FINANCE

What Is Forensic Audit? Forensic Audit VS Internal Audit

What is forensic audit
Written by Shagun Saini

Here we learn about What is forensic audit? Who conducts an audit? When a forensic audit is needed? What is the difference between an audit and a forensic audit? Forensic audit salary as well as the Forensic audit procedures, Forensic audit checklist, Forensic audit qualification, and the Various Types of a forensic audit

But before understanding these all let us first understand What is forensic audit? In detail.

A forensic audit is referred to as an examination and evaluation of the firm or company or individual’s financial information that can be used as a piece of evidence in court to determine fraud in case it has occurred. Further, as we know What is forensic audit? we see that it takes into account the accounting as well as the auditing procedures and also expert knowledge regarding the legal framework of the work.

So, a wide range of investigative activities is covered under forensic audit. a forensic examination can also be known as a forensic audit, making use of different types of investigative techniques to gather shreds of evidence.

Thus, forensic audit definition can be stated as an examination and evaluation of the firm or company or individual’s financial information that can be used as a piece of evidence in court to determine fraud in case it has occurred.

Here, A forensic accountant is the one who examines or evaluates the firm or company, or individual’s financial information that can be used as a shred of evidence in court to determine fraud in case it has occurred. Certified Fraud Examiners (CFEs), or forensic accountants most probably and commonly conducts A forensic audit.

  • Types Of A Forensic Audit

Some of the common types of forensic audit can be categorized as follows:

  • Financial theft
  • Securities fraud
  • Bankruptcy.
  • Evasion on debt.
  • Economic indemnities or cost involved
  • M&A related lawsuits.
  • Tax delusion or fraud.
  • Corporate estimation clashes.

 

  • Forensic Audit Procedures

The forensic audit procedures involve certain steps to be followed as:

  • You or the forensic audit officer need to Identify what fraud if happened.
  • Then You or the forensic audit officer need to Determine the time in which the fraud has taken place.
  • Notice how the fraud was covered up by the company. 
  • Recognize the culprits of the fraud or the culprits involved.
  • Count the loss which was suffered due to the fraud.
  • Forensic Audit Checklist

For the investigation purpose, a forensic audit checklist is also prepared which highlights crucial audit checkpoints and takes the investigation further. It also helps to determine the fraud and the period of the fraud.

  • Who Conducts An Audit?

An audit team is mostly hired for conducting an audit that includes CPAs with accounting as well as CFEs having experience in forensic accounting and auditing. A forensic accountant can also be hired to conduct a forensic audit which helps to understand the financial position of the company. A forensic accountant is the one who examines or evaluates the firm or company or individual’s financial information that can be used as a shred of evidence in court to determine fraud in case it has occurred. Certified Fraud Examiners (CFEs), or forensic accountants most probably and commonly conducts A forensic audit.

  • When A Forensic Audit Is Needed?

Some of the common situations where forensic audit is needed in an organization are as follows:

  • In case of Suspicions of fraud or in case of theft.
  • Account balance is not as per expectation although turnover is there in the organization.
  • When there are timing differences or unidentified differences.
  • When information theft or hacking, etc has occurred in the business.
  • When the quality of the products is hampered.

 

  • Forensic Audit Qualification

To be qualified for the post of forensic auditor one should hold AAT Professional Qualification in accountancy on entry level basis, which covers almost all areas of accountancy and tax in the beginning. Whereas, some other options include the ACCA Foundation Diploma or the ACA Certificate in Finance or Business (CFAB) to be qualified as a forensic auditor.

  • Forensic Audit Salary

According to the BLS, the forensic audit salary as accountants, which even includes forensic accountants, earned an average salary of $ 70,000 approx. Further, Forensic accountants characteristically hold a bachelor’s degree in accounting. Although, salary can also vary according to the work experience which can be grouped up as follows:

ExperienceSalary
Early Career Range (1 to 4 Years)$ 62,000 approx
Mid Career (5 to 9 Years)$ 80,000 approx
Experienced (10 to 19 Years)$ 87,000 approx

  • What Is The Difference Between An Audit And A Forensic Audit?

The differences between Forensic Audit and Audit can be represented with the help of the following table below:

BasisAuditForensic Audit
ObjectiveIt represents the ‘true & fair’ picture. It helps to see correctness of the accounts or in case any fraud have taken place.
TechniquesSubstantive’ and ‘compliance’ trials are used. past trend analysis and substantive or ‘in depth’ checking is being performed on the transactions. 
PeriodIt takes into account all transactions for the particular accounting period There is no limitations while conducting forensic audit as accounts can be audit from the very beginning itself.
Management Representationmanagement certificate/representation of management is needed. Independent authentication of suspected or some selected items is being done. 

Frequently Asked Questions Related To What Is Forensic Audit:

  • What Is The Meaning Of Forensic Audit?

A forensic audit is referred to as an examination and evaluation of the firm or company or individual’s financial information that can be used as evidence in court to determine fraud in case it has occurred. Further, as we know What is forensic audit? we see that it takes into account the accounting as well as the auditing procedures and also expert knowledge regarding the legal framework of the work.

Thus, forensic audit definition can be stated as an examination and evaluation of the firm or company or individual’s financial information that can be used as evidence in court to determine fraud in case it has occurred.

  • What Do Forensic Auditors Do?

A forensic auditor usually examines or evaluates the firm or company or individual’s financial information that can be used as evidence in court to determine fraud in case it has occurred. Certified Fraud Examiners (CFEs), or forensic accountants most probably and commonly conducts A forensic audit.

  • What Is The Difference Between An Audit And A Forensic Audit?

The differences between Forensic Audit and Audit can be represented with the help of the following table below:

BasisAuditForensic Audit
ObjectiveIt represents the ‘true & fair’ picture. It helps to see correctness of the accounts or in case any fraud have taken place.
TechniquesSubstantive’ and ‘compliance’ trials are used. past trend analysis and substantive or ‘in depth’ checking is being performed on the transactions. 
PeriodIt takes into account all transactions for the particular accounting period There is no limitations while conducting forensic audit as accounts can be audit from the very beginning itself.
Management Representationmanagement certificate/representation of management is needed. Independent authentication of suspected or some selected items is being done. 

  • What Are The Types Of A Forensic Audits?

Some of the common types of forensic audit can be categorized as follows:

  • Financial theft
  • Securities fraud
  • Bankruptcy.
  • Evasion on debt.
  • Economic indemnities or cost involved
  • M&A related lawsuits.
  • Tax delusion or fraud.
  • Corporate estimation clashes.

Conclusion:

Thus, we know What is forensic audit? Who conducts an audit? When a forensic audit is needed? What is the difference between an audit and a forensic audit? Forensic audit salary as well as the Forensic audit procedures, Forensic audit checklist, Forensic audit qualification, and the Various Types of a forensic audit.

A forensic audit is referred to as an examination and evaluation of the firm or company or individual’s financial information that can be used as evidence in court to determine fraud in case it has occurred. Further, as we know What is forensic audit? we see that it takes into account the accounting as well as the auditing procedures and also expert knowledge regarding the legal framework of the work.

Thus, forensic audit definition can be stated as an examination and evaluation of the firm or company or individual’s financial information that can be used as a shred of evidence in court to determine fraud in case it has occurred. So, we have understood What is forensic audit?

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Shagun Saini

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