Skip to content

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

Sundaram Textiles Ltd. suspects that its purchase manager has been colluding with a vendor to inflate invoices. The board hires a firm to examine documents, trace payments and prepare evidence that can be produced before a court. Which feature most clearly distinguishes this engagement from a statutory audit?

A forensic audit is distinguished by its purpose of collecting and preserving evidence of suspected fraud that can stand up in legal proceedings. A statutory audit, by contrast, gives an opinion on whether financial statements are true and fair, rather than investigating a specific allegation.

  1. AIt is conducted only after the financial year-end on a sample basis
  2. BIt focuses on gathering evidence of a suspected fraud for use in legal proceedingsCorrect
  3. CIt expresses an opinion on whether the financial statements give a true and fair view
  4. DIt reviews the adequacy of the company's risk management for management

Explanation

A forensic audit is aimed at finding and documenting evidence of suspected fraud in a form admissible in court. Statutory audit expresses an opinion on true and fair view (option 3), which is not the purpose here. Option 4 describes an internal audit function.

Did you get it right without looking?

One question tells you little. A timed set on Basic Concepts of Forensic Audit shows your real accuracy, how long you take and where you lose marks.

Practise Basic Concepts of Forensic AuditFree diagnostic mock

More Basic Concepts of Forensic Audit questions