A forensic audit examines and evaluates the financial records of a business or an individual to derive evidence used in court or legal proceedings.
Forensic audits need accounting and auditing procedures and professional knowledge regarding the legal framework of such an audit.
Forensic auditing includes a wide range of investigative activities. They are often conducted to implead a party for fraud, embezzlement or other financial crimes. In the process of a forensic audit, the auditor may be asked to become an expert witness during investigative actions. Forensic audits can also involve situations that do not involve financial fraud, such as disputes over bankruptcy filings and business closings.
Forensic investigations can reveal or confirm various types of illegal activity. Usually, if the collected evidence is to be used in court, a forensic examination is preferred over a routine audit.