Forensic Audit and Accounting
In recent years, the term forensic audit has come into use. What does it really mean specifically? The following article will discuss the importance of this process.
First, let’s define accounting. Accounting is the method of identifying, measuring, recording, and communicating economic information about an entity or organization. This procedure allows informed judgments by the users of the information. On the opposite side is the forensic audit, which is a fairly new procedure in the field of auditing.
Crime was the reason forensic auditing was born, more specifically economic crime. Economic crime has affected all countries and industries and has intensified in recent times. The number of reported fraud and corruption cases has continued to grow. This is complicated by the challenges facing the criminal justice system. In addition to the general lack of the skills necessary to collect the proper audit evidence that is vital to criminal investigations.
According to information collected from law enforcement and criminal justice agencies, the success rate of convictions is not good because judicial authorities lack the skills and knowledge to provide effective investigation and prosecution. . This is where the forensic audit comes in. Thus, forensic accounting gets its name from its association with a court of law. It is carried out to achieve an objective that entails a judicial process.
An example of this is the computation of patrimonial values in a divorce process. Another is the assessment of damages due to the negligence of an auditor. Another one is the investigation of the facts to see if fraud has occurred, in what amount and if it is appropriate or not to initiate criminal proceedings. And finally, the collection of evidence in criminal proceedings. Forensic accounting primarily focuses on both the evidence of financial transactions and the reports found within an accounting system. It is the legal framework that allows such evidence to be suitable for accounting purposes.
Forensic accountants are public accountants who specialize in these types of cases and when there is a need for such evidence. Their job is to distinguish and interpret evidence of non-fraudulent and fraudulent transactions in the books and records of an accounting system. They also look for the resulting effect on accounts, inventories, and presentations. Therefore, it is important that forensic accountants first understand regular accounting procedures and processes. In other words, forensic accounting is a specialization.
