When most people hear the term "forensic audit," they often think of investigations to uncover fraud or criminal financial misconduct. While that is a significant use of forensic audits, fraud detection far from the only use. In fact, a forensic audit serves a much broader purpose, especially in industries where compliance with contractual and statutory obligations is critical. At my accounting firm Boschan Corp., we focus on forensic audits to ensure that parties uphold their contractual agreements and meet specific statutory requirements.
What Is a Forensic Audit?
A forensic audit is a detailed examination of an entity’s financial or operational records for a legal purpose (often identifying damages claims for potential civil court proceedings). Unlike standard audits, which focus on financial statements’ accuracy and adherence to accounting standards, forensic audits delve deeper into specific agreements or other legal obligations. This may involve investigating transactions, reviewing records, and interpreting data to determine whether all requrements set forth in a contract or law have been met.
Our Focus: Contract and Statutory Compliance
At Boschan Corp., we conduct forensic audits not to detect fraud but to ascertain compliance. This type of audit is especially important in sectors like intellectual property, where royalties, profit-sharing, or licensing agreements can be complex and subject to misinterpretation. Our forensic audits help clients ensure that their counterparties are fulfilling their end of the deal.
For example, imagine a scenario where an artist or inventor enters into a licensing agreement with a company to manufacture and sell products based on their creation. Over time, the licensor may wonder if they are receiving the correct royalty payments as per their agreement. A forensic audit of the licensee’s records can clarify whether the terms of the contract are being met and if the payments due are accurate.
We also perform audits related to statutory compliance. This could involve reviewing whether a company is meeting specific legal obligations, such as those relating to privacy or labor standards, or payment of certain statutory royalties, such as those under the music industry’s statutory license.
Why Forensic Audits Matter
Forensic audits serve as an essential tool for resolving disputes and ensuring fair dealings. When parties enter into complex contracts or agreements, misunderstandings or differences in interpretation can arise. Our forensic audits help clarify these ambiguities and provide clear, objective evidence to support our clients’ positions.
Whether you’re an artist seeking to verify royalty payments or a company ensuring that your statutory privacy obligations are met, forensic audits can provide the transparency and peace of mind you need.
Conclusion
A forensic audit is about more than detecting wrongdoing; it’s about ensuring accountability and compliance. At Boschan Corp., we specialize in using forensic audits to ensure that our clients’ contracts and legal obligations are met fairly and transparently. If you believe a counterparty may not be living up to the terms of your agreement, a forensic audit can provide the clarity you need to move forward confidently.
