The difference between Auditing, Fraud Examination and Forensic Accounting
Understanding the Difference: Auditing vs Fraud Examination vs Forensic Accounting
As fraud examiners, one of the most common questions we encounter is:
“What’s the difference between auditing, fraud examination, and forensic accounting?”
And more importantly:
“Why can’t auditors handle fraud or forensic accounting matters?”
To answer this, we must understand the primary purpose of each profession.
🔍 1. Auditing – Focused on Compliance and Risk Mitigation
Auditors are responsible for:
- Planning audits
- Assessing risks
- Evaluating internal controls
- Testing procedures
- Reviewing documentation
- Preparing audit reports
Example:
Employees submit a report with receipts showing how they spent cash during fieldwork.
The auditor’s role is to review those receipts, ensure financial records balance, and verify compliance with internal policies. The goal is to mitigate financial risks and offer assurance to stakeholders.
Auditing is about what should be, not necessarily what actually happened behind the scenes.
🕵️♂️ 2. Fraud Examination – Focused on Discovery and Accountability
Fraud examiners dig deeper. Their role includes:
- Fraud detection and investigation
- Prevention and deterrence
- Analyzing fraud patterns
- Recommending remedial actions
Example:
Using the same fieldwork case, the fraud examiner goes beyond just reviewing receipts. They verify:
- Authenticity of receipts
- Existence of the supplier/company
- Whether services were actually delivered
- Possible collusion or conflicts of interest
- Any shell companies used to siphon funds
Fraud examiners answer the who, how, where, and why fraud happened — and build a case to help prevent future occurrences.
⚖️ 3. Forensic Accounting – Focused on Legal Evidence and Court Presentation
Forensic accountants work where financial evidence meets legal action. Their responsibilities include:
- Analyzing complex financial records
- Gathering admissible evidence
- Quantifying the extent of fraud or loss
- Preparing expert witness reports
- Testifying in court (civil or criminal)
In practice:
Forensic accountants combine audit reports and fraud examination findings. They ensure every piece of financial evidence is:
- Legally sound
- Verified beyond reasonable doubt
- Fit for court proceedings
👇 In Summary
| Role | Main Focus | Typical Output |
|---|---|---|
| Auditor | Compliance, financial reporting | Audit report for internal use |
| Fraud Examiner | Investigation, fraud detection | Fraud analysis and findings |
| Forensic Accountant | Legal proof, evidence handling | Court-ready reports and expert testimony |
🚫 Why Can’t Auditors Handle Fraud or Forensic Accounting?
Auditors aren’t trained or mandated to conduct criminal or civil investigations. Their scope is limited to risk mitigation and compliance, not evidence gathering, fraud interrogation, or court procedures.
When fraud is suspected, it’s time to bring in specialists — fraud examiners and forensic accountants.