A forensic audit goes further than a normal audit. Its purpose is to find out what happened to money, who was responsible and to produce evidence that can stand up in a legal setting.
What a forensic audit is
A review of financial records, usually by an independent specialist, to uncover unlawful or improper financial activity. The findings can be used as evidence in court or other proceedings, and the auditor may be called as an expert witness. It is not only for fraud. It can also support disputes around business closure, insolvency or divorce.
When you need one
Typically when fraud or a crime is alleged, or suspected, and the question has to be answered with evidence. Common categories include:
- Financial statement fraud
- Asset misappropriation: cash theft, fraudulent payments, inventory and other assets
- Bribery and corruption
- Data and intellectual property theft
- Contract and procurement fraud
- Payment, insurance and consumer fraud
- Computer and internet fraud
- Money laundering, securities and tax fraud
Benefits
- Lower losses. Early detection stops leakage.
- Practical fixes. Reviewing current processes shows exactly where controls failed.
- Awareness of risk. Closing gaps before fraud happens lowers future exposure.
- Legal support. Evidence is gathered so it can be used in court.
- Dispute resolution. Facts settle contract disputes and reassure partners.
- Action on wrongdoing. Management can act on what the evidence shows.
- Stronger policy. The findings inform spending and control policies.
- Reputation. Catching misconduct early protects the brand.
The usual process
1. Acceptance. The firm talks to you to understand the company and the concern before taking the engagement. 2. Planning. The team defines the suspected fraud, the period, how it was hidden, who may be responsible, the likely losses and the evidence needed. 3. Evidence gathering. Records, transactions, communications and system data are collected and preserved. 4. Report. A written report sets out findings, an evidence summary, how the fraud was carried out and recommended preventive controls. 5. Legal stage if required. The auditor explains the evidence in plain language to the court or authority.
Fees and timelines depend on the size and complexity of the case. Ask for a written scope. Evidence should be preserved from the start, so do not alter or delete records once you have a concern.
See our audit services and the guide to forensic audit.
Key takeaways
- A forensic audit produces evidence suitable for legal use, not just an opinion.
- It covers many kinds of fraud and also non-fraud disputes.
- Preserve records as soon as you have a concern.
Frequently asked questions
How is a forensic audit different from a normal audit?
A normal audit gives an opinion on the financial statements. A forensic audit investigates specific concerns and builds evidence.
How long does it take?
It depends on the case. Ask for a scope and timeline in writing.
Talk to a chartered accountant
Questions about your own situation? Reach us directly and we will reply with clear next steps.
This article is general information and not advice for your specific circumstances. Rules and thresholds change, so confirm the current position before you act.
