Accounting is like medicine is a broad field offering numerous no of opportunities for specialization. One of the trending specialization is forensic auditing, forensic accounting which is a branch of profession that applies accounting skills to the legal questions. There are different types of fraud involved which might include battling fraud or uncovering failure to comply with the accepted accounting standards, but forensic audit offers a wide range of other services. This forensic audit is conducted by forensic auditor.

Accounting students who wish to become forensic auditors can choose from the limited no. of programs offering that major or conventional accounting degree and then earn certification in the forensic accounting techniques. The forensic accountants must combine a diverse set of skills. He looks after the true and fair view of the financial crimes that have been taking place.

There is no mention of forensic auditor in the Indian statutes so far but there are various provisions related to the forensic auditors in the statutes. Forensic auditors may help the police, and other authorities in collecting evidences and other investigation purposes.
Forensic audit is the kind of financial information investigation services that provide by professional forensic accounting firms which normally required by entity as the result of legal purposes. It normally requires to have a no. of skills and background that add up to the accounting and auditing skills. Forensic auditor needs both auditing as well as the accounting skills. It goes hand in hand.  In order to perform an investigation on financial statements, the forensic auditor needs to deeply understand how accounting records are performed as well as accounting treatments from normal accounting treatment to the complex accounting treatment.

Importance of Forensic Auditor

Forensic Auditors play an important role. There must be a small group of forensic auditors in the organization because they play a crucial role:

• Carry out the vision and mission of forensic audit to prevent, detect and investigate issues of fraud and financial abuse within the organization
• Identify, clearly define, forensic issues and root causes, recommend improved internal controls and business processes, and ensure that corrective action plans are developed.
• To promote a zero tolerance control environment where fraud or any non-compliance is unacceptable.
• Conduct investigation of fraud and abuse
• Oversee the investigation planning and forensic audit report writing process for forensic audits and investigations.
• During the investigation process, provide effective recommendations and solutions to identified issue, ensure business agreement, and follow-through.

Qualification required being a forensic auditor
To become a forensic auditor one must have a basic accounting degree or economics degree and understanding of how business system works. Some specialized certification could be an added advantage. There are some institutes in India from whom you can obtain such certifications, like

Certified Forensic Accounting Professional

Indiaforensic center of studies is the first institute which has launched the course on forensic accounting in India. Indiaforensic provides various certifications on forensic accounting of which one is Certified Forensic Accounting Professional. One can get more information about the above mentioned courses on Indiaforensic Centre of Studies website.

Role and Responsibilities of Forensic Auditor

If there’s a case in the court concerning funds, money, for an evidence to be found, the forensic auditor comes into picture to carry out the investigation process. A forensic audit is an examination carried out on a particular individual’s organization financial statements/ information to act as evidence in the case of fraud. Following is the role of forensic auditor:

Investigation

The investigation is carried out focusing the suspicion of the client. If a client suspects there might be some fraud going on in the organization. The forensic auditor can investigate on the following points:

• Type of fraud is being carried out
• The time at which the fraud arose
• The steps involved to conceal the fraud
• The impact of fraud on the organization

Evidence

This is the critical part of the investigation since it is the main reason for the auditing to be carried out. The forensic auditor is expected at the end out of the audit to present full evidence showing the type of fraud that was carried out, the effect of the fraud to the company and also the people involved in the fraud.

The techniques used to gather evidence are as follows:

• Substantive Procedure

This is where the auditor reviews the entire documentation o the company concerning the area of investigation to find out if there are any material statements which are not accurate, the validity of the materials and review on the accuracy of the financial records.

• Analytical Procedure

This helps the auditor to understand the client’s business. He uses this to compare the different periods of time on the expenditure/budget of the company for example.

• Software Programs

The forensic auditors have their own software programs that are able to detect any fraud that might have been carried out using technological devices like computers.

• Internal Controls

The forensic auditor takes time to understand and test the internal control systems to find out if there are any loop holes in the system that would have allowed the fraud to take place.

Report

At the end of the audit, the auditor makes a report regarding the fraud to the client. The report shall include the following:

• Findings of the report
• Evidence
• Information on how the fraud was carried out.

Court

During the court proceeding, the auditor must be present in order to explain how he collected the evidence and also how he identified the suspects. The auditor should explain all the process using simple terms.  That being said, it is true that a forensic auditor plays a very big role but he does not work alone. In order to get to hire a forensic auditor, you must decide on which the forensic accounting firm to contact.

Conclusion

Forensic Auditor plays a vital role in all aspects of the society. Regardless the role of forensic auditor in the organization it is likely at the same point the forensic auditor comes in contact with the forensic accounting.

With the boom of fraud in the global economy, forensic accounting has become an emerging topic of great importance for academic, research as well as the industries. Fraudulent acts and corruption go hand in hand as they have become the loop holes that are gone deeply in the fabric of our society.  Forensic Auditing is an essential tool for uncovering or inquiry of financial crimes and direction of justice. As the scope of forensic accounting is increasing, the importance of forensic audit in India is also increasing very rapidly.

Meaning of Forensic Audit

Forensic Audit in India is an analysis and overview of financial records of a company or a person to extract facts, which can be used in the court of law. There may be forensic audit done to prosecute the other party for fraud, embezzlement or other financial crimes that are taking place in the society. Forensic auditing is a specialization within the field of accounting, and most large accounting firms have a forensic auditing department.  It requires expertise of accounting and auditing procedures followed by the expert knowledge about the legal framework of such audit.

Forensic Audit can reveal the cases related to the fraud. Forensic audit is now becoming a key weapon in the legal authorities and the moment one smells a scam the brahmastra of “forensic audit is unleashed.

What is the meaning of Forensic Audit?

Forensic accounting is the assistance of finance professionals to settle disputes concerning allegations, fraudulence, suspicion of fraud and misconduct in business.  Forensic accounting utilizes accounting, auditing, and investigative skills to conduct an examination into the finances of an individual or business. They may be employed by insurance companies, banks, police forces, government agencies, or public accounting firms.

What is the objective of Forensic Audit ?

Forensic Audit is the method of prevention of fraud and corruption, it puts in the hands of judges and the regulatory authorities information and sufficient evidence to do the analysis and put as an evidence in the judicial process, by determining based on legal text by knowing whether or not it is fraud case or not. Following are the objective of forensic accounting:

• Identification of cases of fraud
• Participate in design and creation of fraud prevention program
• Evaluate the internal control systems
• Investigation and collection of evidence that will be placed in the hands of the judicial authorities

What are the reasons to conduct a Forensic Audit?

Forensic audit investigations can uncover, or confirm, various types of illegal activities. Usually, a forensic audit is chosen, instead of a regular audit, if there’s a chance that the evidence collected would be used in court. Below, we cite instances that could necessitate a forensic audit:

Corruption 

In a forensic audit, an auditor would be on the lookout of the following points:

• Conflict of Interest- A conflict of interest occurs where the fraudsters is involved in multiple interest, financial or otherwise. Fraudster uses his/her influence for there personal gains which will cause an adverse effect to the company.
• Bribery- Bribery is defined as offering, giving, receiving or soliciting of any item of value to influence the actions of an official or other person, in charge of any public or legal duty. Offering money to get things done or influence a situation in one’s favor is bribery.
• Extortion- Extortion is a practice of obtaining benefit through coercion. Extortion is likely to constitute the criminal offence. Robbery is the simplest and the most common form of extortion.

Asset Misappropriation

Asset misappropriation fraud is the fraud involving theft or misuse of company’s asset. It is the most common type of fraud although it is not expensive as the less frequent but much more costly financial statement fraud. It occurs in every type of organization from nonprofit to governmental to for profit and from small to large.

Financial Statement Fraud

Financial Statement Fraud is the deliberate misrepresentation of the financial condition of an enterprise accomplished through the intentional misstatement or omission of amounts to deceive the financial statement users.

Forensic Audit Vs Forensic Accounting

Forensic accounting services are usually necessary when there is a dispute or lawsuit already in place. We are often asked by the client’s attorney to assist in the litigation process as an expert. The goal of the forensic accountant is to analyze, report, and assist the court in understanding the financial aspects of the case.

Audits are engagements that examine and evaluate the financial statements of any given organization. An audit’s objective is to provide assurance, to the intended user, that the information contained in those financial statements is a fair and accurate representation of the organization.

One of the main differences between forensic auditing and accounting is that, forensic audit is designed to provide assurance that certain part of financial statements are reasonable. On the other hand, forensic accounting is designed to analyze particular set of transaction.

Forensic Accounting assignments are complex in nature. Forensic Accounting answers the questions such as who perpetuated the fraud?  what was the modus operandi regarding the same?, what were the fraud losses?. Forensic auditors answer the questions such as motives of the businesses behind the fraud.

In India, Forensic auditors witnessed boom, when the bankers started scouting for the experts to ascertain willful default in the borrower’s account.

Conclusion

Forensic accounting should not become a matter of specialization and expertise. It should be a part of the syllabus as undergraduate as well as post graduate level across the country. This will help the corporate and the government to keep a check on the financial crimes that are taking place.