Acca aaa s21 Notes

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September 2021 to June 2022 exams
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Chapter 28
FORENSIC AUDITS
1. Introduction
The word ‘forensic’ is found in the terms:
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forensic accounting - involves the application of accounting knowledge and skills
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forensic investigation - the process of gathering evidence 
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forensic audit - the application of traditional audit procedures and techniques in a forensic 
investigation
In all cases it implies investigating a company’s or person’s financial affairs for legal purposes - in both 
civil disputes and criminal matters. The investigation might be related to a real or suspected fraud, 
quantifying an insurance claim, estimating the effects of professional negligence and discovering the 
assets owned by individuals (such as the proceeds of crime hidden away by a criminal or assets 
owned by a party to a failed marriage).
For the rest of the chapter, we will simply refer to ‘forensic auditing’.
2. General nature of the work
Often, but not always, the work performed by the forensic accountant will be used as evidence either 
in a criminal or civil case. Often the accountant will appear as an expert witness and be subjected to 
cross-examination. Prosecutions or civil claims are invariably defended and the accountants and their 
work will be expertly challenged by the legal representative of the defendant. Any shortcoming or 
flaws in the accountant's work will be picked on in an attempt to undermine the whole case. It is 
therefore very important that the accountant’s work, records, findings and conduct are of the highest 
quality so that their evidence is as solid as possible. It would, for example, be harmful to a case if an 
accountant alleged a finding that could not be substantiated. If the accountant cannot justify one 
statement, doubt is cast on them all.
However, although the accountant will be hired by one or other side of the dispute, the accountant 
must show