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

Meridian Textiles Ltd's board suspects that the purchase manager has been diverting funds through inflated vendor invoices and appoints an expert to trace the money and gather evidence that could be produced before a court. Which feature most clearly distinguishes this assignment from a statutory audit?

The assignment aims to establish the facts of a suspected fraud and build evidence suitable for legal proceedings. A statutory audit instead expresses an opinion on whether financial statements are true and fair, so the evidence-for-court purpose distinguishes forensic work.

  1. AIt is conducted only once a year on a fixed calendar
  2. BIt is aimed at forming an opinion on whether financial statements give a true and fair view
  3. CIt is limited to checking compliance with accounting standards
  4. DIt is directed at establishing facts of suspected fraud and building evidence fit for legal proceedingsCorrect

Explanation

A forensic audit is investigative and is carried out for a specific suspicion, with the purpose of collecting evidence admissible in legal proceedings. A statutory audit gives an opinion on true and fair view, which is the focus of the first distractor and is not the purpose here.

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