Page 349 - CA Final PARAM Digital Book.

QNO Forensic Audit Steps Old Course-- (SM17, N18M, SM21, N21E,N23M)
630.000 TITANIUM CNO – FA.060 New Course-- (SM23)
Enumerate the steps to be undertaken in case of forensic audit process
OR
PQR Ltd. is a listed company having turnover of Rs. 50 crores & plans expansion by installation of new
machines at new building-having total additional project cost of Rs. 20 crore.

Project gets implemented in 2017-18 and one of the accountants points out to Managing Director that
something wrong has happened in the purchase of building material.
On hearing this, the management is planning to appoint Forensic Auditor. Advise the Forensic Auditor
about the steps to be undertaken in case of forensic audit process.
Answer ➢ Each Forensic Accounting assignment is unique. Accordingly, the actual approach adopted and the
procedures performed will be specific to it. However, in general, many Forensic Accounting

assignments will include the steps detailed below.

Step 1. – Initialization
• Purpose
It is vital to clarify and remove all doubts as to the real motive, purpose and utility of
the assignment.

• Meet Client
It is helpful to meet the client to obtain an understanding of the important facts, players
and issues at hand.

• Conflict Check
A conflict check should be carried out as soon as the relevant parties are established.
(Whether it will affect other assignment of firm and vice versa)

• Preliminary Investigation
It is often useful to carry out a preliminary investigation prior to the development of a
detailed plan of action. This will allow subsequent planning to be based upon a more
complete understanding of the issues.

Step 2. - Develop Plan
• Set Objectives & Methodology
This plan will take into account the knowledge gained by meeting with the client and
carrying out the initial investigation and will set out the objectives to be achieved and
the methodology to be utilized to accomplish them.

Step 3. Obtain Relevant Evidence
• Economic Information / Documents / Assets / Person / Expert / Company
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