Forensic Audit

john wrote on December 20, 2010 - 11:57am
in asset misappropriation corruption fraud investigation
FROM: Dr John Vong



Accepting the audit

A forensic accountant must initially consider whether his/her firm has the necessary skills and experience to accept the work. Forensic audits are highly specialized, and the work requires detailed knowledge of fraud investigation techniques and the legal framework. Investigators must also have received training in interview and interrogation techniques, and in how to maintain the safe custody of evidence gathered.

Additional considerations include whether or not the investigation is being requested by an audit client. If it is, there is a possible conflict of interest and pose a risk to achieve objectivity.


Planning the audit

 identifying the type of fraud that has been operating,
 how long it has been operating for,
 how the fraud was concealed for the duration
 identifying the fraudster(s) involved
 quantifying the financial loss suffered
 gathering evidence to be used in court proceedings
 providing advice to prevent the re-occurrence of the fraud.

The investigators should also consider the best way to gather evidence, through data-mining, checking the transaction log systems, SWIFT for financial transaction,

Gathering evidence



1.1 Origin of the Audit
1.2 Audit Objective
1.3 Proposed Audit Outputs
1.4 Audit Implementation Approach

2.1 Internal Environment Risk
2.1.1 Financial Management
2.1.2 Customers, Products and Competitors
2.1.3 Information technology
2.1.4 Business Process
2.1.5 Human Resource Management
2.2 External Environment Forces
2.2.1 Influence of Economics and Loans Market
2.2.2 Political and Legal Scenario
2.2.3 Technology in Banking

3.1 Conflicts of interest
3.2 Bribery
3.3 Extortion
3.4 Cash theft
3.5 Fraudulent disbursements
3.6 Inventory frauds
3.7 Misuse of assets
3.8 Financial Statement fraud

4.1 Logical Framework Approach
4.2 Preconditions and Risks

5.1 Stakeholders
5.2 Budget Considerations

List of Annexes
Annex 1: Members of the Interviews
Annex 2: Organization Chart of Bank
Annex 3: Financial Performance (YYYY to YYYY)
Annex 4: Audit Recommendation Logical Framework
Annex 5: Analysis of Key Risk Events
Many Others:

(Source of information: ACCA, UK Technical Paper, pg 58, September 2009)


Fraud is really a serious matter in our business today. We have to investigate it in such a way that it finds no chance of coming into our business.

Auditing requires not only a definitive skillset and training, but a mental approach the behooves balance, transparency, and assiduousness.