A

Report On

“Forensic Accounting in the Fraud Auditing Case”

Under the subject

‘Emerging Trends in Information

Technology[22618]’

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Submitted by
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Sr. No Enrollment No Name of the student
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1 1700100271 Miss. Shinde Mohini Anandrao

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2 1700100276 Miss. Jagtap Sakshi Krushna

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Under the guidance of

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Mrs. Birnale M. A
Department of Computer Engineering
Government Polytechnic, Karad
1.0 Rationale
Digital forensic is a branch of forensic science encompassing the recovery and
investigation of material found in digital devices, often in relation to computer crime.
The term digital forensics was originally used as a synonym for computer
forensics but has expanded to cover investigation of all devices capable of storing digital
data. With roots in the personal computing revolution of the late 1970s and early 1980s,
the discipline evolved in a haphazard manner during the 1990s, and it was not until the
early 21st century that national policies emerged.
In this project we will study Fraud Auditing Case incident to study use of digital
forensics to solve real world cases of hacking and computer attacks.

2.0 Aim of the project

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1. To analyze real world use of Digital Forensics

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2. To address importance Digital Forensics in case solving.
3. To study Adriano Fraud Auditing Case and how digital forensics was used to solve
the case.

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3.0 Course Outcomes Achieved
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1. Compare Models of Digital Forensic Investigation.
2. Describe evidence handling procedures.
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4.0 Literature Review

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Author (Publication) Abstract Conclusion

Ifath Shaheen This paper is the contribution of We used this paper to
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(International journal of accounting, auditing and understand the accounting,

innovative Research And investigative skills auditing and investigative
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Development) skills.
Natasa Simeunovic This paper presents a real case We used this paper to study the
(The European Journal of of digital forensic analysis and real cases of digital forensic.
Applied Economics) its investigation.
Okoye, E.I, This paper explains the purpose We used this paper to learn
(International Journal of to examine forensic accounting about the tools used for fraud
Academic Research in as a tool for fraud detection and detection and prevention.
Business and Social Sciences) prevention
Ozili K Peterson This research paper consisted We used this paper to study the
(International Journal of the procedure of forensic forensic auditing procedures.
Accounting and Economic accounting.
Studies)

Table 1- Literature Review

5.0 Actual procedure followed
Actual procedure followed during the project is mentioned in the table below with
the planned start date and completed finish date.

Sr.no Details of activity Planned Planned Name of

Start date Finish date responsible Team
members
1. Decide project topic 19/12/2019 26/12/2019 1. Mohini Shinde
2. Sakshi Jagtap
2. Collecting information about 26/12/2019 02/01/2020 1. Mohini Shinde
Digital Forensics. 2. Sakshi Jagtap

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3. Prepare project proposal 02/01/2020 09/01/2020 1. Mohini Shinde

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2. Sakshi Jagtap
4. Collecting information of 09/01/2020 30/01/2020 1. Mohini Shinde
Fraud Auditing Case. 2. Sakshi Jagtap

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5. Collecting Information how 30/01/2020 13/02/2020 1. Mohini Shinde
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digital forensics was used to 2. Sakshi Jagtap
solve case.
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6. Combining all the 13/02/2020 27/02/2020 1. Mohini Shinde
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information collected 2. Sakshi Jagtap

together.
7. Preparing final project 27/02/2020 12/03/2020 1. Mohini Shinde
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report 2. Sakshi Jagtap

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Table 2- Actual procedure followed

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 Introduction
Auditing is a process that enables determining reliability of recorded, classified
and summarized financial data.
Accounting differs from auditing, as a process of recording, classification and
summarizing of economic events to help the management make informed decisions based
on the sound financial data.
Fraud, as a criminal offence, is a generic term that includes surprising, tricking,
cunning, and unfair behavior by which someone else is cheated. Corporate fraud is any
fraud perpetrated by, for, or against some business corporation (Singleton & Singleton,
2010). An occupational fraud and abuse, or employee fraud is: “the use of one’s
occupation for personal gain through deliberate misuse or theft of the employing
organization’s resources or assets” (Nigrini, 2011).
 Economic motives are the most common reason for committing despite the
presence of other reasons such as egocentric, ideological, emotional etc. Essentially,
every fraud includes motivation, opportunity and rationalization. Many researchers have
demonstrated that the fraud triangle can be of great help in profiling employees
committing fraud.
In the computerized accounting environment, fraud could be committed at the
input, throughput or output processing phases. How- ever, entering fraudulent data at the
input state is the most usual fraudulent behavior by ordinary employees, including
account payables, benefits, or expense claims. Frauds within organizations are mainly
associated with the absence of internal controls rather than their weaknesses.
In a legal fraud investigation, the intent is the most difficult aspect to be proved,

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because it occurs in one’s mind and the proof is becoming circumstantial. In any and all
cases, fraud must be considered an economic, social and organizational and in this fraud

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case, the internal auditor could not detect any irregularities, but remained suspicious due
to his business experience and previous knowledge that the related item was not needed
in such quantity. Therefore, he took the case over to digital forensic examiner. In this

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paper, the aspects of the digital forensic investigation and analysis of the case are
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described.
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 Digital Forensic Investigation In Fraud Auditing Process

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Digital forensic investigation, by its nature, is a dichotomy phenomenon; it is as

much an art as it is a science. At the same time, it represents both an intuitive process and
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the formal analytical and scientific methodology. Therefore, it is difficult to be taught and
learned. Similarly, fraud auditing process depends more on intuition and thinking as a
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thief would, than on various formally learnt subjects.

A digital forensic examiner, like a fraud auditor, looks for relevant information
without presumption, organizes it and tries to discover relevant data and make a pattern
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they create in order to reconstruct what may have occurred.

Event reconstruction is one of the most important steps in digital investigation. It
allows investigators to understand the timeline of a criminal case (Chabot et al., 2014).
Also, in the computerized environment, fraud auditors should be familiar with relevant
legislation, applicable standards and other requirements within the organization.
However, investigating fraud related to computers or networks as well as the
Internet requires a combination of auditing, computer crime and digital forensic
investigation skills. In the current reporting environment, forensic accountants are
undoubtedly in great demand for their accounting, auditing, legal, and investigative skills.
They can play a vital role in coordinating the company‘s efforts to achieve a cohesive
policy of ethical behaviour within an organization. Unfortunately, it is quite difficult to
encounter all these skills in one person.
 A digital forensic investigator applies forensic rules, principles, techniques and
tools to investigate the computer related fraud. On the other hand, auditors could provide
forensic investigators with the knowledge of accounting and auditing rules, principles,
techniques, and methods. Since generic fraud involves many variables such as fraud
types, victim types, crime methods, techniques and tools, it seems almost impossible to
create a unified and comprehensive theory or solution.

 Fraud Auditing Principles:

1. Being at the same time an art and a science, fraud auditing is different from
financial auditing.
2. Fraud auditors place emphasis on the exceptions, irregularities, and oddities

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of accounting conduct patterns.
3. Essentially, any fraud is an intentional change of financial or material facts in

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order to gain some benefits.
4. Despite some fraud theories, fraud auditing is learned primarily from
experience.

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5. There are many reasons for committing fraud such as economic, emotional,
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egocentric, psychotics etc.
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6. Places where fraud could be committed in digital environment are at input,
transition or output of transaction.
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7. Some financial gains are the most usual among internal frauds made by
employees.
8. The lack of or poor control is most often the cause of accounting frauds.
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9. Accounting frauds are more often discovered by reactive than proactive

actions.
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10. Proactive fraud measures mainly depend on adequate internal controls,

personal honesty and fair business.
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 Fraud Case - Forensic Analysis

In this fraud case, the senior accountant from the inventory team, getting suspicious about
the unusual excess of the subject item, made the first step in the investigation process. He
collected the data from video monitoring system and acquired the suspected computer as
electronic evidence. However, he couldn’t prove his suspicions due to the lack of digital forensic
knowledge. Thereafter, he hired a DFA who took forensic image of the suspected computer’s
hard disk. In order to verify the digital evidence, two forensic analysts from the Association
(AFTWIT) performed an independent analysis using two different forensic tools (Figure 1).
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Figure 1: Integrated
Integrated forensic accounting investigative process model
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 Results Of Forensic Analysis

Forensic analysts produce a forensic report (King, 2009), in

including
cluding their
opinions and recommendations.
ommendations. IIn this fraud case, somebody under
der the user name
“Kosa” used the computer with accounting application aand financial
nancial data of the
company between June 24, 2013 at 08:19:45AM and June 24, 2013 at
08:37:13AM. Thee MS Access
Access data base “GSD2013.mdb” was changed and
accounting application “Prvi2005.exe” was used.
It was proved that there were two versions of the inventory report from the
ledger list – one from Friday and the other one from Sunday. In the re-
re port from
Sunday, there were 60 pieces of the item No. 1034, which is more than in the
previous one.
 It was necessary to identify who visited the office on Sunday 24, June
2013, and whether he/she knew the credentials for the access to the computer and
accounting application, and to investigate his/ her motives for such manipulation.

 Conclusion

Taking into consideration previously explained case study and available

literature, it is blatantly obvious that ICTs (Information and Communications
Technologies) play an increasing role in capturing accounting and overall business
processes in an organization. It could be observed from the available fraud statistics
and relevant history that fraud can occur anywhere and it continues to grow,
especially in terms of losses and frequency.

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Therefore, in order to successfully investigate fraud, joint efforts of both
digital investigator and fraud auditor is required by combining their auditing,

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computer crime and digital forensic investigation skills, which can be hardly
encountered in a single person. Both of these two roles, fraud auditing and digital
forensics, require skills, knowledge and abilities exceeding the traditional financial

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auditing.
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One of the ways to fight fraud is to provide forensic readiness of companies
in order to ensure a healthy business environment for development of national
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economies.
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6.0 Actual Resources Required

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The resources used during the completion of project are mentioned in the below

Sr.no Name of Specifications Quantity Remarks

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resources
material
1. YouTube MP4-file format, 640 x 1
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360 pixels
2. Microsoft Word 2010 version 1

3. Laptop Dell, RAM 8 GB, 1

Harddisk 1 TB, i3
processor

Table 3- Actual resources required

8.0 Skill Developed/ learning out of this Micro-Project
We learnt,
1. The concept of Digital Forensics.
2. The concept of Ethical and Unethical investigation.
3. Scope of Digital Forensics.
4. Efficient communication skills.
5. Working as a team member for developing c program.
6. Developing leadership qualities.

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9.0 Applications of the Project

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1. This project can be used in the implementation of Digital Forensics in solving the
criminal cases.

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2. The project can be also used to understand the concept of Digital forensics.
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3. The project can be used in learning the case study on particular case and put forth our
conclusions.
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Subject Teacher
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Mrs. Birnale M. A
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