HIJ Industries is a leading textile manufacturing listed company. In the course of evidence collection and analysis, it was observed that the company is involved in siphoning of funds through payments to shell companies.

Each Forensic accounting assignment is unique. Accordingly, the actual approach adopted and the procedures performed will be specific to it. Steps to be taken by K & Associates, as Forensic auditors of the company are: Step 1- Accepting the investigation A forensic audit is always assigned to an independent firm/group of investigators in order to conduct an unbiased and truthful audit and investigation. Thus, when such a firm receives an invitation to conduct an audit, their first step is to determine whether or not they have the necessary tools, skills and expertise to go forward with such an investigation. They need to do an assessment of their own training and knowledge of fraud detection and legal framework. Only when they are satisfied with such considerations, can they go ahead and accept the investigation. Step 2- Develop Plan Planning the investigation is the key step in a forensic audit. The auditor(s) must carefully ascertain the goal of the audit so being conducted, and to carefully determine the procedure to achieve it, through the use of effective tools and techniques. Before planning the investigation, they should be clear on the final categories of the report, which are as follows, Identifying the type of fraud that has been operating, how long it has been operating for, and how the fraud has been concealed. Identifying the fraudster(s) involved. Quantifying the financial loss suffered by the client. Gathering evidence to be used in court proceedings. Providing advice to prevent the recurrence of the fraud. Step 3- Obtain Relevant Evidence In forensic auditing specific procedures are carried out in order to produce evidence. Audit techniques and procedures are used to identify and to gather evidence to prove, for example, how long have fraudulent activities existed and carried out in the organization, and how it was conducted and concealed by the perpetrators. In order to continue, it is pertinent that the planning stage has been thoroughly understood by the investigating team, who are skilled in collecting the necessary evidence. The investigators can use the following techniques to gather evidence, Testing controls to gather evidence which identifies the weaknesses, which allowed the fraud to be perpetrated Using analytical procedures to compare trends over time or to provide comparatives between different segments of the business Applying computer-assisted audit techniques, for example, to identify the timing and location of relevant details being altered in the computer system Discussions and interviews with employees. Substantive techniques such as reconciliations, cash counts and reviews of documentation. Step 4- Perform the Data analysis The process by which evidence is gathered, summarized and compared with existing different sets of data. The aim here is to detect any anomalies in the data and identify the pattern of such anomalies to indicate fraudulent activity. Such an analysis requires three kinds of expertise: Data analyst to perform the technical steps and write the queries Team member with extensive experience of the processes and internal controls in the relevant area of the investigated company A forensic scientist who is familiar with patterns of fraudulent behavior. Step 5- Reporting The reporting stage is the most obvious element in a forensic audit. After investigating and gathering evidence, the investigating team is expected to give a report of the findings of the investigation, and also the summary of the evidence and conclusion about the loss suffered due to the fraud. It should also include the plan of the fraud itself, and how it unfolded, basically the whole trail of events, and suggestions to prevent such fraud in the future Step 6- Court Proceedings The last stage expands over those audits that lead to legal proceedings. Here the auditors will give litigation support as mentioned above. The auditors are called to Court, and also included in the advocacy process. The understanding here is that they are called in because of their skill and expertise in commercial issues and their legal process. It is important that they lay down the facts and findings in an understandable and objective manner for everyone to comprehend so that the desired action can be taken up. They need to simplify the complex accounting processes and issues for others to understand the evidence and its implications.