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Forensic audits, :red_flag:prohibit provide non-audit services to audit…
Forensic audits
Type of forensic service
Disagreement over fact
Proactive service
- agreement vetting
- alternative dispute resolution
- expert determination service
Expert determination service
- PA act as expert referee in providing advices to parties who need info relating to financial matters
Reactive service
- valuation service
- economic loss
- prof negligence
- post acq dispute
- insurance claim
- intellectual property
Valuation service
- involved in commercial / family disputes
- purchaser may willing but not anxious to buy / sell
Economic loss
- biz interruption
- breach of warranty
- personal injury
- prof negligence
-
Forensic accounting
- accountant in practice perform investigation work
- involve in financial affairs
Forensic investigation
- gather evid
- similar to audit of financial info
- planning stage, period gather evid, review process, report to client
- present findings to client & court
Forensic auditing
- involved audit technique in forensic investigation
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- engagement result from actual (reactive)/ anticipated disputes (preventive) / litigation (preventive)
- self-review, advocacy
Matters to consider b4 accepting appointment
- technical competency
- detailed knowledge of fraud investigation techniques & legal framework
- ways to maintain the safe custody of evid gathered
- fee must be high enough to compensate the possibility of being sued
Matters to consider during planning (Obj)
- identify type of fraud tht operating, how long operating for, how fraud has been concealed
- identify fraudster involved
- quantifying financial loss
- gather evid to be used in court proceedings
- provide advice to prevent reoccurrence
- consider best way to gather evid
Procedures to gather evid
- testing ctrl
- analytical procedures: change in trend
- enquiry: suspect / ppl expected to have info
- inspect: reconciliation btwn internal & external records
- observation: physical counting of inv & NCA (misappropriation asset)
- computation: persistent (repeat) cal error may suggest occurrence of fraud
- CAAT: unusual trans captured, indication of possible fraud
Content of fraud report
- non-assurance service, direct reporting engagement
- report matters discovered
- related to obj of forensic engagement
- amt of loss suffered
- how fraudster set up fraud scheme
- ctrl tht circumvented
- recommendation for improving ctrl
Safeguard
- all work conducted at ctrl site, only current engagement team have access
- electronic doc restricted to engagement team
- educate staff for confidentiality
- sign confidentiality agreement
- Chinese Walls
:red_flag:prohibit provide non-audit services to audit client, except tax services
- outcome of tax service always being subj to scrutiny by IRB, any compromisation wld have been noted