What is the primary purpose of a forensic audit?

The primary purpose of a forensic audit is to investigate suspected fraudulent activity and provide evidence for court proceedings. Forensic auditing combines accounting, auditing, and investigative skills to examine financial records and other documentation thoroughly. This specialized type of audit often involves gathering and analyzing data related to potential fraud or misconduct, including embezzlement, money laundering, or other illicit financial activities.

During a forensic audit, auditors employ various techniques to uncover discrepancies and gather evidence that can be used in legal contexts. This evidence may eventually be presented in court or used to support legal actions against those involved in the fraudulent activities. The focus on legal compliance and investigative thoroughness differentiates forensic audits from other types of audits that may revolve around financial reporting or compliance with regulations.

In contrast, the other options involve different primary objectives. Preparing financial statements is a routine accounting function that presents a company's financial position, while assessing tax liabilities focuses on determining the taxes owed by a corporation based on its financial activities. Verifying compliance with industry standards pertains to ensuring that a company meets specific regulatory or operational benchmarks, which does not typically delve into investigative auditing.