While conducting a forensic audit the auditor should follow certain steps which are as follows:
1. Initialization
Meeting with the client accepting the engagement: In order to understand important facts, players, and issues, etc., the investigator must meet the client. It is to be considered initially that whether his form has the necessary skills and experience would accept the work.
Performing conflict check: To achieve objectivity, a conflict check of interest check should be carried out as soon as the relevant parties are established.
Performing an initial investigation: It is generally desired to perform an initial Action Plan before developing a detailed plan. The search initial Action Plan will help to formulate subsequent planning to be based upon a more complete and comprehensive understanding of the situation.
2. Planning the audit
The planning of the audit is to be developed based on the meeting with the client and carrying out the initial investigation on the subjects to be investigated.
The plan made according to audit and the action plan will set out the objectives to be achieved and the methodologies to be adopted. The investigation team must make their objectives clear and carefully take into consideration the objectives to be achieved and plan their work accordingly.
3. Collection of evidence
It involves obtaining relevant documents, economic information, racing different aspects/ persons/ unaccounted records, meeting with other experts, statutory and internal auditors of the client. The evidence that should be sufficient to ultimately identify and prove the fraudsters and the mechanism adopted for such frauds.
4. Performing analysis
The actual analysis to be performed well so lonely depends upon the nature of the assignment. This may include:
- Summarisation of a large number of transactions.
- Performing strong procedures to trace unidentified assets.
- Calculating the economic damages and if required, loss of goodwill.
- Estimating the present value of the financial losses for frauds involved in the case such as regularities or frauds took place for a long period.
- Performing the statistical regression for sensitivity analysis of the frauds etc.
- Using various computerized application software and graphs etc. To explain and analyze the fraud.
5. Reporting
The report generally includes various sections describing the nature of the assignment, scope, approaches utilized, findings, opinions, and limitations.
Reports are generally submitted to the appointing authority.
6. Court proceedings
The investigation is likely to lead to legal proceedings against the suspect. The evidence gathered during the investigation will need to be presented at court, and team members may be called to court to describe the evidence they have gathered and to explain how the suspect was identified.
The requirement of work in the forensic audit also depends upon the type and nature of the entity on which the forensic audit is performed.
