Business involves dealing with many stakeholders such as suppliers & vendors, distributors & related supply chainss, company labour workforce, company management and shareholders. The success or failure of the business depends on the strategic goals along with countless external factors. At times businesses may face issues and prove inefficient due to many internal factors. A forensic audit can help the company board, shareholders and legal authorities to deduce and identify any malpractices affecting the interests of different stakeholders.
A forensic audit can be defined as an analysis and detailed review of an organization's financial records or a person to deduce facts presented in a court of law. Forensic auditing is a particular type of auditing in the accounting industry, and usually, major accounting firms worldwide maintain a department specialized in forensic auditing. Therefore, this field requires experience in accounting and auditing practices and expert knowledge of forensic audit's legal framework.
The steps in the forensic audit are primarily similar to any traditional financial audit, which includes thorough planning, gathering records, and forming a report — with the additional exception step of a possible attendance in the court of law. The litigants' lawyers offer evidence that a possible crime is either upheld or disproved, which decides the damage caused. They also explain their found conclusions to the defendants in case of trial before the judge.
Requirement for Forensic Audit
The Forensic audit is carried out to prosecute a stakeholder for possible fraud, embezzlement or other financial irregularities and crimes. The Forensic auditor may be called in at the time of a forensic audit to act as an expert witness during the following trial proceedings. Forensic audits are required to check and prove the following crimes in an organization.
- Corruption or Fraud
- Asset Misappropriation
- Financial Statement Fraud
Forensic audit investigations can additionally discover and confirm different types of other illegal activities in an organization. Usually, a forensic audit is conducted in place of a regular audit in the following situations where the evidence collected would be used in a court of law.
Steps in Forensic Audit
The following steps are involved in the process of a forensic audit.
Planning the Audit/Investigation
In the planning stage, the forensic auditor and team working for him will thoroughly plan their investigation and deadlines to achieve the audit objectives.
The evidence collected by the audit team should be relevant to prove the fraudster's misdeeds in the court of law and reveal all the fraud scheme's details, and document any possible financial loss incurred and the stakeholders affected by the fraud.
A forensic audit team prepares and submits a carefully written report with all fraud findings, which will allow the client to proceed and file a legal case as deemed necessary.
Legal Court Proceedings
The forensic auditor must attend the court proceedings to explain the evidence collected and the process the team employed to identify the suspect(s). The auditors should simplify any complex accounting issues and explain the case in a language so that people present who have no understanding of legal or accounting terms can understand the accounts clearly to make a decision.
Advantages of Forensic Audit in the UAE
Let us know more about the advantages of the Forensic audit in the UAE:
Forensic audits in the companies will be instrumental in having a closer look at the legal issues. Frauds can be proving costly for the business and result in enormous losses. A forensic audit is implemented to avoid such scenarios in the present and future.
Forensic Accounting and audit can effectively help in solving financial crimes in the company. They can range from bribery in the departments to fraud & money laundering within the organization. Forensic accounting assists with gathering evidence for illegalities and can be used in detecting and proving crimes.
Forensic auditing assists companies in Investigating a particular department like the accurate price of raw material and products, the company's potential profitability, and presents the business's total market worth. In addition, forensic auditors have mandatorily required in case any lawsuit filed against a business.
Tracking and Curbing Malpractices
Different companies use forensic audit services to trace any illegal activity or malpractices practised in a company by practically gathering accounting evidence of such activities so that the management and the company's board can take necessary action.
Companies facing contractual issues regarding contracts while dealing with business vendors and clients are resolved by employing the relevant forensic audit services, which can help solve aroused disputes.
Increased brand Reputation
Forensic auditing is significant in identifying any unprofessional conduct in the organization and alerts the management to take all the remedial measures to maintain and improve the company's goodwill.
Suppose any companies are facing ongoing problems regarding the contracts while dealing with business vendors and clients. In that case, it's high time to implement forensic accounting and use forensic auditing in your business premises, which will help companies to solve disputes and enhances the quality of the company's offering to improve the business profits.
How Can We Assist?
Jaxa Chartered Accountants are one of the most reputed audit companies in the UAE. Our expert consultants can help companies in all aspects of forensic audits. Quality and trust are our most valued processions, which has helped our clients in identifying and resolving internal and external disputes faced by them. Please Contact Us with any questions about forensic accounting and audit. We'd be happy to help!