Forensic auditing critical for transparency

THE implementation of effective forensic auditing practices in Zimbabwe is not just a matter of compliance, but a critical step towards fostering transparency, accountability and trust in the business landscape.

In the realm of financial governance and accountability, the role of forensic auditing is becoming increasingly crucial, especially in a country like Zimbabwe.

As the nation strives to combat corruption, enhance transparency and attract foreign investment, the need for effective forensic auditing practices cannot be overstated.

The difference between financial auditing and forensic auditing

Financial auditing is a traditional practice whose primary objective is to verify the accuracy of financial statements so as to provide an opinion on whether the financial statements provide a true and fair view as an assurance to stakeholders. The disadvantage of this audit is that it relies on the information provided by the management of the audited entity.

Managers are agencies and, therefore, they are conflicted somewhere somehow .This type of an audit has proved not to be adequate when it comes to the issue of detecting sophisticated manipulations and fraudulent activities particularly under the current computerised error.

In comparison forensic auditing is a specialised examination that delves deep into financial records to uncover evidence of fraud, financial misrepresentation, or other illicit activities. It employs advanced investigative techniques, such as data analysis and interviews, to identify irregularities that may be missed by traditional financial audits.

Forensic auditing is viewed as a wholesome and comprehensive to fraud prevention and investigation. It includes fraud detection as well as investigations processes being carried out to either prove or disprove a fraud, gathering financial and non-financial evidence as well as writing of reports directed to management and for court purposes.

Research in fraud detection noted that forensic auditing provides some recipe from the existing susceptibility of traditional accounting. The Centre for Forensic Studies, (2019) identifies forensic auditor as a financial detective who treats all figures as dubious until proven otherwise. A forensic auditor is not a mere accountant but an accountant blended with three expertise namely accounting, auditing and investigative skills. The ability to stand against a fraudster in the courts, is a welcome development from the new type of auditing.

Why the need for forensic auditing

Zimbabwe needs experts in financial forensics to plug all financial leakages emanating from corruption and other financial fiasco in both the private sector and the public sector. These experts must be skilled enough to stand as witness in the courts of law .The expertise of a forensic auditor has been effective in industrialised countries and other emerging economies in reducing white-collar crimes. Zimbabwe needs these experts.

In Zimbabwe, yes we talk about forensic auditing, but in practice it has no effective forensic auditing practice.

Since 2011 we have seen and read in many reports from companies such as state owned or others, that have called for forensic audits after an incident of fraud or corruption has been suspected or identified but no culprits have been sentenced. This is true with the Air Zimbabwe & Navistar Insurance Brokers case — Forensic Audit (Maodza, 2011) NASSA — Insurance Forensic (Ndoro, 2019) ZIMRA Duty Scam Forensic Audit, PISMAS-Salary Surrogate Forensic audit, etc. Sadly enough no substantial claims have been made in courts after these forensic reports. As noted by a number of studies on this area — “there has not been any high-profile conviction in the courts despite the various forensic audits being done.”

Forensic auditing is the answer

Zimbabwe, like many economies, has grappled with instances of financial irregularities and potential fraud within organisations. The shortcomings of traditional financial auditing have been evident in several high-profile cases, highlighting the urgent need for a more proactive and rigorous approach to financial oversight. Like many other countries, Zimbabwe needs effective forensic auditors for several reasons:

Detection of financial misconduct: Forensic auditors can uncover instances of fraud, corruption, or financial mismanagement that may be eroding public trust and draining resources from the economy.

Transparency and accountability: By conducting thorough forensic audits, Zimbabwe can demonstrate a commitment to transparency, accountability, and good governance. This can help attract investors and improve the country’s economic credibility.

Legal proceedings: In cases where financial disputes or legal actions are involved, having skilled forensic auditors can provide the necessary evidence and analysis to support legal proceedings and promote fair outcomes.

International standards: Embracing forensic auditing practices aligns Zimbabwe with international best practices in financial oversight, which is crucial for fostering trust and collaboration with global partners.

Strengthening institutions: By employing forensic auditors, Zimbabwe can build the capacity of its institutions to conduct rigorous financial investigations and maintain the integrity of its financial systems.

Overall, the presence of skilled forensic auditors in Zimbabwe can bolster confidence in the country’s financial systems, support the fight against financial misconduct, and contribute to a more stable and attractive environment for investment and economic growth.

Challenges in implementing

forensic auditing

Several challenges have been identified as hampering effective implementation of forensic auditing in Zimbabwe. These range from poor governance, weak culture, weak legal and political environment, lack of a constituted legal body to serve the profession and failure to harness technology. These are summarised below.

Capacity and expertise: There is a lack of skilled forensic auditors in the country, leading to a shortage of expertise in conducting complex financial investigations and analyses.

Resource constraints: Limited financial and technological resources is hindering the effective implementation of forensic auditing practices, including the acquisition of specialised software and tools necessary for comprehensive forensic analysis.

Legal framework: Inadequate legal and regulatory frameworks governing forensic auditing present challenges in terms of admissibility of evidence and enforcement of findings from forensic audits. Zimbabwe needs a forensic Act that guides and regulates the practice.

Resistance to change: Resistance to embracing new auditing methodologies and standards, especially in established institutions, is impeding the adoption of forensic auditing practices.

Political interference: Political interference and influence in the auditing process compromise the independence and objectivity of forensic audit and therefore undermine their effectiveness.

Capacity building: There is need for significant capacity building, colleges and schools to train and develop a cadre of forensic auditors within Zimbabwe. Currently, there are few training schools and the primary and secondary curriculum has not yet embraced this important knowledge.

Public awareness and education: There is limited public awareness regarding the importance and benefits of forensic auditing, which therefore hinder the support for its widespread implementation. There are many benefits than advantages in fraud and, therefore, very few cadres can be seen speaking against fraud.

Some one jokingly commented that it is bad manners talking while eating. One cannot speak against the system that feeds him.

Integration with existing systems: The integration of forensic auditing practices within existing audit and oversight mechanisms is presenting logistical and procedural challenges. Such an integration is the best way for Zimbabwe.

Addressing these challenges Zimbabwe require a concerted effort from governmental, professional, and institutional stakeholders, as well as a commitment to investing in training, infrastructure and legal frameworks to ensure the successful implementation of forensic auditing in Zimbabwe. Effective forensic auditing would play a pivotal role in identifying corrupt practices, recovering stolen assets and holding perpetrators accountable.

By implementing robust forensic auditing mechanisms, Zimbabwe can showcase its commitment to good governance and integrity in the business environment.

It is, therefore, imperative for Zimbabwean businesses, Government agencies and regulatory bodies to embrace and prioritise forensic auditing as a standard practice. Investing in training and building capacity in forensic auditing skills among professionals will be crucial in ensuring the effectiveness of these measures. There is also a need for collaboration between the public and private sectors, as well as international organisations to enhance the credibility and thoroughness of forensic audits conducted in the country.

In conclusion, the implementation of effective forensic auditing practices in Zimbabwe is not just a matter of compliance but a critical step towards fostering transparency, accountability, and trust in the business landscape.

By adopting and promoting a culture of forensic auditing, Zimbabwe can position itself as a model of integrity and governance, attracting investments and driving sustainable economic development. Let us look forward to a future where the principles of forensic auditing shine brightly, illuminating the path to a more prosperous and ethical business environment in Zimbabwe.

◆