The document discusses corporate fraud and the rise of forensic audits in India. It notes that fraud, including cyber fraud, is a major concern for companies and regulators. Forensic audits involve comprehensive investigations using accounting and investigative techniques to establish the accuracy of transactions and detect any fraud. Forensic auditors need skills like accounting knowledge, auditing experience, and strong communication. Common frauds detected include asset misappropriation and financial statement fraud. Forensic audit techniques include benchmarking, ratio analysis, and system analysis. Auditors have duties to report any detected fraud. Forensic auditing is gaining importance in India due to several corporate scams.

1. PRESENTED BY:- NIHARIKA GARG
REG. NO. :- CRO0523170

2. Corporate fraud is on rise in India, compelling management to conduct
more Forensic Audits.
Fraud is a major concern among companies, regulators, shareholders and
law Enforcement agencies across the globe.
In addition, nowadays, cyber fraud also added to the list of frauds. It has
been A tough challenge for the organizations to deal with these issues.

4. As per S.A. 240, fraud is an intentional act by one or
more individuals among management, TCWG,
employees, or third parties, involving use of deception
to obtain an unjust or illegal advantage.
FRAUD
ASSET
MISAPPROPRIA
TION
CORRUPTION
FINANCIAL
STATEMENT
FRAUD.
*CONCEPT OF FRAUD…..

5. Particulars 2011 2014
Number of Frauds by
Middle Management
45% 54%
Number of frauds
committed by Junior
Staff
50% 31%
Detecting Fraud
Fraud at U.S.
organizations initially
detected by external
measures or by accident
15% 32%
MOST INTERNALFRAUDS ARE COMMITTED BY
MIDDLE MANAGEMENT…STATISTICS

7. FORENSIC
AUDIT
A Forensic Audit is a comprehensive and systematic process
Involving a series of activities and tasks undertaken for
Establishing the accuracy and authenticity of the transactions
review.
It may include:-
 Investigative techniques with an understanding of accounting principles,
 Review of financial statements to determine if they are accurate and lawful,
 Application of accounting methods to the tracking and collection of
forensic evidence.
CONCEPT OF FORENSIC AUDIT

8. *To find out whether the or not the true business value
has been reflected in the financial statements.
*To find whether any fraud has taken place.
*To determine if there are suspicious practices hiding
beneath company or individual financial records and
statements.
NEED OF FORENSIC
AUDIT….????

10. ABC (A PARTNERSHIP FIRM)
Trading in
Television sets.
Kept at
warehouse Outbreak of fire
Firm lodged the claim of 200lacs
For about 1550 television sets.

11. INVESTIGATOR
 He gathered all the routine information-
List of books of accounts, purchase & sales procedure,
List of suppliers & customers.
 He traced the opening balances from the last
Physical verification statement.
 He checked the castings of the stock ledger for
All the quantities received & sold.
 He traced quantities of goods received from the purchase
Register and supplier challan.
 He traced quantities of goods sold, damaged & defective stock
On the basis of sales & claim register respectively.
 He traced quantities of returns from both credit & debit notes.

12. *
*The past audited physical verification statement & earlier balance
sheets of the firm disclosed stocks which were less than 50% of the
stocks value as on the date of fire.
*Some of the purchases being done on the last days were made
without any advance paid to supplier whereas in the past purchases
were made with 50% advance to suppliers.
*Supplier challans for the purchases stated above did not bear the
usual godown keepers signature.
The investigator asked the firm for explanations, and he was satisfactorily replied
by The firm.
But the major evidence found out by investigator when he decide to once visit the
Warehouse. The dimensions of the warehouse apparently did not seem practically
permit more than 1000 television sets to fit in. He called for the layout of the
warehouse and took the Actual measurements of the smallest televisions set stocked
by the firm. Even if these had been the only stocks stocked by the firm, not more
than1200 sets could be fitted.

13. skills
Vast
accounting
knowledge
Knowledg
e of
auditing
Understandi
ng of legal
environment
Strong set
of
communic
ation
skills.
REQUIRED SKILLS TO BE
A FORENSIC AUDITOR…

14. KINDS OF FRAUDS DETECTED
BY FORENSIC AUDITOR….

15. BROAD STAGES OF
FORENSIC AUDIT…

16. • Comparing one financial period with another or
the performance of one cost centre, or business
unit, with another, overall business performance
with its standards defined.
BENCHMARKING
• Used to identify any abnormal trends and
changes.RATIO ANALYSIS
• To examine the systems in place and identifying
any weaknesses that could be opportunities for
the fraudsters.
SYSTEM
ANALYSIS
TECHNIQUES AND TOOLS OF
FORENSIC AUDIT…

17. DUTIES OF AUDITORS TO REPORT
ON FRAUDS…

18. DUTIES OF AUDITORS TO REPORT ON
FRAUDS…

19. *
*Frauds has been perpetrated in the companies worldwide and
have shown their progress in few past years.
*The various cases such as Satyam case, Harshad Mehta Scandal,
Enron etc…have made the various laws strict and gave birth to
the concept of Forensic Auditing.
*This concept is gaining importance in India. Growing financial
frauds, recent stock market scams, failure of NBFC, phenomena
of vanishing companies and plantation companies forced
government to form SERIOUS FRAUD INVESTIGATION
OFFICER(SFIO) under MCA.

20. *
*Various courses have been evolved in India for the people
who desires for becoming a Forensic Auditing professional.
*It is the duty of forensic auditors to unveil the hidden stories
in the manipulated financial statements.
*RBI had made compulsory for the major banks to file a
forensic auditing report.
*Various big accounting firms such as BIG FOUR, etc…are
recognising the demand of forensic auditors and creating a
team of such experts.