Agarwal & Company is one of the major infrastructure companies, deals with building of bridges, roads etc. They obtained road construction contract from the Government for execution of a project. They called for tend

Mechanism of Forensic Audit Having accepted to audit this case, permission will be taken from the Managing Director to interview the Executive Engineer. The response from the engineer are given as under: LM was not given contract for the past 5 years because he quoted high amount. His work done in previous period was satisfactory. Is he your friend because he frequently comes and meet you? No. Then why he comes and meets you? He comes and pleads for a contract. That's why you have given contract to him now. Not like that. He quoted low price and therefore awarded. Was he having any difficulty for undertaking the work? Has he expressed to you any time? No Why your company accepted FD receipts instead of Bank Guarantee? You have pity on him and hence accepted. He smiled and no concrete reply. It is clear that because of some gratification from LM, the contract was given to LM despite the fact that LM was having financial problem. Our next meeting was with Accounts Department to know as to why they did not check the genuineness of the Fixed Deposit receipts. They should have gone to the bank and got a lien on the said receipts recorded without lien, how is it possible to get the money from the bank? There is absolute failure on the part of the accounts department. Surprisingly, accounts department denied that such acceptance of FD receipts was not known to them. It is now clear that Executives has kept the accounts department in dark and it appears that there is collusion among the executives to help Mr. LM. We took the Accounts Officer to bank with the F.D. receipts. We introduced ourself as Forensic Auditor to the Manager and discussed on the FD receipts and asked him as to how his bank can issue such fake receipts. The person who issues F.D. receipts was called for and could explain. We said that we are going to make Police complaint against the Bank. The truth came out that LM had approached this person and this person accepted consideration and issued two receipts not from the current receipt book but from the old receipt book which was discarded. Enquiry also revealed that the Executive Engineer had phoned this person to help Mr. LM. The entire episode was reported to the Management for taking needful action on executive engineer because he played a main role in this episode so that this kind of fraud should not take place in future. It is clear that executive engineer has played a foul role against the monetary interest of the company. Now, the company may resort a mechanism to trace Mr. LM with the help of executive engineer or may initiate the recovery of their loss from the monetary fund of executive engineer available with the company and may also initiate recovery proceeding under applicable procedure code.