Question

Compare a forensic audit with a financial audit. Give specific examples of the differences between the two audits.

Answer 1

The major difference between financial and forensic audits is the purpose of the audit. A financial audit ensures the validity of a company’s financial statement and position statement such as balance sheet helps the investors and creditors with correct financial information. Forensic audits is directly related to an issue explained by the audit client. This concern may include dispute with a vendor or customer and fraud by employees. The auditor’s final report must satisfy all the standards for presenting in the court.

Forensic audits

Forensic audits need to analyse the financial transactions and complexity of the information which helps in presenting for use in court cases. The forensic auditor also test a company’s financial systems to know reliability ,strength and accuracy of internal systems.The court cases also need the evidence which is provided by the forensic accountant, business valuation, divorce and bankruptcy.

Financial Audit

A financial audit has one objective which is to provide the assurance that a company’s financial record keep practicing generally accepted accounting principles. The auditor must examine the company’s financial records and also use his best decisions in making the statements to the perfection. Financial auditors also ensure the certain information such as bank balances or vendor and accounts of customers with the related third parties. This gives the confirmation of the company's practices and standards of accounting.