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

Mehta Textiles Ltd. suspects that its purchase manager has been splitting orders to stay below approval limits. The audit committee hires a forensic auditor. Which feature best distinguishes the forensic auditor's engagement from a routine statutory audit?

A forensic audit is distinguished by its aim of gathering evidence of a suspected fraud that can withstand scrutiny in legal proceedings, whereas a statutory audit mainly expresses an opinion on whether the financial statements are true and fair.

  1. AIt focuses on gathering evidence that can stand scrutiny in legal proceedings regarding a suspected fraudCorrect
  2. BIt is limited to expressing an opinion on whether financial statements give a true and fair view
  3. CIt relies only on sample-based testing of balances at the year-end
  4. DIt is performed only after the company's accounts have been adopted at the AGM

Explanation

A forensic engagement is directed at a specific suspicion and aims to collect evidence admissible in legal or disciplinary proceedings. The true and fair opinion on financial statements is the objective of a statutory audit, so that option describes the wrong engagement.

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