What is the forensic Audit?

All about the Forensic Audit

When we discuss about the Forensic Audit Few Questions are used to come in our mind. Few are mention here under:

What is the forensic Audit?

The procedure used to examine a person’s or a company’s financial information for use as evidence in court is known as forensic audit. It helps in the detection of financial fraud, wilful defaults, and financial statement window dressing. The two main purposes of financial forensics are to apply financial theories and principles to the facts or hypotheses at issue in a legal dispute. Kind of Common Fraud

·   Bank ·   Asset ·   Overseas Corporate Bodies (OCB) ·   Tax ·   Technology ·   Wire fraud, ·   Securities fraud, ·    Bankruptcy fraud

·   Forgery · Management / Internal /Workplace / Employees. ·   Valuation ·   Financial Management ·   Tax fraud, ·   Credit card fraud,

History & Background of Forensic Audit

The Kautilya’s Arthashastra was written in ancient India around the fourth century BC. The accounting rules and practises in use now are comparable to those from the fourth century BC.

Both fraud detection and prevention have been emphasised in the Kautilya’s Arthashastra described a number of fraudulent methods for stealing public cash, which auditors at the royal treasury has to be constantly on the lookout for.

Why Forensic audit is important nowadays

An extensive range of investigative procedures are covered by forensic audits. A party who is suspected of fraud, embezzlement, or other financial crimes may be subject to a forensic audit. The auditor could be asked to take part in a forensic audit in order to testify as an expert witness in court. There are many reason of Forensic audit is important nowadays are listed below :

• Strict governance and regulatory framework for businesses
• Increasing Non-performing asset accounts with lenders
• banking sector in India being under stress
• Regular update & the Change in guidelines & regulations by Reserve Bank of India.

Who can do the Forensic Audit?

• To become a forensic auditor, we must have a specialist Qualification like Chartered Accountants, Certified Fraud Examiner (CFE), Certified Public Accountant (CPA) certification, Certified in Financial Forensics (CFF).

What Elements of Forensic Audit?

• A forensic audit is an examination and evaluation of a firm’s financial records for good governances and to establish an incidence of fraud and diversion of funds, if any. Places, frequency, Amount, Time, Parties of unusual transactions and/or related party transactions are factors to be considered during forensic audit.

Why Elements of Forensic Audit?

• To ensure timely detection of Asset misappropriation, Financial Statement Fraud, Diversion of funds & assurance to lenders & investors, All the Important factors to be considered during forensic audit process.

When Elements of Forensic Audit?

• Non-performing asset, Wilful attempts, Liquidation, Restructuring, Mergers & Acquisitions (M&A), Takeovers, Frauds,

What are the Fraud incidences?

Fraud is an intentional act of deception intended to give the offender an unauthorised advantage or to deny the victim of a privilege.

Ø  Overstated values Ø  Sales Schemes Ø  Payroll Ø  Suspense Accounting Ø  Purchasing schemes Ø  Shell Company

Ø  Improper disclosures Ø  False Sales Ø  Asset transfer Ø  Ghost employee Ø  Skimming of Receipts

What are purpose of Forensic Audit?

A forensic audit is an evaluation and analysis of the financial records of a company or an individual. An auditor tries to gather information during a forensic audit that might be used as evidence in court. A forensic audit is performed to find unlawful behavior like theft or fraud.

In the corporate sector, Forensic audits are needed to verify & prove the following crimes in an form/ company/ Business. forensic audits are conducted for a variety of reasons. The following is the reason:

• Corruption or Fraud
• Asset Misappropriation
• Financial Statement Fraud
• Cases of corruption
• Mishandling of funds

CBI / EOW ·        Availing facility through false documentation ·        Misutilization of Funds ·        Financial Statement Manipulation ·        Sale/Transfer of Assets ·        False public notices ·        Excess payments to Management/Promoters ·        Siphoning of funds	Resolution Professional • Transaction related to Fraudulent trading •   Sale/Transfer of assets •   Excess payments to related parties •   Transactions with respect to section 43, 45, 46, 49, 50 and section 66 of the Insolvency and Bankruptcy Code 2016
SEBI ·        Insider trading ·        Cash flow movement ·        Price Rigging ·        Manipulation of the books of accounts ·        Misappropriation of assets ·        False public notices ·        Transaction with group concerns	SFIO •   Sale/Transfer of assets •   Monitory misappropriation •   Excess payments to related parties •   Transaction related to Fraudulent trading •   Transactions with respect to section 43, 45, 46, 49, 50 and section 66 of the Insolvency and Bankruptcy Code 2016.
Lender / Banks • Misutilization of Funds •  Financial Statement Manipulation • Sale/Transfer of Assets • Availing facility through false documentation via non fund based facilities like: ·        Bank guaranty ·        Letter of credit ·        BOE Mortgage ·        Pre-shipment / Packing Credit ·        Letter of Undertaking

What are the basic benefits of Forensic Audit?

Let us a know more on the advantages of forensic auditing in the India.

• Tracking and CuRiserve Bank Of india ng Malpractices
• Legal Assistance
• Simplifies Litigation
• Disputes Resolution
• Increased brand Reputation

A company is dealing with ongoing issues with its contracts when working with clients and vendors. If so, it’s time to implement forensic accounting and employ forensic auditing at your workplace, which can support businesses in resolving disputes and improve the quality of its services and products in order to increase business profits.

Ø Promoters/Shareholders •         Litigation •         Decision for mergers and acquisition •         Avoid contract disputes •         Inheritance Disputes Ø Benefits to the company •         Build Robust internal controls •         Growth & Expansion •         Detecting fraud •         Cost Saving •         Capital Safeguarding •         Ensure good governance

Ø Lenders ·        Monitor cash flow ·        Reduce Non-performing Asset’s ·        Red Flag safeguarding ·        Pin down accountability ·        Avoid financial discrepancies ·        Take appropriate action ·        Post Non-performing asset action with law enforcement agencies