Forensic Audit: Field to Explore

Growing cyber crimes, failure of regulators to track the security scams, series of co-operative banks bursting – all are pinpointing the need of forensic accounting, irrespective of whether we understand the need or not.

Forensic accounting seeks to uncover the what, why and how behind the computation and reporting of figures. The aim is to ascertain or confirm the substance of those purported transactions.

In the Indian context the Forensic Accountants are the most required in the wake of the growing frauds. The law enforcement officers are the experts of analyzing the fingerprints and the Narcotics but what about the digital evidence analysis.

Why there is the need for Forensic Accountants?

• Forensic Accounting is the specialty practice area that describes engagements which result from actual or anticipated frauds, disputes or litigations. Forensic Accounting, Fraud Detection & Prevention specialization is in increasing demand considering increasing incidents of cyber-crimes and frauds. It is the practice of utilizing accounting, auditing, CAATs/ Data Mining Tools, and investigative skills to detect frauds/ mistakes. The Government bodies , PSU’s , Insurance sector, Banks, Investigating agencies as well as many medium-sized and boutique firms have specialist forensic accounting departments engaging Forensic Auditors.
• Very few know about it – Maurice E. Peloubet who coined the term Forensic Accountant in 1946 said that the preparation of financial statements has some but not all of the characteristics of forensic accounting. This statement is enough for the chartered accountants in India to foray in this field. It is new child on the block. Central Investigating Agencies like CBI do the forensic accounting work.
• The growing number of regulator and the administrative agencies will demand the services in the nature of forensic practice. Chartered Accountants are going to find themselves more involved in what is essentially a type of forensic practice. The changing nature of the Accounting and Auditing & assurance standards also confirms this.
• Nearly 40 per cent of the top 100 American accounting firms are expanding their forensics and fraud services, according to Accounting Today. If this data is of some sense to Indian scenario then the day is not far away when forensic practice will contribute to the total revenue of the Indian CA firm.
• According to ‘2018 Report to the nation’ by Association of Certified Fraud Examiner (ACFE), there were 2690 cases of occupational fraud from 125 countries resulting into loss of more than $7 billion which cause a huge demand for those who can identify and put up relevant control to prevent such mishap. Out of these 72 cases were from India. Against a backdrop of tough economic conditions and growing corporate governance, demand for forensic accountants is increasing. Practitioners believe that the demand for the services of forensic accountants is growing because of the tightening economic conditions and the increasing scrutiny of how companies are governed. In such circumstances, there is heightened sensitivity to fraud, and that translates into more efforts to detect and prevent it, as well as to take legal action against the wrongdoers.

There is nothing surprising to that, as this word ‘Forensic Audit’ has become so familiar now these days, and special credit for this goes to Mr.Vijay Mallya and Mr.Nirav Modi and a huge pile of NPA’s build up by our state-owned banks.

Pre-requisite of a skillful Forensic Accountant

1. a) Dave Cotton, a qualified CFE have greatly defined the attitude the person should maintain while investigating Fraud and Forensic Cases. He said: ‘Many fraud perpetrators aren’t as clever at concealing fraud as most people probably think. If CFEs simply remain alert and maintain a high degree of professional skepticism many potential frauds are easy to find’.
2. b) A good Forensic auditor requires immense knowledge on financial aspect along with good understanding of internal financial controls as identification of weak control can help to easily catch out the areas where fraud can be carried out.

Professional Qualification that can give you an extra edge  

Certified Fraud Examiner (CFE)

A course which is pursued by few (atleast in India) but that will go to take you steps ahead of your peer. A qualified CFE can easily get the job into Forensic and Investigation Department of any high profile firm (Big four).  It helps to give you recognition when you applied for the overseas job. It cost nearly US $450 to complete the course (I am not considering the cost of tuitions). For more information on CFE please visit the link http://www.acfe.com/become-cfe-qualifications.aspx.

Certification course on Forensic Accounting and Fraud detection (FAFD – ICAI)

It is a 7 days course Post Qualification Course with a fee of just Rs 20,000 plus GST. Various topics ranging from internal financial controls, Indian law to real-life case studies will be covered during the lectures.  For more information on FAFD please visit the link http://pqc.icai.org/course/fafd-cc-2

Certified Professional Forensic Accountant (CPFA)

It is offered by the Institute of Certified Forensic Accountants (ICFA). The course is 100% online and offers a broad introduction to the concept of both forensic Accounting and Fraud.