Investigative Experts Conduct Forensic Audits

Meticulous examination of business records to address fraud allegations

The “smoking gun” is the gold standard for proof of a crime. What more does a prosecutor need than the murder weapon, still smoldering, in the tight grip of the guilty party? But if you’re investigating fraud, many times you’re forced to rely on a “paper trail,” which a perpetrator has often taken great pains to hide. The paper trail that winds through business records is not unlike those wilderness trails in old James Fenimore Cooper novels, hidden behind fallen tree limbs or wiped clean of footprints with a leafy branch. A tenderfoot in hot pursuit through the back country can get totally lost. Only a skilled frontiersman can read the signs and follow the trail of a stealthy fugitive.

At North American Forensic Accounting, we know how to spot the signs of business fraud and follow the paper trail. Using sophisticated investigative techniques, we are able to map out a variety of fraudulent acts, such as embezzlement, misappropriation, fraudulent transfer, and hiding revenue. We conduct accurate, in-depth, and insightful forensic audits that elicit the story behind the numbers. Our work has made an invaluable contribution to a wide range of business litigation cases for both plaintiffs and defendants.

The role of forensic audits in financial investigations

A forensic audit is an examination of financial records to distill evidence to be presented in court. A forensic audit can be used as a sword or a shield; it might disclose irregularities that indicate criminal behavior, such as fraud, or, conversely, it might clear a defendant of alleged wrongdoing. Where there is evidence of wrongdoing, the audit can also present a reliable assessment of the amount of damages to the injured party.

Pertinent information disclosed in the audit can include:

  • Acts of fraud
  • Identity of the perpetrator(s)
  • Timeline of the period during which fraud occurred
  • Description of how a scheme operated, such as how a perpetrator acted to conceal the fraud
  • Quantification of losses due to the fraud

Forensic audits can also be useful in identifying weak system controls that allowed the fraud to take place, which then suggests corrective measures to prevent future fraud.

Types of cases that call for a forensic audit

An organization can request a forensic audit as part of a preliminary investigation of suspected criminal behavior, including:

  • Conflicts of Interest— An officer of the company gives preferential treatment to an employee or vendor with whom they have a personal or financial relationship.
  • Bribery— An offer or acceptance of compensation for influencing a situation in a party’s favor, often to the detriment of the organization.
  • Asset misappropriation — This most prevalent form of fraud involves various schemes for skimming a company’s resources, such as misappropriating cash, submitting falsified invoices, issuing payments to ghost suppliers or employees, subverting assets for personal use, and stealing company inventory.
  • Embezzlement — A specific type of asset misappropriation, wherein a professional who has control over assets belonging to the company or a client violates their fiduciary duty by stealing the funds, then uses their professional skills to hide the theft.
  • Financial statement fraud — This type of scheme “cooks the books” to give the appearance of superior financial performance to gain some advantage, such as a line of credit or a higher share price. Employees whose compensation depends on performance metrics have an incentive to falsify financial statements to gain bonuses or simply retain their positions.
  • Corporate noncompliance — Officers of a company can falsify compliance reports rather than spend resources on actual compliance. This type of fraud exposes the organization to civil and criminal sanctions.

Our NAFA investigators have performed forensic audits for all types of organizations conducting internal investigations, often as a preliminary to civil or criminal prosecutions. These scenarios also come up in a variety of civil cases, including:

  • Post-acquisition disputes
  • Insurance claims disputes
  • Bankruptcy

When an organization commits to litigating a financial matter, NAFA’s forensic experts are prepared to investigate and provide the legal team with the reliable evidence it needs to present its case.

Contact NAFA today for advice on forensic audits for your investigation

North American Forensic Accounting performs financial investigations and supports litigation with thorough and reliable forensic audits.  NAFA serves clients from offices throughout the United States, including in Philadelphia, Pittsburgh, New York City, Atlanta, Charlotte, Miami, and the Tampa Bay area. To learn more, call us at 347-286-4860 or contact us online to schedule an appointment.