Forensic audit

Forensic audit refers to the examination of financial records and other company data to gather legal evidence for court purposes. This audit aims to investigate the financial crime and present your findings to the court of law.

How does forensic audit work?

Let’s have a detailed understanding in terms of working mechanics,

1. Understanding fraud/embezzlement

The first step is to understand how fraud was planned and executed. It’s about understanding the hidden scheme that facilitated the preparators for executing the fraud.

• Quantify the loss/damage due to fraud.

Analyze and note the frequency of fraudulent transactions. Quantify losses suffered because of the fraud and how it was formulated. Additionally, depending on the amount and frequency, it’s a good idea to suggest measures/controls to help avoid such fraud.

• Sorting, organizing, and collecting the evidence

Ensure the logical flow of events is understood. The flow should be self-organized, and excessive technical jargon should be avoided. Further, it’s important to ensure that evidence is not destructed in any ways.

• Report your findings

Your report should include the following content.

• Your overall findings.
• The evidence summary.
• Names of the employees who perpetrate fraud.
• Amount of the damages.
• Suggestions to strengthen the controls and strategies to avoid such frauds in the future.

• Presenting the case in a court of law

The forensic report is presented in the court of law as evidence. So, it should be structured, fluent, easy to understand, and provide a summary of the key points.

Conclusion

The goal of a forensic audit or examination is to understand the hidden scheme used in conducting/executing fraudulent transactions, collecting evidence, and reporting the same in court. The reporting should be summarized, sorted, understandable, self-explanatory, and concise.