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

Sundaram Textiles Ltd. notices that its purchase ledger shows unusually high payments to a single vendor. The board appoints an independent professional to examine the records so that the findings can be presented before a court if required. Which description best fits this assignment?

This is a forensic audit. A forensic audit examines specific suspected irregularities using accounting and investigative skills and builds evidence that can be presented in court, unlike a statutory audit, which only expresses an opinion on whether financial statements give a true and fair view.

  1. AA forensic audit, because it examines records with a view to producing evidence admissible in legal proceedingsCorrect
  2. BA routine statutory audit, because it is aimed at expressing an opinion on true and fair view
  3. CA concurrent audit, because it checks transactions only before they are processed
  4. DA performance audit, because it assesses the economy and efficiency of purchasing

Explanation

Forensic audit combines accounting, auditing and investigative skills to examine suspected irregularities and gather evidence usable in legal proceedings. A statutory audit gives an opinion on financial statements and is not designed to build court-ready evidence of a specific suspected fraud.

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