Certified Public Accountants (CPA) are educated and experienced auditors who are accredited and licensed to examine financial statements and to report on whether others have followed policies. For example, are the financial statements presented in accordance with Generally Accepted Accounting Principles (GAAP)?
Traditionally, auditors have not been responsible for detecting fraud, but CPAs do assess the system of Internal Controls to determine effectiveness of deterrence and discovery, namely the strength of an entity’s internal controls. The amount of audit work performed is then based on the reliance the auditor places on the effectiveness of the internal controls.
The auditor will assert reasonable but not absolute assurances that the amounts presented are in accordance with GAAP. This will be based on the examination of evidential matter and conclusions based on the judgment of the auditor,
Forensic auditing deals with information gleaned from tips, unusual and unexpected relationships and occurrences, and unusual documents among other things. There is no reliance on systems and the fraud audit is heavily dependent on documents, information, technology and following the money, so to speak.
The forensic auditor’s objective is dramatically different than the traditional CPA auditor in that the objective is to discover what happened, how much was involved, over what time period, and who was responsible. A fraud audit is usually initiated by the surprised and resulting from the unexpected and/or the variance from expectations.
If you have any questions, please call 845-356-6100 x211
Dennis Kremer, CPA/ABV/CFF/CGMA, CVA