Forensic Auditing Show

Forensic Auditing,[object Object],Prepared by:,[object Object],VikasKalyanshetty,[object Object],ACA, B Com,[object Object],Associate Finance ,[object Object],Team: Systems & Process Improvement,[object Object],Corporate Accounting Group,[object Object],Infosys Technologies Ltd, Bangalore,[object Object],1,[object Object]

Contents,[object Object],Meaning of Forensic,[object Object],Forensic Auditing/Accounting,[object Object],Qualities of a forensic accountant,[object Object],Purpose,[object Object],Broad Categories of Frauds,[object Object],Broad Stages of Investigations,[object Object],Fraud Symptoms,[object Object],Specialized Forensic Audit Techniques,[object Object],General Questions that are answered,[object Object],Statutory Vs Forensic Audit ,[object Object],Conclusion,[object Object],2,[object Object]

Forensic Meaning,[object Object],Dictionary: Relating to, used in, or appropriate for courts of law or for public discussion,[object Object],Having Legal identity,[object Object],Forensic reports can be presented as an evidence in the court of law,[object Object],E.g. Forensic Science,[object Object],3,[object Object]

Forensic Auditing/Accounting,[object Object],Often associated with fraudulent activities,[object Object],Also performed in non fraudulent cases,[object Object],Forensic auditing aims at legal determination,[object Object], of whether fraud has actually occurred,[object Object],Investigating into Financial Records,[object Object],Forensic Auditing and Accounting are same,[object Object],4,[object Object]

Required Skills of a Forensic Accountant – A Pizza!,[object Object],Base of Pizza: Accounting Knowledge,[object Object],Middle Layer: Dispersed knowledge of Auditing, internal ,[object Object], controls, risk assessment and fraud detection,[object Object],Toppings: Basic understanding of the legal environment,[object Object],The Cherry on the toppings: A strong set of ,[object Object], communication skills, both written and oral,[object Object],5,[object Object]

Purpose – In Case of Alleged Fraud,[object Object],Discover if there is a fraud (Focus – White Collar Crime),[object Object],Identify those involved,[object Object],Quantify the monetary amount of fraud,[object Object],Present Findings to the client/court,[object Object],6,[object Object]

Three Broad Categories of Frauds,[object Object],Corruption,[object Object],Asset Misappropriation,[object Object],Financial Statement Fraud,[object Object],7,[object Object]

1. Corruption,[object Object],Conflicts of Interests,[object Object],Bribery,[object Object],Extortion,[object Object],8,[object Object]

2. Asset Misappropriation,[object Object],Cash Theft,[object Object],Fraudulent Disbursement,[object Object],Inventory Frauds,[object Object],Misuse of Assets,[object Object],9,[object Object]

3. Financial Statement Fraud,[object Object],Material misstatement in Financial Statement:,[object Object],Deliberate Falsification of Accounting Records,[object Object],Omission of Transactions/Balances/Disclosures etc.,[object Object],Misappropriation of Financial Reporting Standards.,[object Object],10,[object Object]

Satyam Modus Operandi,[object Object],7,561 Fake Invoices,[object Object],Inflated receivables,[object Object],Fake Fixed Deposit Receipts were printed. ,[object Object],Bank Guarantees were manipulated,[object Object],Fake Bank balance statements of ICICI, Citibank, HSBC and BNP Paribas,[object Object],11,[object Object]

Facts and Figures of SATYAM Fiasco!,[object Object],12,[object Object]

Broad Stages of Forensic Audit,[object Object],13,[object Object]

1) Accepting the investigation,[object Object],1) Forensic accountant must ensure whether their firm has ,[object Object],Necessary skills and ,[object Object],Experience,[object Object], to accept the work,[object Object],2) Ideally Statutory Auditors should not accept Forensic auditing assignments,[object Object],14,[object Object]

2) Planning the Investigation,[object Object],Objectives of the investigation includes:,[object Object],Identify type of fraud,[object Object],Identify Fraudsters,[object Object],Quantify the loss,[object Object],Gather Evidence,[object Object],Provide advice to prevent the reoccurrence,[object Object],15,[object Object]

3) Gathering Evidence (Techniques),[object Object],Testing internal controls ,[object Object],Use analytical Procedures,[object Object],Apply CAAT,[object Object],Discussion and Interviews with the employees,[object Object],Substantive techniques such as Reconciliation, cash counts and review of stocks,[object Object],16,[object Object]

4) Reporting,[object Object],Report contains:,[object Object],Findings/Observations,[object Object],Summary of Evidences,[object Object],Amount of loss,[object Object],How fraudsters set up fraud scheme and which controls were circumvented,[object Object],Recommend improvements of controls,[object Object],17,[object Object]

5) Court Proceedings,[object Object],Members of investigation team are involved,[object Object],Evidence gathering is presented,[object Object],Simplify technical terms,[object Object],Forensic Accountants do not testify that fraud has occurred but only present evidence,[object Object],18,[object Object]

Fraud Symptoms,[object Object],Unusual and unexpected ,[object Object], changes,[object Object], Two types:,[object Object],Financial Record Related: Document analysis e.g. Handwriting/ Ink Analysis/ Trend analysis,[object Object],Person Related: Personality/Life style changes/ Behavioral Changes,[object Object],19,[object Object]

Specialized Forensic Audit Techniques,[object Object],Supervising,[object Object],Comparing actual with expected,[object Object],Search warrants,[object Object],Surveillance,[object Object],Anonymous complaints/tips (most popular),[object Object],Interview & interrogation,[object Object],Verbal Cues,[object Object],Non Verbal Cues,[object Object],20,[object Object]

General Questions that are answered:,[object Object],How long fraud was carried?,[object Object],How was it conducted and carried?,[object Object],What was the suspects motive & opportunity to commit fraud?,[object Object],Whether it involved collusion?,[object Object],Are there any physical evidence at the scene of crime or in the documents?,[object Object],What comments are made by the suspects during interrogations?,[object Object],Were there any attempts to destroy evidence?,[object Object],21,[object Object]

Statutory Vs Forensic Audit,[object Object],22,[object Object]

Conclusion,[object Object],Forensic Audit is a specialist type of engagement: Auditor Cum Investigator,[object Object],Requires skilled and experienced team,[object Object],Team should be comfortable with appearing in court proceedings,[object Object],Management of IT companies must carry out,[object Object],Employees should be made aware before such audit to co operate with the team,[object Object],Exception to the clause: ‘auditors can be watchdogs and not blood-hounds’ ,[object Object],23,[object Object]

References:1) Google2) American Journal of Business Education3) Article Published in The Chartered Accountant by S Vasudevan,[object Object],24,[object Object]

Forensic Auditing Show

Forensic Auditing Show

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Forensic Auditing Show