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Like medicine, accounting is a wide field that offers several opportunities for one to specialize in. Forensic auditing (a job of a forensic auditor) is one of these specializations.
It is a branch that deals with applying accounting skills to legal questions and could involve contending fraud or exposing failure to agree with the standards of accounting.
Accounting students who aspire to become forensic auditors can select from the available number of programs offering that major or better still, take a degree in accounting, and then earn certification in techniques based on forensic accounting.
Forensic accountants must have a wide variety of skills which includes; Fundamental knowledge or background in accounting principles and the regulatory environment for business accounting.
Moreover, forensic auditors also investigate and must obtain vital information by interrogating suspected parties or witnesses. Another helpful skill is public speaking, as forensic auditors most times make testimonies in courtrooms.
Forensic auditing is one of the fields in accounting, of which a forensic auditing department is usually found in large accounting firms. Accounting, auditing procedures and expert knowledge are required when conducting a forensic audit.
A forensic auditor usually examines and evaluates a company or an individual’s financial records to obtain evidence used in court.
Forensic audits encompass a vast scope of activities that involve an investigation. A forensic audit is most times carried out to charge or start criminal proceedings against a party for cases of fraud, embezzlement, or other financial crimes.
During the process of a forensic audit, the auditor may be called upon during trial proceedings to act as an expert witness.
Asides from cases of financial fraud and embezzlement, forensic auditing could also include situations such as conflicts that relate to divorces, business closures and bankruptcy filings.
In addition, a forensic audit can either expose or prove different types of illicit activities that may be going on in a firm.
A forensic audit process is most times similar to that of a regular financial audit. It involves planning the investigation, collecting evidence, and writing a report (which includes a potential court appearance).
The attorneys on both sides provide evidence that either proves or disproves the fraudulent crime, and the amount of money lost is calculated later. Should the case be taken for trial, the findings are presented to the client and the court.
In this stage, planning is done by the forensic auditor and a team to achieve specific goals, such as;
Evidence gathered should be sufficient to uncover the perpetrator(s) identity in court, expose the details of the fraud scheme, and keep records of the financial damages suffered and the victims affected.
Through a reasonable flow of evidence, the court is aided to understand the fraud and the evidence. Forensic auditors then suggest preventive measures or actions making sure that documents and other evidence gathered are still intact.
A forensic audit isn’t complete without a written report. A report is required on the fraud committed, which must be presented to the client to continue with the legal proceedings if they so desire.
The written report must include the following:
The forensic auditor must be present in court to explain the evidence and how the parties were identified.
Ambiguous accounting issues must be simplified and presented in a layman’s language to help people in court who do not know legal or accounting understand the fraud in clear terms.
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Forensic audit investigations are carried out for the following reasons:
During the processes of investigating fraud, an auditor would pay attention to:
This is the most prevalent form of fraud. Asset misappropriation includes cash embezzlement, creation of false invoices, payments to suppliers that do not exist or employees, assets misuse, or inventory theft.
Organizations or firms engage in this type of fraud to show that the firm’s financial performance isn’t as same as the former and that it is, in fact, better than what it is.
The aim of presenting false numbers may be to:
Financial statement fraud could take the form of accounting records and documents forged deliberately, omission of transactions, either expenses or revenue generated, non-disclosure or exclusion of relevant details from the financial statements, or non-application of the essential financial reporting standards.
In summary, a forensic audit is a rigorous commitment that necessitates competence in both accounting and auditing techniques, as well as professional legal understanding.
It is usually selected instead of a regular audit if there’s a possibility that the evidence gathered would be used during court proceedings.
So, a forensic auditor is needed to have both knowledge and experience of several frauds that can be conducted and how to collect evidence.
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