What’s in a forensic audit?

Forensic audit has become such a magic and trendy term that a day hardly passes without hearing it several times in people’s conversations or in the media in general.

The term has become so popular that given some Malawians’ penchant for terms in the news, I will not be surprised to hear, in a couple of months or years to come, some children answering to ‘Forensic Audit’ as their first names. Already, we have seen some entrepreneurs naming their businesses ‘2 Missed Calls Bottle Store’, ‘Falklands’ or ‘Baghdad’ taverns.

I have also heard some folks answering to first names such as ‘Manifesto’, ‘Society’ and ‘Israel’, leaving one wondering what inspired such names. Some people have also claimed that there are children with first names such as ‘Impeachment’ Gondwe, ‘Samsung’ Mkandawire, ‘Injunction’ Sibande and ‘Unconstitutional’ Mwakhwawa (not related to the learned John-Gift Mwakhwawa).

Personally, I also know of people whose first names or surnames are said to have been derived from parts of a bicycle such as saddle (sadulo/sado) and spokes (spoko or sipokosi) or after utensils such as fork (foloko), spoon (supuni) or tumblers (tambulasi, with due respect to my good friend Felix Tambulasi.

What is a forensic audit? Why the hullabaloo about it that even the President is talking about forensic audit? How different is it from normal audits we have heard about before? Forensic audit, so what? These are some of the questions that immediately come to mind.

I first heard about forensic audit when the technically dissolved government investment arm, the Malawi Development Corporation (MDC), was still operational. It was around 2005 or thereabouts when a forensic audit report was released and confirmed MDC’s poor state. Briefly, MDC was virtually bankrupt.

This time around, a forensic audit is set to be conducted at Capital Hill in Lilongwe to investigate the Capital Hill cash-gate.

Technically, a forensic audit refers to an examination and evaluation of an organisation’s or individual’s financial information for use, mostly as evidence in court. Forensic auditing, therefore, is an investigation that attempts to get evidence suitable for use in litigation. In other words, a forensic audit is more scientific as it analyses several traces of evidence, including fingerprints.

Normal audits usually involve internal and external auditors. Internal auditors or auditing devise controls in organisations and ensure that controls are working based on the system. Internal auditors are employed by organisations whereas external auditors are independent of an organisation and their services are often outsourced.

External auditors or auditing tests the systems in an organisation to gain reasonable assurance. They physically check receipts, invoices, petty cash, payments to ensure compliance with international financial reporting standards (IFRS). There are several external audit firms in Malawi, including KPMG, Deloitte, Price WaterhouseCoopers (PWC), EY and Wilson& Johnson.

Multi-award winning writer Stanley Onjezani Kenani, who works as an auditor at the United Nations in Geneva, Switzerland, told me that external auditing also seeks to obtain reasonable assurance that finances of the organisation were utilised for planned purposes.

From the outline above, each of the auditors or system of auditing has its own focus. Whether one is an internal, external or forensic auditor, they work alongside certified fraud examiners, whose aim is to investigate whether fraud occurred.

Now, in the case of the Capital Hill cash-gate, certified fraud examiners would be particularly useful to uncover the truth of what happened.

From the look of things, it appears cases of fraud, embezzlement and corruption in general are on the rise. I feel this is one area our universities, both public and private, should consider introducing programmes in.

This should be food for thought for the Institute of Internal Auditors as well. I feel it does not make sense to train accountants when we cannot train investigators at such a high level as well.

Above all, if tertiary institutions invest in training financial investigators, including forensic auditors, in future the country will save some foreign exchange in terms of hiring foreign forensic auditors. I understand we have some Malawians qualified in forensic auditing but are rarely used by the State.