Forensic accounting

Presented by: Ruquia Batool

Lubna mueen

Hafiz Adnan

Word forensicWhat is Forensic Accounting?Other Terminology.Techniques of Forensic Accounting?Types of assignments a Forensic Accountant

perform.Skills required.Ethical PrinciplesStage to Forensic Accounting.Case studies.

M.Com 3rd(Auditing) Islamia University Bahawalpur

Meaning in Urdu ۔ َح�ث ب ِّن� َح� ۔ َح�� کا َح�دلال ِا�س ۔ َح�ہ َح� ُم�با َح�ث ب

The adjective forensic describes scientific methods used to investigate crimes. It could also mean that it has to do with the courts or legal system.•belonging to, used in, or suitable to courts of judicature or to public discussion or debate’•In the accounting profession the term ‘forensic’ deals with the relation and application of financial facts to legal problems



• The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting.

• Professional accountant conduct an examination on the client’s Financial statement using Investigative and Auditing techniques , only needed in the potential court cases.


So we can say that Forensic Accounting is an umbrella ofForensic Auditing + ForensicInvestigation.


Forensic Audit

The process of gathering, analysing and reporting on

data , in a pre-defined context, for the purpose of

finding facts and evidence in the context of

financial/legal disputes and irregularities and

giving preventative advice in this area.


The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law. A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline. Main purpose is to find out possible fraud committers, may be specialized investigation applied in court proceeding



(THEIR EXPERT ADVICE)

Type of fraud

How it happened(check internal control system)

Evidence

Interview with suspects(gain a confession from him)

Report(summarize suspects and quantify economic loss


• EXPERTWitness in the Court

• ADVICETo Company how to improve their internal control system in the future


• Materiality (no materiality threshold)

• Timing (less predictable than audit. Timing of

procedures need to be unpredictable).

• Documentation

Needs to be reviewed more critically than on an audit.

• Interviews (required high skill level)

• Computer-aided techniques (access, management

and knowledge of Computer-aided techniques )



Motive

Rationalization Opportunity


PressurePersonal or family financial problemsGambling or drug problemsFinancial Expectations OpportunityWeaknesses in controlsThird parties Rationalization


Criminal Investigations

Shareholders' and Partnership Disputes

Business Interruption / Other Types of Insurance Claims

Business/Employee Fraud Investigations

Business Economic Losses

Professional Negligence

Terrorist FinancingM.Com 3rd(Auditing) Islamia University

Bahawalpur

• Gender (male)• Marital status (married)• Education status (highly educated)• IQ level (high IQ level)• Age level (done by older than young's one)• Position at the business (mostly at managerial

post)• Relations outside of business (good business

relations)


• Invetigative• Accounting• Auditing• Creativity –(where might I find evidence?)• Curiosity (recognise the warning signs)• Perseverance (paper or accounting irregularities

may exist, but unless the evidence is connected to individuals, no fraud can be established)

• Common sense (what is possible?)


• Business sense (understanding of how a business functions)

• Confidence (stand up in court and present evidence in a clear and concise manner)

• Attention to detail (evidence must be gathered & preserved in such a way that it can meet the standard of proof test in court)

• Communication skills


• Integrity (be honest otherwise withdraw assignment)

• Objectivity(independence and objectivity)• Professional competence and due care• Confidentiality• Professional behavior


Meet with the client

Perform a conflict check

Perform an initial investigation

Develop an Action Plan

Obtain the relevant evidence

Attendance at Court

Prepare the report

Perform the analysis


Planning StageMeet with the Client

Obtain an understanding of issues at hand Perform preliminary assessment of work to be done and

prepare tentative schedulePerform a Conflict Check

Ensure that the firm does not have conflicts of interestPerform an Initial Investigation

Preliminary investigations examination of available information

Allows auditors to identify likely trouble areas and assess the work to be done

Plan the Audit It Should identify objectives to be achieved and plan audit

methodology to be used


Execution StageCollect the Relevant Information

In depth interviews with client’s staff Examination of hard-copy & electronic info

Electronic info is often best source for forensic auditors

Specialized computer forensic auditors are sometimes called in, depending on the audit

Off-site computers & servers, hard-copy info, etc. are also examined


• Perform the Analysis• Highly dependent on specifics of the engagement• Often involves: calculating economic damages and sensitivity

analysis, tracing of assets• Prepare the report

• It contains the details of the engagement, the scope, any limitations and a detailed summary of the findings

• Reports are generally confidential and often used in court proceedings

• Review Process & report to the client. • Identify those involved and quantify amount of fraud.• Present findings to the client and court


• It is to exclusively associated with "negative" applications, such as bankruptcy, fraud, business disputes, or matrimonial divorce insurance claims legal disputes.

• It may also be applied in "positive" assurance engagements such as due diligence reviews, business valuations, audit committee advisory services and enterprise risk management




• Forensic accounting, which has been growing rapidly as a profession in the world and has been accepted as a profession in countries such as Canada, Australia, the USA, and the UK, is beginning to gain the importance that it deserves. The traditional auditor was following a reactive approach during the audit process. Now we see that proactive approaches have begun to replace the reactive solutions.
