Many of the times, external auditors are unable to detect corporate fraud as they are more focus towards financial audit. It has nothing to do with the competency level.

Forensic accounting work entails a different set of skills and experience besides the usual accounting skill whereas the financial audit is more to express an opinion on whether there are any major misstatements of company accounts based on generally accepted accounting principles and auditing standards. For obvious reason,corporate fraud is always a deliberate ploy or action by an individual and/or group to deceive an organisation for personal or collective gains. 

In Forensic/Fraud Audit, the forensic accountants specifically look for evidence of fraud and the process and procedures are different compared with financial audit. It entailed many aspects and the work scope was beyond what auditors have to doFor example, the forensic accountant would run a battery of tests on the company’s accounts including:

• physical examination and investigation of its operations such as debtors and stock levels,
•  investigate in detail from accounting irregularities,
• tests on system applications,
• variances in debtors and stock levels,
• invoices and even visit customers and suppliers if necessary. 
• Other intangibles like body language were also things that need to be observed and assessed.

In fact there are no quick and fast rules to fraud detection. The forensic accountant will do whatever is necessary to detect fraud, be it through investigations of systems, billings, stock and people working for the company. It is very much like a private detective Hence, normally the detection of fraud in any organisation or company is left to the experts as investigation goes beyond normal professional accounting work scope which are external parties who specialize in fraud detection/forensic audits.  To those forensic accountants, some of the indicators of fraud or common red flags includes the following:

·         rapid growth of the company versus industry growth,

·         abnormal profits in contrast with general economic performance,

·         unusual variances in stock and debt levels,

·         financial ratios, and

·         movement of funds.