{"id":133300,"date":"2025-03-14T16:33:52","date_gmt":"2025-03-14T16:33:52","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/no-theres-no-such-thing-as-a-forensic-audit\/"},"modified":"2025-03-14T16:33:52","modified_gmt":"2025-03-14T16:33:52","slug":"no-theres-no-such-thing-as-a-forensic-audit","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=133300","title":{"rendered":"No, there’s no such thing as a forensic audit"},"content":{"rendered":"


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The term “forensic audit” has become commonplace with allegations of financial impropriety. That’s too bad, because there’s actually no such thing as a forensic audit.<\/p>\n

How is that possible, when it’s used in everything from proposals to firm advertising? The culprit is a snowball of misunderstanding, allowed to fester by clients who don’t know any better, and practitioners who probably should.\u00a0<\/p>\n

In fact, the term forensic audit is an oxymoron, and its use is not only wrong, it’s dangerous, at least as far as our world is concerned; it sets false expectations, the bedrock of unhappy clients and future litigation.\u00a0<\/p>\n

There are a few reasons why.<\/p>\n

First, consider the word audit, a term defined<\/u><\/a><\/ps-link> by the American Institute of CPAs. An audit’s goal is to obtain “reasonable assurance” about whether the financial statements are free of material misstatement. It is, by nature, a broad brush.<\/p>\n

Forensic work, however, is restricted<\/u><\/a><\/ps-link> to analyzing and evaluating specific evidential matter. In other words, it is a narrow, predefined scope. Providing any assurance is therefore incongruent.\u00a0<\/p>\n

It’s also impractical, because audits rely on a concept of materiality. Not every dollar has to be checked, because not every dollar is important to the user of the financial statements. For instance, a cashier stealing change at a multibillion-dollar business, while concerning, is likely immaterial.<\/p>\n

But fraud has no materiality. A cashier stealing change is fraud, whether it’s $0.10 or $10,000. Identifying every aspect of fraud ranges from impractical to impossible, which is why it’s standard for engagement agreements to disclaim that acts of fraud may not be caught.<\/p>\n

Hearing the phrase “forensic audit,” a client might assume assurance that everything will<\/i> be caught. That’s antithetical to forensic work. We offer no assurance that we’ll catch everything, or even anything.\u00a0<\/p>\n

Forensic audit is also paradoxical in reporting. In audits, a CPA expresses an opinion. But practitioners performing forensic services are prohibited from providing formal opinions; we deal in fact only.\u00a0<\/p>\n

That’s why the term forensic audit doesn’t appear in regulatory guidance: it doesn’t exist.\u00a0<\/p>\n

That said, it’s easy to see why it’s used. The public knows audits as a validation exercise. A forensic <\/i>audit? Performed by forensic accountants, that cool role Ben Affleck nailed in that movie? It just sounds<\/i> more rigorous. Who wouldn’t do that?<\/p>\n

But its use confuses the public, and paves the way for post-engagement disputes \u2014 and even lawsuits \u2014 if a so-called forensic audit fails to catch all fraud. So ultimately, just like a doctor correcting patients who misname procedures, it’s up to practitioners to correct misinformed clients.<\/p>\n

If a federal, state or local agency issues a request for proposal for a forensic audit, the forensic accountants who respond, many of whom also provide assurance work, should be proposing forensic services instead and explain the reason.\u00a0<\/p>\n

And the firms and educational institutions that actually promote forensic auditing \u2014 yes, there are a few \u2014 should adjust that language. How can we expect the public to understand misnomers, if we as practitioners are guilty of propagating it ourselves?<\/p>\n

Some might say that worrying about nomenclature is unnecessary. That focusing on the finer details misses the bigger picture.<\/p>\n

Those people miss the point of forensic services altogether. If we can’t manage the small details, who will rely on us for the bigger ones?<\/p>\n

Let’s get this fixed.\u00a0<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"

The term “forensic audit” has become commonplace with allegations of financial impropriety. That’s too bad, because there’s actually no such thing as a forensic audit. How is that possible, when it’s used in everything from proposals to firm advertising? The culprit is a snowball of misunderstanding, allowed to fester by clients who don’t know any […]<\/p>\n","protected":false},"author":1,"featured_media":133301,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11759],"tags":[57665,16404,57664,19533,55338],"dealstore":[],"offerexpiration":[],"class_list":["post-133300","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting","tag-accounting-firm-services","tag-audit","tag-audit-preparation","tag-forensic","tag-fraud-detection"],"yoast_head":"\nNo, there's no such thing as a forensic audit - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=133300\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"No, there's no such thing as a forensic audit - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"The term “forensic audit” has become commonplace with allegations of financial impropriety. That’s too bad, because there’s actually no such thing as a forensic audit. How is that possible, when it’s used in everything from proposals to firm advertising? 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