Question

Forensic Audits. Present arguments that you believe a forensic audit will never become an accepted fraud detection practice.

Answer 1

Forensic accountants are experienced accountants, auditors, and investigators of legal and financial documents that are mainly hired to look into possible suspicions of fraudulent activity within an organisation; or are hired by a organisation who may just want to prevent fraudulent activities from occurring in future. Forensic Accountants combine their accounting knowledge along with investigative skills in numerous litigation support and investigative accounting settings. Forensic accountant is required to collect, analyze, and evaluate evidential matter and then to interpret and communicate findings, and may involve either an attest or consulting engagement. But there is an inherent limitation in sampling results and as a result all transactions are not tested. The several transactions are untested by the auditors, which mean there is a high chance that fraudulent transaction may not be part of the testing. Furthermore the managers are aware that the auditors usually choose larger dollar entries to test thus they may manipulate the records in accounting with numerous transactions instead of one large transaction. The auditors are at the mercy of managers who are the information holders. Also it is difficult to audit the manager's judgment and estimates in company’s financial statements. Thus the forensic audit can never become an acceptable practice for fraud detection.