Forensic Audit Essay

711 Words 3 Pages
Forensic audit includes lots of activities and it is not part of regulatory guidance. Forensic auditing are the wide range of activities for investigation purpose, which are performed by accountant in practice. The work of the forensic auditor is to investigate the financial affairs of the organization and most importantly includes investigation of any fraudulent activity. Internal auditor can use a third party forensic auditor for this purpose and than report the findings to the Board and audit committee.

Why We Need Forensic Audit:
Fraudulent activities lead to forensic audit. We can categorize fraudulent activities into three broad types, which need investigation by forensic auditor. These categories are corruption, asset
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Conflict of interest can arise due to which fraudster influence others to get personal benefits, which ultimately adversely affect the performance of organization. There might be no financial benefits but personal benefits as a result. E.g. manager approves conveyance allowance to an employee who is his friend to maintain that relationship although employee doesn’t deserve it.
b. Bribery is another case of corruption in which financial benefits are offered to someone to influence and get personal benefits. E.g. Employee giving bribe to get promotion.
c. Extortion where forcefully require money/benefit from some one to give security to other’s particular need. E.g. not to telling the manager affair’s with secretary to wife in response to get better promotion.
2. Asset Misappropriation:
Asset misappropriation is a most common fraud and it includes:
a. Stealing company’s cash. E.g. proceeds of sale invested in some activity, which will give better return, than depositing that money back in company’s account after 2-3 months and repeating it to make money.
b. Other situation is one where entity’s funds are used in fraudulent proceeds i.e. fraudulent disbursement. E.g. payroll scheme, where payments are made to ghost employees.
c. Stealing inventory from company’s premises.
d. Misuse of assets by employees for their personal interest.
3. Financial Statement

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