Forensic Audit:

The examination a company’s financial records to derive evidence which can be used in a court of law is a Forensic Audit Services

Importance of forensic audit reports:

Product/proof of work done
Document for potential legal issues
Document for decision making and action
Marketing tool
Report quality
Quality of the investigation
Competence of the investigator

Characteristics of a good forensic audit report:

Objective / unbiased- The report should be neutral and non-judgmental.
Clear- The content of the report must be clearly understood.
Thorough- Includes all information needed to reach a conclusion.
Accurate- The content reflects facts as gathered.
Professional- Report must be professionally written and presented.
Timeliness- Issued within the expected timeframe.

STEPS OF FORENSIC AUDIT:

Plan the investigation:

Identify the fraud if any is being carried out;
Time period for which this fraud has been conducted in the organization

How the fraud has been concealed so far?

Identify the fraudsters
Quantify the loss suffered due to this fraud
Gather relevant evidence that is admissible in the court

Suggest measures that can prevent such frauds in the company in future

Collecting Evidence:

Forensic auditor is required to understand the possible type of fraud that has been carried out, and how it has been committed. The evidence so collected should be adequate enough to prove the identity of the fraudster/(s) in the court, the technicalities of the fraud scheme, the amount of financial loss suffered and parties effected.

Reporting

A report is required so that it can be presented to client about the fraud. The report would have the findings of the investigation done.

Court Proceedings

Investigations done by auditor would obviously lead to legal proceedings against suspected fraudster. The team that carried out the Forensic audit need to be presented during the court proceedings as they would be required to explain the evidence collected and how suspect was identified.

FINANCIAL FEASIBILITY

Are you a start-up looking for an investment, or an existing business looking for an expansion:-

For both the situations above, you need to find an investor/ bank and as and when you come across various fund providers, the following random questions would be thrown upon you:

In how much time, is your business going to achieve break even?
What level of profitability does your business going to achieve in next 3 years or 5 years?
What level of current ratio would you be expecting at any given point in time?
Whether your current assets would be sufficient enough to fund the current liability?
What level of “Free Cash Flow”, will your business generate?
What Rate of Return (ROR) your business will generate?
What is the Net Present Value of your business if it is discounted for 5 years, at a relevant Industry expected rate of return?
What would be the level of your Debt service coverage ratio (DSCR), in case you are opting for a loan?

If you are not from a finance background, these questions can really demotivate you as a businessman. And these questions can’t be just answered verbally until and unless you analyze your business and model your financials.

The feasibility report will look at how a certain proposal can work in a long-term basis or endure financial risks that may come. It is also helpful in recognizing potential cash flow. Another important purpose is that it helps planners focus on the project and narrow down the possibilities.

OPERATIONAL FEASIBILITY

Operational feasibility is the measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development.

The importance of operational feasibility is highlighted in the following points.

Helps in assessing the capability of the project in fulfilling the desired organizational goal.
Helps in analyzing and tackling any resistance from management, team, and individuals.
Helps in evaluating the probable impact of the project on the environment.
Assists in proper implementation of the project.
Helps in periodical review of the implemented project.
Assists in analyzing the impact of the project on the end-users.
Ensures proper utilization of scarce resources.

A good example might be if a company has determined that it needs to totally redesign the workspace environment.