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A forensic audit is an investigation into the financial accounts of one or more individuals on trial for criminal acts. This type of thorough examination is typically performed by a forensic accountant who is trained as a Certified Fraud Examiner (CFE), Certified Public Accountant (CPA), or Chartered Accountant. The report prepared is designed specifically for use in a court of law.
This process may also be known as forensic accounting. It is similar in nature to the type of audit performed by tax collecting agencies, such as the Internal Revenue Service (IRS) in the United States. It provides both an overall picture and detailed analysis of the accused party's economic status.
A forensic audit may be used in a variety of court cases. These often include questions of embezzlement, fraud, divorce and child custody, and, in some instances, are used to provide motive for murder charges. The audit is typically requested by one or both attorneys arguing the court case. The auditor may then be appointed by the judge hearing the case.
A forensic audit could be used, for example, if an elected official were accused of embezzlement of party funds and accepting bribes while in office. The investigation would examine the accused individual's bank statements, yearly salary, stocks and bonds held, and items of value received or purchased during the time period in question.
The audit could then provide a summary of the value of holdings possessed by that individual, whether in the form of money, stocks and bonds, real estate, or private property. Its purpose would be to determine if such items could reasonably be owned by someone at the established salary level of that position. If the value of an individual's estate greatly exceeded reasonable expectations, a more detailed audit would most likely be performed.
The trial of former U.S. Senator Ted Stevens from the state of Alaska is an example of the use of a forensic audit in a criminal court case. Senator Stevens was accused of accepting bribes while in office from a large oil company operating in the state he represented. These bribes were allegedly in the form of home improvements and large personal gifts made to him, that he could not reasonably have purchased at the time of their installation. The case was ultimately dismissed based on the manner in which the prosecuting attorneys proceeded in attempting to prove the illegality of such gifts.
Another common use of forensic auditing is in the inspection of mortgage documents. This is known as forensic loan auditing. This type of service may be initiated by a homeowner who believes he or she has been forced into a mortgage through dishonest means by a loan company. Forensic loan auditors and auditing software are available for purchase online.
Mortgage Fraud Examiners exposed this problem over a year ago in a press release: "Beware of the Latest Foreclosure Rescue Scam--Loan Audits."
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