Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Forensic Auditing Show


Published on

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

Published in: Technology, Economy & Finance

Forensic Auditing Show

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