Forensic Audit Vs. Internal Audit: What Is The Difference?
To evaluate the current financial situation, organisations have to conduct financial auditing. Financial auditing helps manage an entity’s financial records. In addition, there are many other types of audits that help expose vulnerability, detect fraud, comply with forensic laws, etc. An organisation usually undergoes two types of audits — forensic and internal — to maintain financial prudence and sustainability. Let’s delve deeper to fully understand the difference between forensic and internal audits.
What Is Forensic Audit?
The financial records of any organisation are backtracked in forensic auditing. It helps uncover any fraud or accounting red flags within the firm. During legal disputes, a forensic audit helps collect substantial evidence that can be presented in a court. The surveillance system should be compliant with standard norms set for determining risks/frauds. Forensic compliance can be ensured by transferring the auditing process to a reliable third-party firm.
What Is An Internal Audit?
Company policies are monitored via an internal audit, and any flaws that exist are identified during the process. Besides policies, an organisation’s accounting processes are analysed in an internal audit. An internal audit helps a firm correct any shortcomings in its business processes before an external audit is performed. It also helps a firm in determining its control over the internal processes.
Forensic Audit vs. Internal Audit
An internal audit is performed to find flaws in the internal processes of a corporation, while a forensic audit is performed to detect fraud within the company. Forensic auditors have to collect evidence that will be presented in a court, therefore they have to be aware of the laws/policies. Internal auditors are not concerned with forensic compliance and, hence, do not require expert knowledge of the law. Any flaw/evidence discovered through an internal audit cannot be used in the court, as this is carried out by a forensic audit.
Companies do not necessarily need to conduct a forensic audit; they undergo forensic audits only when there is suspicion against them or their employees. Contrary to a forensic audit, an internal audit is performed as a regular activity within an organisation to find flaws in the business processes/accounting policies. Many companies hire an internal auditor to ensure control and compliance. However, companies only look for a forensic auditor when a dispute/suspicion occurs. A forensic audit is performed to collect evidence before appearing in a court, while internal audit reports are cross-checked by the company’s governing board.
Conclusion
To determine any ethical or accounting lapses in an organisation, you need to conduct an internal audit. A forensic audit is more concerned with fraud-related and embezzlement-related issues within an organisation and you can hire trusted third-party firms to conduct the audit.
