Forensic audit is an examination and evaluation of a firm’s or individual’s financial information for use as evidence in court and also to determine whether fraud has actually occurred.
Whereas statutory audit is an independent examination of financial statements of a firm, irrespective of its size and legal perspectives with a view to express an opinion on true and fair presentation thereon.
The differences between Forensic Audit and Statutory Audit are tabulated below;
|Sl.No.||Basis||Statutory Audit||Forensic Audit|
|1||Objective||To express opinion as to ‘true & fair’ presentation.
|To determine correctness of the accounts or whether any fraud has actually taken place|
|2||Techniques||‘Substantive’ and ‘compliance’ procedures.
|Analysis of past trend and substantive or ‘in depth’ checking of selected transactions are done.|
|3||Period||Normally all transactions for the particular accounting period are considered.||There is no such limitations while conducting forensic audit and accounts may be examined in detail from the beginning.|
|4||Management Representation||Auditor relies on the management certificate/representation of management.||Independent verification of suspected/selected items carried out/|
|5||Off balance-sheet items (like contracts etc.):
|Off balance-sheet items are used to vouch the arithmetic accuracy & compliance with procedures||Regularity and propriety of these transactions/contracts are examined|
|6||Adverse findings, if any||If there are any adverse findings, negative opinion or qualified opinion is expressed, with/without quantification.||The auditor aims at legal determination of fraud and also naming persons behind such frauds.|
What mentioned above is just a brief and the main differences, there can be many other differences between these two types of audits. To conclude, Statutory Audit may be seen as an evergreen actor like Amitabh Bachhan and Forensic Audit as a rising star like Varun Dhawan both have their charm but with the kind of increasing use of technology future remains in forensic audit.
(Author CA Piyush Baranwal, DISA, Certified FAFP(ICAI),Certified in International Taxation(ICAI) can be reached at email@example.com or 9818133880)