due diligence background notes. Complete the preliminary stage of investigation. Check the prediction assuming that there will be a litigation. Begin with external investigation. Gathering the required proofs and evidences. Preparing report on findings; and Court proceedings. Common Areas of Forensic Audit Some of the common areas that are to be detected in forensic audit are: Asset Misappropriation. Instances of Corruption. Extortion. Financial Statement fraud. Conflict of interest. Business Frauds Corporate fraud consists of illegal or unethical and deceptive actions committed either by a company or an individual acting in their capacity as an employee of the company. Corporate fraud