SEBI orders forensic audit of Shell Companies

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As the more enforcement agencies and regulators order the forensic audit of the books of accounts of the registered companies, scope of Certified Forensic Accounting Professionals (CFAP) increases in India. CFAPs are specifically trained for conducting the forensic audits. The certification program which started in 2008 is now generating momentum as the Regulators have started ordering the forensic audits of the books of various companies.

What is Forensic Audit ?

Though it is used as the synonym to forensic accounting, there is a significant difference. Forensic Audit is performed for identification of the financial statement frauds of the suspected, shell or other fraudulent businesses. It is a small subset of services rendered by the Forensic Accountant (CFAP).

Forensic Audits in India are ordered by the agencies such as Serious Fraud Investigation Office, Securities Exchange Board of India or Reserve Bank of India etc.

RBI & Forensic Audit

PRofession witnessed the first wave of demand when the Reserve Bank of India issued the notifications requiring the forensic audits for tackling the Non Performing Assets. Growing Non Performing assets helped Bank Forensic Audits to grow exponentially. Bank Forensic Auditors are typically asked to look at the nature of loss to the bank and comment on whether the loss is willful default caused by the borrower or it is a genuine business problem. Banking Sector in India is tightly regulated and now requires the services of Market Intelligence to strengthen the sources of informal information

SEBI Orders forensic Audit

Securities Exchange Board of India, on 7th August’2017 Declared 331 Companies as Shell Companies. The stock market regulator received the list from the ministry of corporate affairs (MCA) on 9 June, wherein it was asked to initiate necessary action under its regulations. SEBI empaneled forensic auditors for conducting the detailed investigation of books of accounts (Forensic Audit).

On 5th September’2017, SEBI ordered Mumbai Stock Exchange to get the forensic audits of the two firms done from Independent forensic auditors viz. GV Films and Kavit Industries.

GV Films’ standalone revenue stood at Rs5.68 crore in FY15, fell to Rs3.36 crore in FY16 and further to nil in FY17, Sebi said, while observing that it had no other revenue stream to support expenditure of about Rs9 crore and was incurring losses year after year.

Besides, the company made investments in shares of a subsidiary company to the tune of Rs15.05 crore even as its net worth was getting eroded over years. “The financials of the company is dominated by current liabilities of Rs96.87 crore against which total assets of Rs118.73 crore are shown, which are disproportionate to the income and expenditure of the company. SEBI Ordered forensic audits of many other companies and is entrusted with Independent Forensic Auditors.

NSE Academy Certification

NSE Academy Limited (NAL) is the subsidiary company of National Stock Exchange Limited. Looking at the growing need of the Forensic Auditors in the different financial sectors, NAL launched its first Forensic Audit Certification in association with Indiaforensic. This course prepares the non-chartered accountants to take up the career in forensic audit. In order to get more information on Forensic Audit Courses please write an email to or call us on +91-9766594401

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