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Audit & Assurance

Forensic Audit & Investigation

Investigation of financial irregularities and fraud detection.

Overview

A forensic audit is a detailed examination of financial records to establish facts about suspected irregularities such as fraud, misappropriation, diversion of funds or manipulation of accounts. Findings are documented so they can support decisions by the board, lenders or legal advisers.

The ICAI has issued Forensic Accounting and Investigation Standards (FAIS), which set out how such engagements are planned, conducted, documented and reported.

Who needs this service

Boards and promoters investigating suspected fraud or leakage
Banks and lenders reviewing end-use of funds or account irregularities
Investors and partners in disputes
Companies responding to whistle-blower complaints

Legal and regulatory framework

  • Forensic Accounting and Investigation Standards (FAIS) issued by the ICAI
  • Companies Act, 2013: Section 143(12) on reporting of fraud
  • RBI directions on frauds for lender-initiated reviews
  • Indian Evidence law principles on documentation

Scope of services

Investigation

  • Review of transactions and records for suspected irregularities
  • Fund-flow and end-use analysis
  • Identification of related parties and round-tripping
  • Review of vendor, customer and employee master data

Data analytics

  • Pattern and exception analysis on large data sets
  • Duplicate payments, split invoices and unusual entries
  • Journal entry testing

Reporting and support

  • Structured report of findings with evidence
  • Support to legal advisers and lenders
  • Recommendations to prevent recurrence

How the engagement works

  1. ScopingAgreeing objectives, period and access with the appointing authority.
  2. Evidence gatheringCollection and preservation of records and data.
  3. AnalysisTesting, analytics and interviews where appropriate.
  4. ReportingFactual report of findings, without conclusions of guilt.

Documents typically required

Books of account and bank statements for the period under reviewERP data extractsAgreements, approvals and correspondencePrevious audit reports

Key forms and due dates

ItemTimeline
TimelineAgreed case by case, based on scope and data availability

Indicative; subject to amendments and extensions notified by the authorities.

Deliverables

  • Forensic audit report
  • Supporting schedules and evidence index
  • Control recommendations

The scope of each engagement is agreed in writing and depends on the nature, size and regulatory requirements of the entity.

Frequently asked questions

How is forensic audit different from statutory audit?

A statutory audit gives an opinion on the financial statements as a whole. A forensic audit is a focused investigation into specific allegations or transactions.

Who can appoint a forensic auditor?

The board, audit committee, lenders, investors or regulators, depending on the situation.

Does the report conclude whether fraud occurred?

The report sets out facts and evidence. Legal conclusions are for the appropriate authorities.

This page is for general information only and does not constitute professional advice or solicitation.