Forensic auditing refers to the process of examining an individual or organization’s financial records in order to determine whether there is evidence of fraud, embezzlement, and other white-collar crimes, or in order to discover evidence that may be used in a court of law. Forensic auditors use a combination of investigative techniques and accounting/auditing knowhow to discover suspicious practices and irregular transactions. They then present their findings before a court of law or regulatory body or to individuals or companies that have ordered the audit.
Forensic audits are conducted to investigate claims of fraud, conflict of interest, bribery, extortion, and embezzlement. They may also be carried out in cases where asset misappropriation is suspected e.g payments to nonexistent suppliers, inventory theft and cash appropriation. Finally, forensic editors also investigate financial statement fraud which is usually committed by top management in order to make a company look like it is performing better than it actually is.
A forensic audit is conducted by a specially trained accountant or auditor with knowledge of forensic/investigative techniques and legal accounting know-how. The forensic audit process has several steps that need to be performed in addition to regular audit activities. These steps include; understanding the focus of the audit e.g. a client might suspect that the firm under investigation is embezzling funds and ask the auditor to investigate. Other steps in the process include; identifying the type of fraud that is being carried out, naming the perpetrators, determining when the fraud was committed and gauging the losses suffered due to the loss.
Forensic auditors also collect evidence, create reports and present their findings to clients or in a court of law. They may also recommend preventive measures in order to ward off fraudulent activities in the future.
Advantages of Forensic audits
- Minimizing the losses suffered by affected organizations. Audits discover fraudulent activities and ensure that perpetrators are punished or fined in order to prevent future occurrences. This helps to safeguard an individual or organizations assets and helps them avoid future losses from fraud.
- Reduced risk of litigation: Businesses that carry out fraudulent activities such as financial statement fraud or embezzlement may find themselves getting penalized or losing their trading licenses altogether if the fraud is serious enough. Organizations can be penalized even if business owners were unaware of the fraudulent activities perpetrated by staff members and other parties. Forensic audits help to discover fraudulent activities and make recommendations on what organizations should do to prevent them from recurring.
- Improved financial management: Forensic auditing helps organizations discover the weak points in their financial management systems and fix these in order to improve efficiency. For instance, a firm may discover that employees are embezzling funds due to poor computer security or lax supervision. Once you discover where the gaps are, you can put measures in place to reduce fraud and safeguard business finances.
- Enhanced brand reputation: No one wants to be associated with a brand that is infamous for its fraudulent activities. Forensic audits reveal fraud, inefficiencies and other problems within your organization and give you the opportunity to clean house and ultimately enhance your brand’s reputation.
Bon and Drew Associates has a number of highly qualified and experienced forensic accountants and auditors to help with your forensic audit needs. Whether you are an individual needing to determine a partner’s financial worth for help in your child support case or an organization looking to prevent fraud and strengthen internal controls, Bon and Drew Associates can help. We provide the following forensic auditing services;
- Investigating your financial statements to detect evidence of fraud, embezzlement, bribery, extortion and other illegal activities.
- Analyzing data to discover if there are discrepancies such as; payments to non-existent suppliers, cash appropriation or creation of suspicious accounts.