4. The identification, interpretation, and
communication of the evidence of
economic transaction and reporting events
Forensic accounting is the „speciality‟
practice area of accounting that describe
engagements, which result from actual or
anticipated disputes or litigation.
7. Investigative Accounting-It deals with
investigation of criminal matters relating to
employee,theft, securities fraud, insurance
fraud etc. it does not end with investigation
but also includes provisions of
suggestions regarding possible courses of
8. Litigation Support- it involves providing
accounting assistance in litigation
matters. It primarily deals with
quantification of economic damage
9. •Investigating and analysing financial
• Developing computerised applications to
assist in the analysis and presentation of
•Communicating their findings in the form
of reports, exhibits and collections of
• Assisting in legal proceedings, including
testifying in courts, as an expert witness
and preparing visual aids to support trial
10. Human nature:
– Hide failures; not admit them.
– Conceal problems; not discuss them.
– Defend wrong decisions; not admit
– Cover up mistakes; not own up.
While Forensic Accounting developed as
early as 1995 in USA,But after the
fiasco, the same has gained proposition in
Indian context also.
12. ◦ Preliminary investigations examination of
◦ Allows auditors to identify likely trouble
areas and assess the work to be done
◦ Should identify objectives to be achieved
and plan audit methodology to be used
13. Collect the Relevant Information
◦ In depth interviews with client‟s staff
◦ Examination of hard-copy & electronic info
Electronic info is often best source for
Specialized computer forensic auditors are
sometimes called in, depending on the
◦ Off-site computers & servers, hard-copy
info, etc. are also examined
14. ◦ Highly dependent on specifics of the engagement
◦ Often involves: calculating economic damages and
sensitivity analysis, tracing of assets
◦ Should contain the details of the engagement, the
scope, any limitations and a detailed summary of the
◦ Reports are generally confidential and often used in court
◦ Period in which evidence gathered
◦ Review Process & report to the client.
◦ Identify those involved and quantify amount of fraud.
◦ Present findings to the client and court
15. ◦ Self Study (e.g., ICAI Certificate course started in
◦ On-the-job training
◦ Formal education
Obviously, a combination of at least two of
these approaches will lead to optimal
16. Revenue in forensic accounting in the United
States is expected to grow 6.8% annually from
$4.3 billion in 2012 to $6.0 billion in
2017, according to a report by IBISWorld.
A 7.0% increase in forensic accounting
revenue is expected for 2013.
17. Large unexpected losses
Non-compliance with corporate policy or
Employees apparently living beyond their
Inventory shortages remain unexplained
and poorly investigated
Copies rather than original invoices are
Missing and/or altered documentation
18. Business valuations
Divorce proceedings and matrimonial
Personal injury and fatal accident claims
Insurance claims evaluations
Partnership and corporation disputes
Shareholder disputes (minority shareholders
19. Central Bureau of Investigation (CBI)
Insurance Sector (TRAI)
Securities Exchange Board of India (SEBI)
Big Corporations and Companies ( Proactive
and Reactive Action)
Military and Police Department
State And Central Government.
Banks and Financial Institutes.
20. Serious Fraud Office: SFIO is the dedicated division of the
Department of Company affairs, which looks into the
frauds that involves the violations of multiple laws such
as Income Tax, FEMA and RBI Act etc.
CBI: Central Beauro of Investigations has its specialized
wing to deal with the financial frauds called as economic
CVC: Central vigilance commission is the place, which
handles the crucial part of the occupational frauds ie.
Corruption. It also helps in resolving the bank fraud
21. There is an acute shortage of forensic
accounting skill sets in India. A huge
demand for forensic accountants has come
up in the wake of the requirements from the
investors after the Satyam fiasco. There are
only about 400 forensic accountants in the
country though India loses approximately
$40 billion because of frauds.
22. Satyam Computers Ltd.
Founder Chief Executive Raju charged with
fraud, false corporate reporting and making
false statements to regulators.
First CEO charged under Criminal offence for
Satyam Computers case is the first of Its Type
23. It is only through the practice of preventive
rather than reactive auditing that forensic
auditing will become visibly effective and
make auditing credible, once more.
Awareness of human element, organization‟s
behavior, knowledge of the system, the
technology in use and expected to be
used, knowledge of fraud, evidence are so
called red flags are key issues