A forensic audit is an analysis and inspection of a company’s financial records or an individual. 

It aims to extract facts that can then be used in a court of law. 

Forensic auditing is a speciality in the accounting industry and requires experience in accounting, auditing, and knowledge of the legal framework. 

A forensic audit covers a wide range of investigative activities, from fraud to embezzlement. It also covers situations such as divorces, bankruptcy and business closures. 

The reasons for a forensic audit

Compared to a routine audit, a forensic audit will possibly use evidence gathered in court, and the audit can also move to expose illegal activities. 

However, like a traditional audit, there is a large amount of planning, reporting and evidence accumulation, but the possibility of a court appearance is a crucial difference. 

How does it work?

A forensic audit will usually look something like this: 

Investigation Planning

Auditor and team will plan the investigation to meet final goals, which can include: 

-Identifying what fraud, if any, is being carried out

-Determining the period during which the fraud took place

-Unearthing how the fraud was hidden

-Quantifying the loss suffered to the parties involved 

Evidence Collection

The next step is to gather as much evidence as needed. There should be enough to identify perpetrators and other details related to the situation, and the evidence must be precise enough for the court to understand the fraud. 

Reporting

A written report will need to be collated and given to the client. If they wish, they can then continue to file a legal case. The information must include:

-The findings of the investigation

-A summary of the evidence collected throughout 

-Suggests for preventing similar occurrences in the future

Legal Proceedings

If it comes to this stage, the forensic investigator will act as an expert witness in a courtroom. They must explain the evidence clearly and tell the court how it was found in layman’s terms. 

This ensures that those with no prior knowledge of legal or accounting language can understand the circumstances.

If you have any questions about forensic audits, please do not hesitate to contact James Hyland and Company on (021) 480 6346 or email info@jhyland.com