Forensic Audit

Forensic Audit in India

Forensic audit in India involves examining financial records, documents, and other evidence to determine if any fraudulent activity or misconduct has occurred. It is typically conducted by a team of forensic accountants and other professionals with specialised training in detecting and investigating financial crimes.

In India, a forensic audit is often used in corporate fraud, money laundering, and other financial crimes. It can be initiated by government agencies, law enforcement agencies, or private organisations to uncover any wrongdoing or misconduct.

SEBI (Securities Exchange Board of India) mandates a forensic audit in India for publicly listed companies. They enlist forensic auditors to examine their various financial records and transactions.

Apart from SEBI, the RBI (Reserve Bank of India) mandates a forensic audit in India for all banks within the country. SEBI, RBI and other government bodies rely on SFIO (Serious Fraud Investigation Office) for assistance in the field of forensic accounting.

Forensic auditors provide information and evidence per the request from a court of law based on their investigations. This may include corruption, conflict of interest, extortion, commercial litigation, bankruptcy, and fraud.

Purpose of a Forensic Audit

The purpose of a forensic audit is to provide an independent, objective, and unbiased evaluation of financial data to determine if there has been any misappropriation of assets or financial misconduct. It is often used to gather evidence for legal proceedings or to identify and correct internal control weaknesses that may have contributed to financial misconduct.

Additionally, a forensic audit may assess a company's financial health and identify any potential financial risks or vulnerabilities. The following points are some of the purposes of a forensic audit:

• To determine whether financial records accurately reflect the financial position of an organisation
• To identify any discrepancies or irregularities in financial transactions or documents
• To identify potential fraud or mismanagement of funds
• To provide evidence for use in civil or criminal court cases
• To recommend corrective actions to improve financial practices and controls within the organisation.

How to Conduct a Forensic Audit?

Forensic auditors are focussed on auditing financial transactions and identifying fraud and its intent. This is necessary for providing proof in a court of law. Four steps are involved in the forensic audit procedure:

• The Plan - The forensic auditor prepares a plan to go through the books to discover the fraud, the people involved, etc. This procedure is all about formulating an effective investigation plan.
• Securing Evidence - The forensic auditor audits the accounting records and collects evidence based on his/her findings.
• Reporting - A forensic audit report documents the findings from the audit investigation, with references to the evidence discovered.
• Court Witness - The forensic auditor is called to court as an expert witness, to substantiate his/her findings based on the evidence and simplify any complicated terms or information.

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Forensic Audit Report

The forensic audit report documents the findings from the audit investigation, with references to the evidence discovered. The purpose of a forensic audit report is to present the audit findings clearly and concisely, providing evidence of any wrongdoing discovered during the investigation.

The report should include a detailed description of the audit process, the collected evidence, and the conclusions reached based on that evidence. The format of a forensic audit report can vary. However, they all have the same objective.

The forensic audit report should be presented to the appropriate parties, such as law enforcement, regulatory bodies, and the organisation's management team. The report may also be used in legal proceedings, such as criminal trials or civil lawsuits.

Forensic Audit Courses

Forensic audit courses pertain to unique areas of investigative techniques for accounting and auditing. In India, these forensic audit courses are available with several certification providers such as;

• The Institute of Chartered Accountants of India (ICAI)
• Indiaforensic Center of Studies
• Institute of Certified Forensic Accountants
• Gujarat Forensic Sciences University and
• the National Stock Exchange (NSE) Academy.

The focus areas of these courses include legal research, the ability to identify fraud or criminal activities, and court procedures. Aside from this, forensic audit courses also focus on comprehending the workings of insurance claims, preparation of legal contracts and insider trading.

Why Vakilsearch?

Vakilsearch has a team of legal experts who will help you with the audit process. We understand the importance of a forensic audit for your company, so we have a separate team of bookkeepers and chartered accountants who will guide you through the forensic audit process. Vakilsearch caters to each company’s specific needs during the audit process. Our support will be available throughout the audit process to clarify your doubts.