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Forensic Auditing Show
 

Forensic Auditing Show

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This PPT gives general understanding and clarifies the basics of Forensic auditing

This PPT gives general understanding and clarifies the basics of Forensic auditing

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    Forensic Auditing Show Forensic Auditing Show Presentation Transcript

    • Forensic Auditing
      Prepared by:
      VikasKalyanshetty
      ACA, B Com
      Associate Finance
      Team: Systems & Process Improvement
      Corporate Accounting Group
      Infosys Technologies Ltd, Bangalore
      1
    • Contents
      Meaning of Forensic
      Forensic Auditing/Accounting
      Qualities of a forensic accountant
      Purpose
      Broad Categories of Frauds
      Broad Stages of Investigations
      Fraud Symptoms
      Specialized Forensic Audit Techniques
      General Questions that are answered
      Statutory Vs Forensic Audit
      Conclusion
      2
    • Forensic Meaning
      Dictionary: Relating to, used in, or appropriate for courts of law or for public discussion
      Having Legal identity
      Forensic reports can be presented as an evidence in the court of law
      E.g. Forensic Science
      3
    • Forensic Auditing/Accounting
      Often associated with fraudulent activities
      Also performed in non fraudulent cases
      Forensic auditing aims at legal determination
      of whether fraud has actually occurred
      Investigating into Financial Records
      Forensic Auditing and Accounting are same
      4
    • Required Skills of a Forensic Accountant – A Pizza!
      Base of Pizza: Accounting Knowledge
      Middle Layer: Dispersed knowledge of Auditing, internal
      controls, risk assessment and fraud detection
      Toppings: Basic understanding of the legal environment
      The Cherry on the toppings: A strong set of
      communication skills, both written and oral
      5
    • Purpose – In Case of Alleged Fraud
      Discover if there is a fraud (Focus – White Collar Crime)
      Identify those involved
      Quantify the monetary amount of fraud
      Present Findings to the client/court
      6
    • Three Broad Categories of Frauds
      Corruption
      Asset Misappropriation
      Financial Statement Fraud
      7
    • 1. Corruption
      Conflicts of Interests
      Bribery
      Extortion
      8
    • 2. Asset Misappropriation
      Cash Theft
      Fraudulent Disbursement
      Inventory Frauds
      Misuse of Assets
      9
    • 3. Financial Statement Fraud
      Material misstatement in Financial Statement:
      Deliberate Falsification of Accounting Records
      Omission of Transactions/Balances/Disclosures etc.
      Misappropriation of Financial Reporting Standards.
      10
    • Satyam Modus Operandi
      7,561 Fake Invoices
      Inflated receivables
      Fake Fixed Deposit Receipts were printed.
      Bank Guarantees were manipulated
      Fake Bank balance statements of ICICI, Citibank, HSBC and BNP Paribas
      11
    • Facts and Figures of SATYAM Fiasco!
      12
    • Broad Stages of Forensic Audit
      13
    • 1) Accepting the investigation
      1) Forensic accountant must ensure whether their firm has
      Necessary skills and
      Experience
      to accept the work
      2) Ideally Statutory Auditors should not accept Forensic auditing assignments
      14
    • 2) Planning the Investigation
      Objectives of the investigation includes:
      Identify type of fraud
      Identify Fraudsters
      Quantify the loss
      Gather Evidence
      Provide advice to prevent the reoccurrence
      15
    • 3) Gathering Evidence (Techniques)
      Testing internal controls
      Use analytical Procedures
      Apply CAAT
      Discussion and Interviews with the employees
      Substantive techniques such as Reconciliation, cash counts and review of stocks
      16
    • 4) Reporting
      Report contains:
      Findings/Observations
      Summary of Evidences
      Amount of loss
      How fraudsters set up fraud scheme and which controls were circumvented
      Recommend improvements of controls
      17
    • 5) Court Proceedings
      Members of investigation team are involved
      Evidence gathering is presented
      Simplify technical terms
      Forensic Accountants do not testify that fraud has occurred but only present evidence
      18
    • Fraud Symptoms
      Unusual and unexpected
      changes
      Two types:
      Financial Record Related: Document analysis e.g. Handwriting/ Ink Analysis/ Trend analysis
      Person Related: Personality/Life style changes/ Behavioral Changes
      19
    • Specialized Forensic Audit Techniques
      Supervising
      Comparing actual with expected
      Search warrants
      Surveillance
      Anonymous complaints/tips (most popular)
      Interview & interrogation
      Verbal Cues
      Non Verbal Cues
      20
    • General Questions that are answered:
      How long fraud was carried?
      How was it conducted and carried?
      What was the suspects motive & opportunity to commit fraud?
      Whether it involved collusion?
      Are there any physical evidence at the scene of crime or in the documents?
      What comments are made by the suspects during interrogations?
      Were there any attempts to destroy evidence?
      21
    • Statutory Vs Forensic Audit
      22
    • Conclusion
      Forensic Audit is a specialist type of engagement: Auditor Cum Investigator
      Requires skilled and experienced team
      Team should be comfortable with appearing in court proceedings
      Management of IT companies must carry out
      Employees should be made aware before such audit to co operate with the team
      Exception to the clause: ‘auditors can be watchdogs and not blood-hounds’
      23
    • References:1) Google2) American Journal of Business Education3) Article Published in The Chartered Accountant by S Vasudevan
      24