Every Chartered Accountant can not be a forensic auditor

I see a lot of Accounting Firms on various panel of forensic audits. They are always trying to make a good fortunes out of the booming sector. Many of these are certified from Institute of Chartered Accountants of India. But it is important to understand the paradigm shift in the way the non-traditional practice is conducted. Decades back, auditors used to offer all services under one roof. Even today, many of the firms have the same mindset.

The Reserve Bank of India has made forensic audits mandatory for large advances and restructuring of accounts.

In light of this, the RBI recently came up with the concept of creating a ‘forensic audit pool.’ It was reported that it wants banks to create a common pool of forensic audit firms so that they can pick one of them quickly whenever a high-value fraud needs to be investigated. 

The aim was to ensure that there wasn’t any wastage of time in the garb of evaluating the eligibility criteria of forensic auditing firms.

It was seen that such a step could pave way for Banks to investigate instances of high-value frauds is that banks can quickly take appropriate action, including fixing staff accountability, lodge complaints with law enforcement agencies, and invoke penal measures, such as debarring fraudulent borrowers from availing bank finance or raising funds from capital markets.

Forensic auditors/accountants do not differ from other financial accountants. However, they possess special skills to detect fraud, and ways to document it. Their role goes beyond just looking into statements, that includes investigation, bringing out evidence, writing reports, understanding the legal scope of the evidence, and ways to prove it in court. Thus, a forensic auditor is need of a little more professional skepticism and has to conduct critical assessment throughout the audit of all essential material, which is known as forensic thinking. It can be understood that the work of a forensic auditor is two-phased.

  • Investigation Services – At first the auditor begins with an investigation; looking into the accounts and statement, and identifying defects in it. It then moves on to find ways to deal with such defects, which is a reactionary function.
  • Litigation Services – It is entirely possible the frauds detected be resolved within the company itself. However, there are times when they need to be resolved through legal channels. During such situations, forensic auditors give litigation support to the advocates. Their advice and consultation about the legalities of commercial disputes are very essential. Moreover, they also provide research assistance by giving relevant documents and facts to support a legal claim, and also help decide the extent of damage that is required. They are also called up by the Court as an expert witness for further investigation.

Sarang is one of the first forensic accountants in the country who worked extensively with the law enforcement agencies across the country to solve the fraud problems. He is a Certified Anti Money Laundering Expert. He worked in the shipping industry before joining Riskpro and is instrumental in exposing the Trade based money laundering cases for the banking sector. He investigated numerous Ponzi Schemes for the Government of Maharashtra and presented in the court of laws as the expert witness to justify the findings of the reports.