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Financial Crime and Forensic Accounting in the UAE

The term ‘financial crime’ is used to describe a wide range of criminal activity that includes money laundering, bribery, corruption, fraud, and terrorist financing, to mention a few.  In recent years, there has been a significant increase in the number of financial crimes committed in the UAE. To combat financial crime, the UAE government has introduced notable laws and regulations. Thus, it is essential for corporations to outsource the expert services of trusted financial and forensic audit firms in UAE to combat any probable risk of financial crimes, compliant with the set regulations and standards. 

What is a Forensic Audit?

In forensic accounting and auditing, potential financial crimes are investigated through specialized auditing methods, hence it is a vital tool to combat financial crime. More so, financial records are subject to forensic audits to identify irregularities and to determine the root cause of financial discrepancies. 

The Difference Between a Forensic Audit and a Regular Audit?

A regular audit primarily focuses on compliance, auditors look into facets like the company's financial statements and verify their accuracy. Contrary, with a forensic audit, the auditor looks for evidence of fraud or wrongdoing.

What is the Importance of Forensic Audits in the UAE?

It is often a complex task to trace fraud without a thorough investigation since it can be so subtle, companies can rely on forensic audits to uncover any financial discrepancies.

Advantages of Forensic Accounting in Dubai

  1. Legal assistance: It is primarily responsible for providing evidence for legal actions, assisting in the detection of financial crimes within an organization, and helping to prevent large financial losses due to fraud.  It helps to prove or disprove the allegation which is made against the firm.
  2. Financial management: The role of forensic audit in effective financial management is similar to that of a third eye since it guarantees that a firm's resources are used solely for its own benefit and requirements.  Its comprehensive investigation of the firm and its departments helps to prevent frauds associated with asset misappropriation and malpractices.
  3. Dispute settlement: Forensic audits can help avoid and resolve disputes, and they can provide relevant information to parties who might be hesitant to sign contracts with a firm. Transparency about the firm's operations and management can be gained from it.
  4. Boosts the firm's goodwill and reputation: Occasionally, individuals may falsely accuse the firm, resulting in a decrease in its reputation and goodwill. It is possible that this will cause public confidence to decrease, and that other parties may be reluctant to invest or enter into contracts with the firm. To prevent such misunderstandings and increase goodwill, the firm can perform a forensic audit and provide accurate reports to the parties.
  5. Loss reduction: A company's loss may be drastically reduced if there is a reduction in fraud losses. In forensic audits, fraud is detected at an early stage and the correct measures are taken to prevent it from occurring again.

Read More : Forensic Accounting Expert Witness: How an Expert Can Help

How Can Businesses Prevent the Occurrence of Financial Crime?

What steps can you take to prevent financial crime in your business? To begin with, make sure you have an effective anti-fraud strategy. Training employees, reviewing financial procedures regularly, and encrypting data should all be part of this process.

Ensure that you are sharing information with your bank and that you have a good relationship with them. It is possible for them to spot fraudulent behavior before it causes too much damage, and they can help you keep track of any unusual activity.

In addition to monitoring your finances, it's important to have a good system in place. Invoicing, expenses, and payments should be tracked so that any discrepancies can be caught early on. Last but not least, always do business with reputable companies.

What is an Internal Financial Audit?

The first thing that comes to mind when you think of forensic audits is likely white-collar crime. Although this is certainly a major part of it, internal financial audit goes far beyond that. An effective forensic audit is an integral part of any successful business.

But what exactly does it entail? The purpose of internal financial audits is to detect and prevent fraud by examining and analyzing financial data. A good communication system is critical to the success of any organization and helps to keep everyone on the same page.

The purpose of an internal financial audit is not only to catch criminals but also to improve a company's performance and bottom line. There is no doubt that it is a powerful tool, and it is one that more and more businesses are beginning to utilize.

Financial Crime Risk Audit

A financial crime risk audit will help you understand the different types of scams and fraud that are common in Dubai, and how to protect yourself from them. It's also a good way to find out about the different types of forensic audits that are available, and how they can help protect your business.

So if you're looking for peace of mind when doing business in Dubai, a financial crime risk audit is a must.

In Dubai, financial crime audits have become commonplace, and more companies are seeing the benefits of having one performed. Financial crime audits can help protect your business from financial crime.

Forensic Audit Process

Performing a forensic audit is similar to performing a standard financial audit, with the exception of one additional and crucial step, namely appearing in court.

A legal proceeding requires the presentation of evidence gathered.

The steps involved in forensic auditing are as follows:

1. Planning an Audit Investigation

Planning must be done in great depth and with efficiency if the examination is to succeed.

It is necessary to determine the time period during which the fraud occurred.

Calculating the financial loss incurred

Identifying rules that cause fraud and system failures

2. Seeking Evidence

The fraudster’s identity must be revealed by the evidence that the investigation team gathers.

It needs to be structured in a logical sequence so that the court can comprehend it.

It ought to help in determining the particulars of the fraud and the monetary damage it caused.

Concrete, unaltered evidence is required and it should not be altered at all.

Evidence must be guarded against any kind of harm and attack.

3. Reporting the Evidence

The report needs to be clear and must contain detailed information regarding the uncovered fraud

Description of the heist's planning and execution or in the form of a flow chart

recommendations for avoiding similar fraud

Presentation in a legal proceeding

It is the forensic auditor's responsibility to present the evidence acquired in court and plainly describe how suspects were identified. The forensic auditor will provide the investigation with all required judicial support.

Why Choose Farahat & Co?

Farahat & co. is a trusted and reputable audit firm in Dubai, we provide expert services that are customized to meet the client’s specific needs. Our scope of audit services includes forensic audits and fraud investigation services, to mention a few. Thus, do not hesitate to contact our expert team today and we shall be glad to assist you! 

Read More : Forensic Accounting Techniques and Methods

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.