Why is a forensic audit important for my business?
As a business, you often encounter a number of new issues. This happens especially once you have just started your business. You try to keep track of the finances and you manage to do so quite successfully. Until the company starts to grow and the work piles up. Then you may work less and less on things that you are good at and what you consider very important. Yet you also know that the finances must be in good order, because otherwise many things can go wrong. What forensic audit exactly means and why it can be important to hire an external company, we will explain in this blog.
Definition of forensic audit
We’ll start with the definition of forensic audit. A forensic audit is actually a process of reviewing a company’s financial records against laws and regulations. This is a precise job and therefore takes a very long time. Many individuals think of forensic accounting as tax audits, but it can also be performed by companies to get an overall picture of a single entity’s finances. Within forensic auditing there are several activities. For example, fraud investigations, anti-money laundering and anti-corruption compliance.
In what situations are forensic audits necessary?
There are several possible situations where forensic audits may be necessary. We just mentioned a few of them. Ultimately, forensic auditing is used where finances create a legal problem. In fact, it can also be used to investigate bribery allegations, expired licenses, extortion and conflicts of interest. For example, an investigation may be started into a manager who favors certain employees. He may have a personal relationship with them and thus use their influence to gain profit. Some companies even falsify a company’s financial statements. Such companies want to show better performances than they really had.
Performing a quality control
A forensic audit does not always have to be about corruption, fraud or bribery. It may also be that a company would like a quality control on its financial statements. In fact, companies conduct regular audits themselves to see if production is running smoothly. A company improves its positions with customers and shareholders by regularly checking and presenting audits. In the process, it provides a good picture of a company’s finances internally. The company can choose to do these audits itself, or it can hire a specialized company. For example, large accounting firms often have a whole forensic auditing department of their own.
What are the reasons for conducting a forensic audit by a specialized firm?
Once you choose to hire a specialized company to do these matters, of course it will cost you money. Yet you get very much in return. For example, they have broad audit knowledge and research skills, which the staff within the company do not possess. In addition, these companies have received more complex assignments and can share their experiences. Furthermore, they can give you personal feedback on other issues within the company. For example, do you want to have your company audited in the Netherlands? Then choose an audit firm in Amsterdam, because they have a lot of experience with this kind of work. They know the market and all the minor rules when it comes to forensic auditing.