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CS Professional · Internal and Forensic Audit · Basic Concepts of Forensic Audit

Kaveri Pharma's internal audit department reports to the audit committee and reviews controls across procurement each quarter, with no specific allegation of wrongdoing. Which statement correctly contrasts this with a forensic audit of the procurement function?

Internal audit is a continuous, preventive activity reviewing controls and risks as part of the regular plan, while forensic audit is usually triggered by a specific suspicion or allegation of fraud and aims at investigation and evidence collection.

  1. AInternal audit is continuous and preventive in nature, whereas forensic audit is typically triggered by a suspicion or allegationCorrect
  2. BInternal audit is triggered only by a fraud allegation, whereas forensic audit is routine
  3. CBoth are performed solely by the statutory auditor appointed at the AGM
  4. DForensic audit is limited to testing controls, whereas internal audit gathers court evidence

Explanation

Internal audit is a routine, ongoing assurance activity on controls and risk, while forensic audit is generally initiated when fraud is suspected or alleged. Option 2 reverses the roles, and options 3 and 4 are incorrect on appointment and scope.

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