Forensic audit involves examination of legalities by blending the techniques of propriety , regularity and investigative and financial audits. The objective is to find out whether or not true business value has been reflected in the financial statements and in the course of examination to find whether any fraud has taken place.
WHY IT HAS GAINED IMPORTANCE
Companies (Auditors’ Report) Order, 2003, requires auditors to report, amongst others, “whether any fraud on or by the company has been noticed or reported during the year. If yes, the nature and the amount involved are to be indicated”. In this background, the techniques of Forensic auditing have gained importance.
DIFFERENCE BETWEEN FINANCIAL AND FORENSIC AUDIT
The concept of Financial Auditing may be defined as “a concentrated audit of all the transactions of the entity to find the correctness of such transactions and to report whether or not any financial benefit has been attained by way of presenting an unreal picture
Forensic auditing aims at legal determination of whether fraud has actually occurred. In the process, it also aims at naming the person(s) involved (with a view to take legal action).
Detection Techniques that are used here:
Critical Point Auditing:
Critical point auditing technique aims at filtering out the symptoms of fraud from regular and normal transactions in which they are mixed or concealed. Here we mainly do analysis of some trends. We examine the unusual credits or debits in certain things
Also called as “value for money audit". In this we mainly examine whether all expenditure are need based or not.
While statutory audit gives opinion on true and fair view. Forensic audit aims at verifying correctness of accounts or finding of accounting frauds.