Increasing Incidences Of Fraudulent Activities Are Driving The Global Forensic Audit Services Market

21 Oct, 2019

The global forensic audit market is expected to grow from $11.4 billion in 2018 to $15.0 billion in 2022 at an annual growth rate of 7.2%. The increasing incidences of corporate fraudulent activities will contribute to the increasing demand for forensic audit services. Increasing numbers of high-profile frauds and preventive approach of regulators associated with amendments in laws were the factors responsible for forensic audit becoming an emerging and revenue generating business for accounting firms. In 2014, about 88 corporate frauds were reported in the USA, for instance, of which 54 were recommended for prosecution and 79 people were sentenced. Large accounting companies are strengthening and investing more time and money into their forensic auditing teams. Exposure of frauds committed by financial and non-financial companies led to several changes in the corporate governance of firms around the world, thus driving the demand for forensic auditing services.

There have been many cases of fraudulent activities in the recent years. In July 2019, Infrastructure Leasing & Financial Services, an India-based leasing and financial services provider, appointed Grant Thornton to investigate the fraudulent activities in the organization which led to the insolvency of the company. The company is reported to have an outstanding debt of about INR 20,000 crores ($3.1 billion).

In 2018, Cambridge Analytica, the political consulting firm that worked for the Trump campaign, harvested raw data from up to 87 million Facebook profiles without consent. When the scandal came to light, Facebook’s shares dropped by 7%. Facebook then hired the digital forensics firm Stroz Friedberg to perform an audit on Cambridge Analytica.

Also in 2018, Belgium-based consultancy firm BDO was appointed as forensic auditor by Punjab National Bank to investigate five Nirav Modi Group companies that were suspected of $1.77 billion fraud. Nirav Modi is a billionaire and a luxury diamond designer, and the founder of Nirav Modi chain of diamond jewelry retail stores. He allegedly acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.

Another example is the Kingfisher Airlines scam. United Breweries Group is an Indian conglomerate with businesses in the fields of alcoholic beverages, aviation infrastructure, real estate and fertilizers. There were charges of fraud and money laundering related to Kingfisher Airlines owing several Indian banks around INR 9,000 crore ($1282.3 million). Vijay Mallya, an Indian businessman and chairman of United Breweries Group, was arrested under the Prevention of Money Laundering Act, 2002. Forensic audits were carried out by PricewaterhouseCoopers and later by Ernst & Young.