Before understanding what is Forensic Audit, I would define few basic terminologies so understanding becomes gradual and more clear.
Fraud:
Intentional perversion of truth for the purpose of inducing another to part with something valuable
- Black's Law Dictionary
Thus we may say that there are three elements in 'fraud'
A) Intent to deceive, B) Materiality, C) Damage
Forensic
Word forensic has been arrived from Latin adjective 'forensis', this means 'of or before the forum'
Thus Forensic Audit is a process of reviewing an entity's (Company/Individual/any person) financial statements to determine the accuracy and its lawfulness and the same can withstand in court-of-law.
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