Forensic Audit
A forensic audit examines accounting records and related evidence to establish facts about suspected irregularities, such as misappropriation, altered entries or unusual procurement. Chirde and Associates, Chartered Accountants, carries out such reviews with attention to confidentiality, objectivity and documented evidence, in line with the Forensic Accounting and Investigation Standards issued by the ICAI. We report what the records show and make no promise about the outcome.
A forensic review reports what the records and evidence show. Whether an act is an offence, and what action follows, is for the management, the lender, the regulator or the court concerned. Legal advice and representation are provided by advocates.
The result of a review cannot be known in advance. An engagement carries no assurance that an irregularity will or will not be found, or that any amount will be recovered.
Examination of records and evidence
- Forensic accounting and fraud examinationExamination of books, vouchers and supporting records to identify misstatement, misappropriation or manipulation, within the scope agreed.
- Investigation of financial irregularitiesReview of specific concerns, such as discrepancies, complaints or unexplained variances, to establish the facts from the records.
- Fund-flow tracing and data analysisTracing the movement of money across bank accounts, ledgers and related parties, and analysing accounting data to find duplicates, gaps and unusual patterns.
- Vendor and procurement reviewsReview of vendor selection, rates, approvals, payments and related-party dealings against policy and supporting documents.
- Expense and payroll reviewsExamination of employee expense claims, advances and payroll records for irregular, duplicate or unsupported items.
- Internal control gap assessmentIdentifying weaknesses in approvals, segregation of duties and record-keeping that allowed an irregularity to occur, with observations for management.
- Forensic audit for lendersForensic audit assignments where a lender or regulator requires one, subject to the lender's own appointment and eligibility norms.
- Documentation for legal proceedingsOrganising financial records, schedules and working papers so that an advocate can use them in proceedings, where the engagement so provides.
A confidential, documented process
Scope and confidentiality
We discuss the concern, the period and the functions involved, confirm our independence, limit access to a small named group, and record the scope in an engagement letter.
Secure the records
Records and electronic data are obtained as copies in a documented manner so that originals are not altered. A log of what was received, from whom and when is maintained.
Examine and analyse
Transactions are traced and data analysed. Explanations are sought from the persons concerned where appropriate and agreed with you, and facts are kept separate from inference.
Report and document
A written report sets out the procedures performed, the facts found, the evidence relied on and the limitations. Working papers are indexed to the evidence, and the decision on further action rests with you.
Situations that call for a forensic review
- Owners and boards who suspect misappropriation or irregular entries in the accounts
- Companies that have received complaints about vendors, procurement or expense claims
- Management seeking an independent review of employee expense and payroll records
- Partners or promoters in a dispute who need the flow of funds reconstructed from records
- Borrowers and lenders where a forensic audit is required under the lender's or a regulator's framework
- Parties to legal proceedings who need financial records organised for their advocate
Frequently asked questions
How does a forensic audit differ from a statutory audit?
A statutory audit gives an opinion on whether financial statements are fairly presented, using materiality and sampling, and it is not designed to detect every fraud. A forensic audit is directed at a specific concern, examines transactions in detail and concentrates on gathering and documenting evidence.
Will a forensic review prove fraud or recover the money?
We cannot promise either. The report states the facts and evidence found within the scope of work. Whether fraud is established is for the competent authority or court, and recovery depends on legal and other processes outside our control.
How is confidentiality maintained?
Access is limited to named members of the team, and information is used only for the engagement. It is stored securely and disclosed only where law or professional duty requires, in line with the ICAI Code of Ethics.
When do lenders require a forensic audit?
Lenders may call for a forensic audit in situations specified under their own fraud-risk policies and applicable RBI directions, and they appoint auditors under their own norms. Please check the requirement with your lender; we take up such assignments only where eligible.
What should we do if we suspect an irregularity?
Do not delete or alter records, and preserve original documents and electronic data. Limit the number of people informed, and avoid confronting anyone before the facts are established. Then seek professional help, including legal advice where needed.
Discuss a confidential matter
To discuss a forensic audit requirement, write to us at enquiries@chirdeassociates.in or visit our Nagpur or Yavatmal office. Please avoid sending sensitive documents by unencrypted email.