Project Report

On
`

FORENSIC ACCOUNTING AND

AUDITING.

BY
Mirza Marziya Farid Hussain.
 FORENSIC ACCOUNTING AND
AUDITING

Project Report

Submitted By:
Marziya Mirza
2021-2022

Under the Guidance Of:

Mr

Submitted in partial fulfillment of the

Requirement for qualifying BAF
Semester -VI Examination

UNIVERSITY OF MUMBAI

JES COLLEGE OF COMMERCE AND SCIENCE &

INFORMATION TECHNOLOGY
Arvind Gandbhir high School Campus,cave road,
Nr.Rly station.
Jogeshwari East. Mumbai-400060
 JOGESHWARI EDUCATION SOCIETY
JES COLLEGE OF COMMERCE AND
SCIENCE
& INFORMATION TECHNOLOGY
Caves Road,Arvind Gandbhir Camus;opp.Rly Stn;Jogeshwari East;mumbai-400060.

PROJECT CERTIFICATE

This is to certify that the project certified

By Mr/Mrs Seat no.

In partial fulfillment of BAF degree Sem VI examination had not been
submitted for any other examination and does not form any other
course undergoes by the candidate.

Internal Guide External Examiner

Co-ordinator College Seal

 A PROJECT REPORT
ON
FORENSIC ACCOUNTING AND AUDITING

BACHELOR’S OF ACCOUNTS & FINANCE

SUBMITTED BY
MIRZA MARZIYA FARID HUSSAIN

PROJECT GUIDE
MR

JES COLLEGE OF COMMERCE AND SCIENCE &

INFORMATION TECHNOLOGY
ARVIND GANDBHIR HIGH SCHOOL CAMPUS,
CAVES ROAD, JOGESHWARI (EAST),
MUMBAI-400060
 ACKNOWLEDGEMENT

I acknowledge with gratitude my indebtness to

professors for giving me the opportunity to work on this
project and gave valuable guidance for preparing this
project.

I would like to thanks those people who directly or

indirectly help me to enhance my practical knowledge in
the field of commerce and express my sincere gratitude
to all those who share valuable thoughts with me.

This is being my first effort, the possibilities of errors and

omissions in its contents and presentation cannot be
completely ruled out, I shall however, grateful to my teachers,
colleagues and other readers from their suggestion for its
improvement.
Contents
INTRODUCTION…………………………………………………………..
WHAT IS FORENSIC ACCOUNTING?……………………………..
FORENSIC ACCOUNTING IMPLEMENTATION IN INDIA..
OBJECTIVES OF STUDY………………………………………………
RESEARCH OF METHODOLOGY………………………………..
HISTORICAL PERSPECTIVE OF FORENSIC ACCOUNTING IN
INDIA………………………………………………………………………
NATURE OF FORENSIC ACCOUNTING…………………………..
TYPES OF FRAUDS…………………………………………………….…
THE SCAMS IN INDIA…………………………………………………..
USES OF FORENSIC ACCOUNTING………………………………..
FORENSIC ACCOUNTANTS-THE BLOODHOUNDS OF BOOK-
KEEPING…………………………………………………………….
WHAT DOES A FORENSIC ACCOUNTANT DO?……………….
APPLICATION OF PRINCIPLES OF FORENSIC ACCOUNTING TO
AN ORGANISATION…………………………..
THE TECHNIQUES OF FORENSIC ACCOUNTING:…………….
COMMON ACCOUNTING FRAUDS AREAS……………………..
WHY ENGAGE A FORENSIC ACCOUNTANT?………………….
ROLES OF FORENSIC ACCOUNTANT……………………………..
ROLES OF FORENSIC ACCOUNTANTS UNDER INDIAN INDIAN
STATUES…………………………………………………………..
WHAT CHARACTERISTICS/SKILLS SHOULD FORENSIC
ACCOUNTANT POSSES?………………………………………………..
ADVANTAGES AND DISADVANTAGES OF FORENSIC
ACCOUNTING………………………………………………………………
CURRENT AFFAIRS:-……………………………………………………
CONCLUSION……………………………………………………………….
 INTRODUCTION

Corporate fraud is on the rise in India, Compelling more

management to conduct forensics audit. Experts on white-
collar crime say forensic accounting is not just gaining
prominence, the methods are changing fast. Unofficial
estimates value the practice at Rs- 400-500 crore annually but it
is believed that this could be double in next three or four years.

Forensic accounting utilizes accounting, auditing, and

investigative skills to conduct an examination into the finances
of an individual or business. Forensic accounting is frequently
used in fraud and embezzlement cases to explain the nature of
a financial crime in court.

 Forensic accountancy or financial forensics is the specialty

practice area of accounting that investigates whether firms
engage in financial reporting misconduct. Forensic accountants
apply a range of skills and methods to determine whether there
has been financial reporting misconduct

Forensic accounting and fraud investigation methodologies are

different than internal auditing. Thus forensic accounting
services and practice should be handled by forensic accounting
experts, not by internal auditing experts. Forensic accountants
may appear on the crime scene a little later than fraud
auditors, but their major contribution is in translating complex
financial transactions and numerical data into terms that
ordinary laypersons can understand. That is necessary because
if the fraud comes to trial, the jury will be made up of ordinary
laypersons. The fieldwork may carry out legal risks if internal
auditing checklists are employed instead asking to a forensic
accountant and may result serious consultant malpractice risks.
Insider fraud was particularly rise in India, with 89% of
respondents indicating the perpetrator was an insider of some
sort -- a junior, middle management or senior employee, or an
agent.

In 2016, the Forensic Auditors Certification Board (FACB) of

England and Wales was established by the major forensic
auditing and accounting bodies from across the world with its
registered address in London. FACB is a professional bodies
membership body comprising the International Institute of
Certified Forensic Accountants (IICFA) of USA

But other spaces too are exposed to fraud, which is why the
scope of forensic auditing is getting wider. What’s more,
Chartered Accountants, MBA’s and Lawyers are no longer
solely relied upon. While they do form the core part of forensic
accounting, there is now a need for financial research analysts,
engineers, journalists, artists and even formal law enforcement
officials. As experts point out, fraud related to a toll road or
competitive bidding would call for the services of a professional
with insides into the infrastructure industry while a white-collar
crime in financial services and issues related to stressed assets
or anti-money laundering would require an understanding of
the working of banks and financial intermediaries. The nature
of crimes is complicated and issues such as conflicts of
interests, code-of-conduct violations and regulatory non-
compliance require a strong working knowledge of a sector.
But there are other reasons why demand maybe rising.
Provisions of the new companies at mean that every company
now has to have proactive fraud risk management policies. The
Act requires independent directors to increase safeguards
against fraud and reminds them of there whistle blowing
responsibilities. Objections must be documented, and now at
the Act defines fraud and safeguards explicitly, ignorance of the
parameters of the either will no longer be a defense.
 WHAT IS FORENSIC ACCOUNTING?

Forensic accounting is a rapidly growing area of accounting

concerned with the detection and prevention of financial fraud
and white-collar criminal activity.
George A. Manning in his book “Financial Investigation and
Forensic Accounting” defines Forensic Accounting as the
science of gathering and presenting financial information in a
form that will be accepted by a court of jurisprudence against
perpetrators of economic crimes. The integration of
accounting,auditing,and investigatives skills yields the speciality
known as Forensic Accounting which focuses very closely on
detecting or preventing accounting fraud.

“Forensic”, according to the Webster's dictionary means,

“Belonging to,used in or suitable to courts of judicature or to
public discussion and debate”. The word Accounting is defined
as “A system of recording and summarizing business and
financial transactions and analyzing, verifying, and recording
the results”. The term Forensic Accounting refers to financial
fraud investigation which includes the analysis of accounting
records to prove or disprove financial fraud and serving as an
export witness in court to prove or disprove the same. Thus,
basically the forensic accounting is the use of accounting for
legal purpose.

Forensic Accounting is very important tool to detect,investigate

and prevent the frauds. Whether it is stock market fraud or
bank fraud or cyber fraud; Forensic Accounting has become an
indispensable tool for investigation. With India being ranked as
88th most corrupt nation, the needs for forensic accountants
become all the more profound.
Forensic accounting is the assistance of finance professionals to
settle disputes concerning allegations, fraudulence, suspicion of
fraud and misconduct in business.

Forensic accountants, investigative accountants or expert

accountants may be involved in recovering proceeds of serious
crime and in relation to confiscation proceedings concerning
actual or assumed proceeds of crime or money laundering.

Forensic Investigation:-

The utilization or specialized investigative skills in carrying out

an enquiry conducted in such a manner that the outcome will
have application to a court of law. A Forensic Investigation may
be grounded in accounting, medicine,engineering or some
other discipline.

Forensic Audit:-

An examination of evidence regarding an assertion to

determine its correspondence to establish criteria carried out in
a manner suitable to the court. An example would be a
forensic audit of sales records to determine the quantum of
rent owing under a lease agreement,which is a subject of
litigation.
FORENSIC ACCOUNTING IMPLEMENTATION
IN INDIA

In India, Forensic Accounting has not got its due recognition

even after alarming increase in the complex financial crimes
and lack of adequately trained professional to investigate and
report on the complex financial crimes.the task of Forensic
Accountants is handled by Chartered accountants who apart
from handling traditional practise of auditing as required under
the Companies Act,1956 or Income Tax Act are called upon the
law enforcement agencies or the companies or private
individuals to assist in investigating the financial crime or scam.

The CA or CMAs in India are best suited for this profession due
to their financial acumen acquired during their rigorous training
which can be further honed by introducing post qualification
degree or diploma in Investigating and Forensic Accounting
similar to one by CICA.

However, growing financial frauds cases, recent stock markers

scams, failure of non financial banking companies, phenomena
of vanishing companies, and implementation companies and
failure of the regulatory mechanism to curb it has forced the
government of India to form Serious Fraud investigation Office
(SFIO) Under ministry of corporate affairs which can be
regarded the first step of Government of India to recognize the
importance and advance the profession of forensic
accountants. The SFIO is a multi disciplinary organization having
experts from financial sectors, capital market, Accountancy,
forensic audit, taxation, law, Information technology, company
law, custom and investigations
In the lexicon of accounting, terms such as fraud auditing,
forensic accounting, fraud examination, fraud investigation,
investigative accounting, litigation support, and valuation
analysis are not clearly defined. Some distinctions apply,
between fraud auditing and forensic accounting, Fraud auditing
involves a specialized approach and methodology to discern
fraud; that is the auditor is looking for evidence or fraud. The
purpose is to prove or disprove a fraud exist. Historically,
forensic accountancy, however, have been called in after
evidence or suspicion of fraud has surfaced through an
allegation, compliant, or discovery.

These experts have been taken care from various organizations

like banks, Securities and Exchange board of India, Comptroller
and Auditor general and concerned organization and
department of the government. However, the main important
law enforcement agency involved directly in combating frauds
is the police, CBI, DRI etc.

Fraud investigation usually encompasses about the same thing

as a fraud audit except investigation typically involves a lot
more non-financial evidence, such as testimony from
interviews, than a fraud audit. So fraud investigation includes
fraud audit bus goes beyond it in gathering non financial
forensic evidence.
 OBJECTIVES OF STUDY

1. To know the various uses of forensic accounting in India.

2. To know the role of forensic accounting techniques in

fraud examination.

3. To find proof of a crime

4. To present in a way that can stand up in a court of law.

5. To identify the perpetrators of said fraud.

6. To establish the motives and methods used by fraudsters.

7. To prove beyond reasonable doubt the involvement of the

alleged perpetrators.

8. To prove that a business or individual has suffered financial

loss.
 RESEARCH METHODOLOGY: 
 
The paper is based on secondary data and some discussion
with  eminent person in the corporate sector. Forensic
accounting is an investigation accounting which involves
analyzing, testing, inquiring and examining the civil and criminal
matters and finally giving an unbiased and true report. Just as
forensic investigation and lab reports are needed in the court
to solve the mystery. Similarly forensic accounting plays a key
role in tracing the financial frauds and white-collar crimes 
 
However, forensic accounting cover a wide range of operation
of which fraud examination is a small part where it is most
prevalent 
 
 
 
  
HISTORICAL PERSPECTIVE OF FORENSIC
ACCOUNTING IN INDIA 
 
Maurice E. Peloubet who coined the term Forensic Accountant
in 1946 essay “Forensic Accounting: Its place in today’s
economy”. Archaeological findings reveal that, during 3300-
3500 BC, accountant if their day in Egypt, were involved in the
prevention and detection of fraud. During 1800 close
relationship developed between accountancy and legal
profession. Many amendment to financial statements
disclosure can be attributed to frauds in corporate. In 1930s
America Eliot Ness was credited to bring down gangster Al
Capone, but his case was based on the investigate work done
by Elmer Irey, an accountant with the Internal Revenue service
that ensured Capones conviction for tax evasion. He was
probably America s first high profile Forensic Accountant. 
 
But in Indian Context history of investigative accounting goes
back to ancient time of Mauryan Times. Kautilya was the first
person to mention the famous forty ways of embezzlement in
his famous kautilya Arthashastra. 
 
A fraud examination is the area that is considered to be the
monopoly of the chartered accountants because of the nature
of the expertise it involves in accounting. In India chartered
accountants are call upon to take up such investigative
assignment. Very few chartered accountants firms have fraud
examination as a separate practice. But by and large this area is
dominated by the big fir consultancy firms such as Deloitte,
KPMG, price water house coopers and Ernst and Young. 
 
 
 
In India the formation of serious fraud investigation office is the
landmark creation for the forensic accountants. Growing cyber
crimes, failure of regulators to track the security scams ,series
101 of co-operative banks bursting all are pointing the need of
forensic accounting, irrespective of whatever we understand
the need or not. 
 
 
Forensic Accounting has taken many great leaps of growth in
recent history. The 
Accounting industry has gradually called for more and more
Forensic Accountants. It is  
predicted that growth of the industry, based on the amount of
jobs, will reach 6.7% for the  
years between 2013 and 2018. The revenue the industry brings
in is also steadily increasing as  
time goes on. In 2013 the industry brought in $4.5 billion and is
expected to bring in $6.3  
billion by 2018 (Chiang, 2013). 
 
 
It has been said on numerous occasions that corporate fraud
has been on the rise but is  
it really? In a survey done by Kroll provided by Georgetown
University for their 2013/2014  
Global Fraud Report it was discovered that over 70% of
companies were affected by at least one type of fraud in the
past year. That is an increase from the previous year that
showed only  
61% had been affected. Corporate fraud is just one area that
Forensic Accountants deal with.  
The following chart shows the percent of companies affected
by the listed types of fraud for the past two years.  
 
Even though technology has made it easier for fraud to occur it
has become a double- 
edged sword. Forensic Accountants have developed their own
technology in order to keep up with the growth of methods for
committing criminal financial acts. Technology has provided the
opportunity for fraud to occur as the Fraud Triangle predicts. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HISTORICAL PERSPECTIVE OF FORENSIC
ACCOUNTING IN INDIA 
 
Maurice E. Peloubet who coined the term Forensic Accountant
in 1946 essay “Forensic Accounting: Its place in today’s
economy”. Archaeological findings reveal that, during 3300-
3500 BC, accountant if their day in Egypt, were involved in the
prevention and detection of fraud. During 1800 close
relationship developed between accountancy and legal
profession. Many amendment to financial statements
disclosure can be attributed to frauds in corporate. In 1930s
America Eliot Ness was credited to bring down gangster Al
Capone, but his case was based on the investigate work done
by Elmer Irey, an accountant with the Internal Revenue service
that ensured Capones conviction for tax evasion. He was
probably America s first high profile Forensic Accountant. 
 
But in Indian Context history of investigative accounting goes
back to ancient time of Mauryan Times. Kautilya was the first
person to mention the famous forty ways of embezzlement in
his famous kautilya Arthashastra. 
 
A fraud examination is the area that is considered to be the
monopoly of the chartered accountants because of the nature
of the expertise it involves in accounting. In India chartered
accountants are call upon to take up such investigative
assignment. Very few chartered accountants firms have fraud
examination as a separate practice. But by and large this area is
dominated by the big fir consultancy firms such as Deloitte,
KPMG, price water house coopers and Ernst and Young. 
 
 
 
In India the formation of serious fraud investigation office is the
landmark creation for the forensic accountants. Growing cyber
crimes, failure of regulators to track the security scams ,series
101 of co-operative banks bursting all are pointing the need of
forensic accounting, irrespective of whatever we understand
the need or not. 
 
 
Forensic Accounting has taken many great leaps of growth in
recent history. The 
Accounting industry has gradually called for more and more
Forensic Accountants. It is  
predicted that growth of the industry, based on the amount of
jobs, will reach 6.7% for the  
years between 2013 and 2018. The revenue the industry brings
in is also steadily increasing as  
time goes on. In 2013 the industry brought in $4.5 billion and is
expected to bring in $6.3  
billion by 2018 (Chiang, 2013). 
 
 
It has been said on numerous occasions that corporate fraud
has been on the rise but is  
it really? In a survey done by Kroll provided by Georgetown
University for their 2013/2014  
Global Fraud Report it was discovered that over 70% of
companies were affected by at least one type of fraud in the
past year. That is an increase from the previous year that
showed only  
61% had been affected. Corporate fraud is just one area that
Forensic Accountants deal with.  
The following chart shows the percent of companies affected
by the listed types of fraud for the past two years.  
 
Even though technology has made it easier for fraud to occur it
has become a double- 
edged sword. Forensic Accountants have developed their own
technology in order to keep up with the growth of methods for
committing criminal financial acts. Technology has provided the
opportunity for fraud to occur as the Fraud Triangle predicts. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HISTORICAL PERSPECTIVE OF FORENSIC
ACCOUNTING IN INDIA 
 
Maurice E. Peloubet who coined the term Forensic Accountant
in 1946 essay “Forensic Accounting: Its place in today’s
economy”. Archaeological findings reveal that, during 3300-
3500 BC, accountant if their day in Egypt, were involved in the
prevention and detection of fraud. During 1800 close
relationship developed between accountancy and legal
profession. Many amendment to financial statements
disclosure can be attributed to frauds in corporate. In 1930s
America Eliot Ness was credited to bring down gangster Al
Capone, but his case was based on the investigate work done
by Elmer Irey, an accountant with the Internal Revenue service
that ensured Capones conviction for tax evasion. He was
probably America s first high profile Forensic Accountant. 
 
But in Indian Context history of investigative accounting goes
back to ancient time of Mauryan Times. Kautilya was the first
person to mention the famous forty ways of embezzlement in
his famous kautilya Arthashastra. 
 
A fraud examination is the area that is considered to be the
monopoly of the chartered accountants because of the nature
of the expertise it involves in accounting. In India chartered
accountants are call upon to take up such investigative
assignment. Very few chartered accountants firms have fraud
examination as a separate practice. But by and large this area is
dominated by the big fir consultancy firms such as Deloitte,
KPMG, price water house coopers and Ernst and Young. 
 
 
 
In India the formation of serious fraud investigation office is the
landmark creation for the forensic accountants. Growing cyber
crimes, failure of regulators to track the security scams ,series
101 of co-operative banks bursting all are pointing the need of
forensic accounting, irrespective of whatever we understand
the need or not. 
 
 
Forensic Accounting has taken many great leaps of growth in
recent history. The 
Accounting industry has gradually called for more and more
Forensic Accountants. It is  
predicted that growth of the industry, based on the amount of
jobs, will reach 6.7% for the  
years between 2013 and 2018. The revenue the industry brings
in is also steadily increasing as  
time goes on. In 2013 the industry brought in $4.5 billion and is
expected to bring in $6.3  
billion by 2018 (Chiang, 2013). 
 
 
It has been said on numerous occasions that corporate fraud
has been on the rise but is  
it really? In a survey done by Kroll provided by Georgetown
University for their 2013/2014  
Global Fraud Report it was discovered that over 70% of
companies were affected by at least one type of fraud in the
past year. That is an increase from the previous year that
showed only  
61% had been affected. Corporate fraud is just one area that
Forensic Accountants deal with.  
The following chart shows the percent of companies affected
by the listed types of fraud for the past two years.  
 
Even though technology has made it easier for fraud to occur it
has become a double- 
edged sword. Forensic Accountants have developed their own
technology in order to keep up with the growth of methods for
committing criminal financial acts. Technology has provided the
opportunity for fraud to occur as the Fraud Triangle predicts. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HISTORICAL PERSPECTIVE OF FORENSIC
ACCOUNTING IN INDIA 
 
Maurice E. Peloubet who coined the term Forensic Accountant
in 1946 essay “Forensic Accounting: Its place in today’s
economy”. Archaeological findings reveal that, during 3300-
3500 BC, accountant if their day in Egypt, were involved in the
prevention and detection of fraud. During 1800 close
relationship developed between accountancy and legal
profession. Many amendment to financial statements
disclosure can be attributed to frauds in corporate. In 1930s
America Eliot Ness was credited to bring down gangster Al
Capone, but his case was based on the investigate work done
by Elmer Irey, an accountant with the Internal Revenue service
that ensured Capones conviction for tax evasion. He was
probably America s first high profile Forensic Accountant. 
 
But in Indian Context history of investigative accounting goes
back to ancient time of Mauryan Times. Kautilya was the first
person to mention the famous forty ways of embezzlement in
his famous kautilya Arthashastra. 
 
A fraud examination is the area that is considered to be the
monopoly of the chartered accountants because of the nature
of the expertise it involves in accounting. In India chartered
accountants are call upon to take up such investigative
assignment. Very few chartered accountants firms have fraud
examination as a separate practice. But by and large this area is
dominated by the big fir consultancy firms such as Deloitte,
KPMG, price water house coopers and Ernst and Young. 
 
 
 
In India the formation of serious fraud investigation office is the
landmark creation for the forensic accountants. Growing cyber
crimes, failure of regulators to track the security scams ,series
101 of co-operative banks bursting all are pointing the need of
forensic accounting, irrespective of whatever we understand
the need or not. 
 
 
Forensic Accounting has taken many great leaps of growth in
recent history. The 
Accounting industry has gradually called for more and more
Forensic Accountants. It is  
predicted that growth of the industry, based on the amount of
jobs, will reach 6.7% for the  
years between 2013 and 2018. The revenue the industry brings
in is also steadily increasing as  
time goes on. In 2013 the industry brought in $4.5 billion and is
expected to bring in $6.3  
billion by 2018 (Chiang, 2013). 
 
 
It has been said on numerous occasions that corporate fraud
has been on the rise but is  
it really? In a survey done by Kroll provided by Georgetown
University for their 2013/2014  
Global Fraud Report it was discovered that over 70% of
companies were affected by at least one type of fraud in the
past year. That is an increase from the previous year that
showed only  
61% had been affected. Corporate fraud is just one area that
Forensic Accountants deal with.  
The following chart shows the percent of companies affected
by the listed types of fraud for the past two years.  
 
Even though technology has made it easier for fraud to occur it
has become a double- 
edged sword. Forensic Accountants have developed their own
technology in order to keep up with the growth of methods for
committing criminal financial acts. Technology has provided the
opportunity for fraud to occur as the Fraud Triangle predicts. 
 
 
The word forensic is derived from the Latin word ‘forensis’,
meaning thereby belonging to the forum (the site for public
discussion and debate in ancient Rome). It refers as assistance
in disputes regarding allegations or suspicion of fraud which are
likely to involve litigation, expert determination and enquiry by
an appropriate authority and investigations of suspected fraud,
irregularity or impropriety which could potentially lead to civil,
criminal or disciplinary proceedings. Forensic accounting is a
specific area of accounting which investigates fraud and analyze
financial information which can be utilized in legal trials. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 NATURE OF FORENSIC ACCOUNTING

Forensic Accounting is the specialty area of the accountancy

profession which describes engagements that result from
actual or anticipated disputes or litigation. ,,Forensic”means,,
suitable for use in a court of law” and it is to that standard and
potential outcome that forensic accountants generally have to
work (Crumbley et al.2005). It is often said “Accountants look at
the numbers but forensic accountants look behind the numbers
(okoye-2009). Forensic Accountants are trained to look beyond
the numbers and deal with the business realities of the
situation. Analysis, interpretation, summarization and
presentation of complex financial and business related issues
are prominent features of the professions(bhasin-2007).

THE SERVICES PROVIDED BY FORENSIC ACCOUNTANTS ARE AS

FOLLOWS:-

. Business Valuation

. Divorce proceeding and matrimonial disputes

. Personal Injury and Fatal accidents claims

. Professional negligence

. Insurance claims evaluation

. Arbitration

. Partnership and cooperation disputes

. Share Holder disputes(minority share holders claiming)

. Civil and criminal actions concerning fraud and financial
irregularities cross examination, formulate question

. Fraud and white-collars crime investigations

. Criminal investigation service

. Dispute Resolution Service

Forensic accounting services generally involve the application

of specialized knowledge and investigative skills possessed by
CPAs to collect, analyze, and evaluate evidential matter and to
interpret and communicate findings in the courtroom,
boardroom, or other legal or administrative venue.
 TYPES OF FRAUDS
Following are the types of frauds

1. Bank frauds

2. Corporate frauds

3. Insurance frauds

4. Cyber frauds

5. Securities frauds

6. Tax evasion

1. Bank Frauds:-
The number of bank frauds in India is substantial. Its in
increasing with the passage of time in all the major operational
areas in banking. There is different area in bank
deposits,loan,inter branch,accounting,transaction etc. Bank
fraud is a big business in today's world.India saw more banking
frauds in the first half of 2021-22 than in the same year-ago
period. However, the amount involved in the frauds declined
from ₹64,621 crore to ₹36,342 crore, according to the RBI's
Trend and Progress of Banking in India report
2. Corporate frauds:-
In India corporate frauds is rising 45%from leading Indian
business declare that fraud eg: Satyam computers stunned the
national financial world in 2009 Satyam founder B.Ramalingan
Raju declare he had inflated profit and jacked up the companies
balance sheet by more than 1 Billion dollars.The first corporate
fraud that took place in the history of independent India was
the Mundhra Scam. Haridas Mundhra was an industrialist who
in 1957 invested Rs. 1.24 crores in government owned LIC
policies which belonged to six different companies.

3. Insurance Frauds:-
There is different types of fraud in insurance sector. Eg:- health
insurance, claim fraud, false claim, insurance
speculations,application fraud etc.Insurance fraud is an attempt
to exploit an insurance contract. Insurance is meant to protect
against risks, not to serve as a vehicle to enrich the insured.
Although insurance fraud by the policy issuer does occur, the
majority of cases have to do with the policyholder attempting
to receive more money by exaggerating a claim. A drawback of
insurance is that the increased cost of insurance is passed on by
the insurer to the customers.

4. Cyber Frauds:-
Who says Indian cyber crimes are still in the infancy? This is a
man who penetrated the e-commerce for his personal benefits
to a great use credit card,ATM card,cyber taking, work at home
etc.Cyber crime refers to illegal activities in which a computer is
used as a tool, a target, or both. Traditional criminal actions
such as theft, fraud, forgery, defamation, and mischief, all of
which are covered under the Indian Penal Code, might be
included in cyber crimes.
5. SECURITIES FRAUDS:-
Although not corruption scams these have affected may people
there is no way that the investor community forget the under
truncate Rs.4000 crore Harshad Metha scam and over Rs.1000
crore Ketan Parekh scams which ended the shareholder wealth
in form of big market.Security frauds refer to the idea of
diversion of funds from the banking system to various
stockholders or brokers. The 1992 scam was a systematic fraud
committed by Mehta in the Indian stock market which led to
the complete collapse of security systems.
6. Tax Evasion:-
The crime of not paying all the taxes that you should pay.
As per Section 271(C) of the Income Tax Act of 1961, in case of
hiding or understating your income, the penalty can be
anywhere between 100% to 300% of the amount of tax that
was due but not paid.

Financial Statement Fraud:-

Such types of frauds are committed intentionally by
misstatements or omissions of amounts or in disclosures of
financial statements. These frauds involve manipulation,
falsification, or alteration of accounting records or supporting
documents from which financial statements are prepared.
According to a study conducted by the Association of Certified
Fraud Examiners, fraudulent financial statements, as compared
with the other forms of fraud perpetrated by corporate
employees, usually have a higher dollar impact on the
victimized entity as well as a more negative impact on
shareholders and the investing public.
 THE SCAMS IN INDIA:-
SCANDAL YEAR SCOPE KEY PLAYERS SUMMARY
REPORTED
Stamp 2005 Rs.600 Abdul Karim Telgi Counterfeiting of
Paper Scam Billion & his associates, stamp papers.
police officers, Selling fake to bulk
Govt employees purchasers like
& politician banks, insurance
companies & stock
bro-king firms.
Sentenced to 30
years of rigorous
imprisonment
Satyam 2009 Rs.1400 Ramalinga Raju & Inflated figures of
Scam 0 crore his family, CFO & cash & bank balance,
other top level operating profit
management, artificially boosted
Auditors & Board from 61 crores to
of Directors 649 crores, fictitious
names of employees
2G 2010 Rs.1760 A Raja, MK Irregularities in
Spectrum billion Kaniamozhi, Nira awarding spectrum
Radia, Many licence issued on
telecom cos. first serve basis
instead of auction.
Advancing of cutoff
date which is illegal.
Common 2010 Rs.3500 Suresh Kalmadi & Allegations of
wealth 0 crores other organizing corruption &
games committee mismanagement by
members, 2 the organizing
private companies committee delay in
& govt officials construction of main
venue leading to
misuse of funds.
Adarsh 2010 Not known Top Army Originally meant to be
Housing yet officials, six-storey structure to
Society politicians & house Kargil was
Scam legislators heroes and widows,
got converted into a
31-stoney and alloted
to bureaucrats, top
defense officers, a
former environment
minister and
legislators. The market
rate was 6-8.5 crores &
was alloted at throw
away price of 60-85
lakhs. Violates in
environment rules.
Coal 2012 Rs.1.86 Govt of Govt of India allocating
Gate lakh crore India, coal blocks in an
private & inefficient manner
public leading to windfall gain
sector to allocating (chose not
companies to go through the
competitive bidding
process)
VVIP 2013 Rs. 362 Augusta It has been alleged that
Chopper crores Westland former IAF chief has
deal Company, accepted bribes to win
scam Former IAF contact worth Rs-36
chief SP billion. Two Indian
Tyagi & his firms played key role in
cousins,poli the controversy.
ticians,Govt
officials
&several
middleman
 USES OF FORENSIC ACCOUNTING:-

Forensic accounting is a combination of accounting

and investigative techniques used to discover financial crimes.
One of the key functions of forensic accounting is to explain the
nature of a financial crime to the courts. Forensic accounting is
used by the insurance industry to establish damages from
claims.

Forensic accounting is used by law enforcement agencies,

government agencies, independent adjustment firms,
insurance companies, banks and businesses of all sizes. Large
accounting firms often have their own forensic accounting
department, while other firms are entirely dedicated to
providing forensic accounting services.

The services rendered by the forensic accountants are in great

demand in the following areas:

1. Fraud detection where employees commit fraud:

Where the employee indulges in fraudulent negativities and
are caught to have committed fraud, the forensic accountant
tries to locate any assets created by them out of the funds
defalcated, then try interrogating them and trying to find out
the hidden truth.

2. Criminal Investigation:
Matters relating to financial implications the service of the
forensic accountants are availed of. The report of the
accountants is considers in preparing and presentation as
evidence.
3. Cases relating to professional negligence:
Professional negligence cases are taken up by the forensic
accountants. Non-conformation to generally accepted
Accounting Standards (GAAS) or non compliance to auditing
practices or ethical codes of any profession they are needed to
measure the loss due to such professional negligence or
shortage in services.

4. Arbitration service:
Forensic accountants render arbitration and mediation services
for the business community, since they undergo special traning
in the area of alternative dispute resolution.

5. Settlement of insurance claims:

Insurance companies engage forensic accountants to have an
accurate assessment of claims to be settled.
Similarly, policyholders seek the help of a forensic accountant
when they need to challenge the claim settlement as worked
out by the insurance companies. A forensic accountant handles
the claims relating to consequential loss policy, property loss
due to various risks, fidelity insurance and other types of
insurance claims.

6. Dispute settlement:
Business firms engage forensic accountants to handle contract
disputes, construction claims, product liability claims,
infringement of patent and trade marks cases, liability arising
from breach of contracts and soon.

. Forensic accounting is commonly used by law enforcement in

criminal investigations. A forensic accountant can help discover
whether a crime occurred and if criminal intent was likely.
 FORENSIC ACCOUNTANTS-THE
BLOODHOUNDS OF BOOK-KEEPING

Forensic accounting requires the most important quality a

person can possess: the ability to think. There is no book that
tells you how to do a forensic investigation. It is about solving a
puzzle or peeling an onion. It takes creativity.

All of the larger accounting firms, as well as many medium-

sized and boutique firms have specialist forensic accounting
departments. Within these groups, there may be further sub-
specializations: some forensic accountants may,for example,
just specialize in insurance claims, personal injury claims, fraud,
construction, or royalty audits.

Forensic accountants may be involved in recovering proceeds

of crime or money laundering.In the United Kingdom,relevant
legislation is contained in the proceeds of crime Act 2002. In
India there is a separate breed of forensic accountants called
Certified Forensic Accounting Professionals. Some forensic
accountants are also Certified Fraud Examiners, Certified Public
Accountants, or Chartered Accountants.

Forensic accountants utilize an understanding of business

information and financial reporting systems, accounting and
auditing standards and procedures, evidence gathering and
investigative techniques, and litigation processes and
procedures to perform their work. Forensic accountants are
also increasingly playing more proactive risk reduction roles by
designing and performing extended procedures as part of the
statutory audit,acting as advisers to audit committees, fraud
deterrence engagements,and assigning in investment analyst
research.
The forensic accountant is a bloodhound of Bookkeeping. These
bloodhounds sniff out fraud and criminal transactions in
ban,corporate entity or from any other organizations financial
records. They hound for the conclusive evidences. External
Auditors find out the deliberate misstatements deliberately.
External auditors look at the numbers but the forensic auditors
look beyond the numbers.

Forensic Accountants takes more proactive, skeptical approach

in examining the books of Accounting. They make no
assumption of management integrity show less concerns for
the arithmetical accuracy have nothing to do with the
accounting or assurance standards but are keen in exposing any
possibility of fraud.

In audition to the specialized knowledge about the techniques

of finding out the frauds one needs patience and analytical
mindset. One has to look beyond the numbers and grasp the
substance of the situation. It is basically the work of the
intelligent accountants. He needs to question seemingly benign
document and look for inconsistencies. He searches for
evidence of criminal conduct or assists in the determination
of,or rebuttal of, claim damages.