When an audit is done with the purpose of providing information for legal reasons, it is known as a forensic audit. “Forensic” means “suitable for use in a court of law,” meaning that the information uncovered during a forensic audit is intended to be used in court, arbitration, or mediation. Forensic audits are commonly performed for cases involving insurance fraud, personal injury or breach of contract, money laundering, embezzlement, fraud, and divorce and marital disputes. To perform forensic audits, forensic auditing accountants will use various investigative methods to uncover the truth about nefarious actions performed against individuals, companies, and financial institutions.
Sacramento’s Cook CPA Group employs accountants that are committed to performing thorough forensic audits for clients. The accountants that work for Sacramento forensic accounting firm Cook CPA Group can put years of expertise of use to perform forensic audits for any purpose.
When Forensic Audits are Necessary
Accountants are needed to perform forensic audits when finances are being examined in a legal setting. There are four basic areas in forensic auditing in Sacramento, CA: reporting, data analysis, data preparation, and data collection. Forensic audits are most frequently used in court cases, though there are many other situations in which forensic auditing is needed. One type of court case that frequently requires forensic audits is one that involves the calculation of economic damages when there has been a personal injury or a breach of contract. Other court cases that require forensic auditing include product liability, divorce and marriage disputes, cybercrimes, tax fraud, securities fraud, insurance fraud, embezzlement, and environmental damages.
Forensic auditing accountants are often needed to perform examinations to be used in court. Sometimes, though, they are called on to be expert witnesses during trials. When giving expert testimony, they will share data that is based on principles and methods that are widely accepted in the field of forensic auditing.
Forensic auditing accountants may also be needed to investigate suspected criminal behavior within a company. Stolen assets, warranty breaches, unpaid vendors, skewed account balances, failed attempts at reconciliation, and theft of information are all reasons for a forensic auditing accountant to be asked to perform an audit. Cases of bankruptcy, insolvency, reorganization, and post-acquisition disputes would also require the work of a forensic accountant.
Aside from finding and identifying criminal or malevolent behavior, forensic audits may also be conducted to reinforce good practices that already exist within a company. To ensure that operations are running as smoothly as possible and that the risk of fraud and embezzlement is low, forensic auditing accountants will perform audits. These audits can expose vulnerabilities and reduce the chance of liabilities. Forensic audit accountants may also design procedures for periodic audits in the future, create fraud deterrence engagements, do investment research analysis, implement controls for what to do if and when fraud takes place, and provide training for internal auditors.
Why Our Sacramento Accountants Do During Forensic Audits
The goal of a forensic audit is to discover information, which our Sacramento, CA accountants do using a variety of financial and investigative methods. Forensic audit accountants will speak with sources to uncover facts relevant to certain cases, consult public records, analyze statements and journal entries, and track the movement of funds throughout various channels. Accountants who perform forensic audits must have a deep understanding of business administration, data management and analysis, practices for detecting fraud, litigation processes, economic theories, and, of course, auditing procedures.
Insurance companies, adjustment firms, law enforcement agencies, government agencies, and lawyers are most likely to require the services of forensic auditing accountants as either expert witnesses or consultants. In addition to certification for accounting, forensic auditing accountants will need additional certification to perform forensic audits, including CVA (Certified Valuation Analyst), (CFE) Certified Fraud Examiner, CFF (Certified in Financial Forensics), and IFA (Investigative & Forensic Accountant), among others.
How Forensic Audits are Different from Internal Audits
People often confuse internal audits with forensic audits. While the two are similar in that they are audits that are usually performed on large companies, there are some crucial differences that people should take note of. Internal audits are an examination of a company that is done by its own accountants or financial experts. Forensic audits are done to investigate specific financial matters.
There are specific circumstances under which an internal audit is performed on a company—usually internal audits are done when special expertise is needed to complete a special project, a company suspects that employees are not following certain policies and procedures, there are major lapses in ethical behavior, inaccuracies or mistakes are frequently made, or risks are prevalent because of changes to the industry that the company does business in.
When faced with certain issues, Sacramento companies often wonder whether they should perform an internal audit or a forensic audit. Which one is needed depends on the needs and goals of the company. It is possible that a company will need both an internal audit and a forensic audit to be done.
Work with Our Experienced Sacramento Forensic Auditing Accountant
Sacramento’s Cook CPA Group has forensic auditing accountants available to assist clients with financial investigations pertaining to court cases and other legal matters. Get in touch with them soon to learn more about how you can use their services or schedule a free consultation.