Every year, Indian companies lose crores to employee fraud, vendor collusion, and misrepresentation that a standard statutory audit simply does not flag. If you are a promoter, board member, investor, or financial controller who has spotted anomalies in books of accounts, unexplained shortfalls, or irregular transactions, a statutory audit will confirm your numbers. It will not tell you where the money went, who authorised it, and whether it constitutes a criminal offence under the Companies Act 2013. That is the gap a Forensic Audit fills. Under Section 143(9) and (10) of the Companies Act 2013, every auditor must comply with the Standards on Auditing prescribed by the ICAI, including SA 240 (SAS 4400 equivalent), which explicitly requires the auditor to consider fraud and error during an audit engagement. Beyond the Act, FEMA violations, GST input tax credit frauds, and RERA project fund diversions all carry personal criminal liability for directors under Sections 447 and 450 of the Act. KAMRIT Financial Services LLP deploys a structured forensic audit team combining chartered accountants, forensic accountants, and legal counsel to investigate, quantify, document, and present findings in a manner that is admissible before a court, tribunal, or regulatory authority. From kickoff to final report, we manage the entire process so that your management attention stays on running the business, not chasing paper trails.
What is Forensic Audit in India 2026?
A Forensic Audit is a structured, evidence-based examination of financial records, transactions, and business processes conducted for the purpose of detecting fraud, misappropriation, embezzlement, or irregular financial conduct. Unlike a statutory audit, which opines on whether the financial statements present a true and fair view, a forensic audit opines on whether specific transactions are genuine, authorised, and in compliance with applicable law. Under the Companies Act 2013, the Central Government or the Serious Fraud Investigation Office (SFIO) can order a forensic audit under Section 212 in cases involving fraud above ₹1 crore. The RBI mandates forensic reviews of borrower entities under its Prompt Corrective Action (PCA) framework for banks. SEBI, under the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, requires listed entities to conduct internal forensic investigations in connection with insider trading or price manipulation disclosures. For private companies, a voluntary forensic audit is commonly triggered by investor disputes, M&A due diligence red flags, whistleblower complaints, or aChange in management where outgoing directors refuse to provide audited statements. The engagement is governed by SA 240 (Standard on Auditing dealing with Fraud in a Financial Statement Audit) and, in criminal proceedings, by the Indian Evidence Act 1872, requiring the forensic report to be notarised and signed by a Practising Chartered Accountant under the ICAl's Peer Review Standards. State-level commercial disputes may additionally invoke the Commercial Courts Act 2015, requiring the forensic report to be filed in a specific format with annexures.
Who needs this
A Forensic Audit is not a periodic filing. It is triggered by specific conditions. You need one if any of the following applies to your entity or a party you are dealing with.
- Any company where the SFIO or MCA has ordered a forensic audit under Section 212 of the Companies Act 2013 in connection with a fraud investigation
- Listed companies responding to a SEBI investigation or a whistleblower complaint under Regulation 22 of SEBI LODR 2015
- Companies with paid-up capital, reserves, or turnover exceeding ₹50 crore where unexplained discrepancies exceed ₹1 crore in a financial year
- NBFCs and UCBs directed by the RBI under its Supervisory Action Framework or PCA framework to undergo a forensic review of loan books
- Parties to an M&A transaction where the buying entity has identified material discrepancies during financial due diligence under Clause 34(3) of SHA standards
- Companies receiving complaints under the Companies (Commutation of Ventions by Directors and Significant Beneficial Owners) Rules 2018 or the BRSR framework under SEBI's ESG disclosures
- Directors or partners named in a complaint under Section 447 of the Companies Act 2013 (fraud liability) where a forensic report is required to establish mens rea
- Entities involved in a partnership or shareholder dispute where Books of Account under Section 128 of the Act are contested in a Commercial Court
- Companies with pending income tax search and seizure under Section 132 where the Assessment Officer has requested forensic verification of books
- Any entity where GST authorities under Section 67 of the CGST Act 2017 have ordered a special audit where the Chartered Accountant or Cost Accountant appointed finds anomalies beyond the scope of a regular audit
Documents required
A forensic audit document set is materially wider than a standard tax audit. The investigation team needs access to primary records, not summarised financials, and every document must be sourced, catalogued, and authenticated to withstand legal scrutiny.
- Original Books of Account maintained under Section 128 of the Companies Act 2013, including cash books, ledgers, and subsidiary journals for the period under review
- Bank statements and bank reconciliation statements (BRS) for all current and savings accounts for every month in the scope period
- Goods and Services Tax (GST) returns filed under the CGST Act 2017, including GSTR-1, GSTR-3B, and E-Way Bills for the period under review
- Income Tax returns filed under the Income Tax Act 1961 for the relevant assessment years, including computation of income and audit reports under Section 44AB
- Sales invoices, purchase invoices, and debit/credit notes exceeding ₹10,000 per transaction where the counterparty is an unrelated party
- Board resolutions and management committee approvals for transactions above the applicable materiality threshold set in the engagement letter
- Form 8 (Statement of Changes in Financial Position) and Form 11 (Annual Return) as filed with the MCA for each financial year in scope
- Fixed asset register with original cost, depreciation schedule, and disposal records for assets sold during the scope period
- Employee salary registers, PF/ESI contribution records, and contractor payment records where misclassification of expenditure is suspected
- Related-party transaction agreements, disclosure forms under Section 188 of the Act, and register of contracts under Form MBP-4
- Bank loan agreements, FDR receipts, and margin money registers where diversion of working capital is alleged
- Form 23C (appointment of Cost Auditor) and Cost Audit Report (Form 1A) where cost records are required under the Companies (Cost Records and Audit) Rules 2014
How KAMRIT runs it, step by step
KAMRIT manages the forensic audit engagement in eight structured phases. Each phase has a defined deliverable, timeline, and sign-off checkpoint to ensure the report is complete, accurate, and legally defensible.
- Engagement Scoping and Appointment Letter. KAMRIT first executes a formal Engagement Letter with the client entity, defining the scope, period under review, materiality threshold, and the specific allegations or red flags being investigated. The scope is documented as per SA 300 (Planning an Audit). If the engagement is court-directed, KAMRIT obtains a copy of the court order or SFIO summons specifying the scope and date of appointment. This step also includes a preliminary independence check under the ICAI Code of Ethics and execution of a confidentiality agreement. Turnaround: 2 to 3 business days from receipt of instruction.
- Document Collection and Cataloguing. KAMRIT issues a formal Document Request List (DRL) to the client's finance team, covering all books of account, bank statements, GST returns, and board minutes for the defined period. All documents received are acknowledged via a typed Receipt Voucher with page count and timestamp. Each document is assigned a unique Document ID and uploaded to a secure, access-controlled digital vault. Physical documents are scanned at 300 DPI and stored in TIFF or PDF/A format for long-term preservation. This step is critical as gaps in document availability become a key issue in the final report. Turnaround: 5 to 10 business days depending on volume and complexity of records.
- Analytical Review and Data Analytics. Using accounting data exported from the client's Tally, Zoho Books, or ERP system, KAMRIT's forensic team runs Benford's Law analysis, duplicate payment tests, round-figure transaction analysis, and trend analysis across the entire scope period. Any transaction falling outside the expected pattern is flagged and marked as an Exception Item. GST input tax credit matching is run against GSTR-2A to identify credits claimed without corresponding supplier filings. This desk review phase narrows the investigation to specific transactions and individuals before on-site fieldwork begins. Turnaround: 5 to 7 business days.
- On-Site Investigation and Transaction Testing. KAMRIT's forensic auditors conduct on-site visits to the client's offices and, where required, to third-party premises such as major debtors, creditors, or branch locations. Transaction testing is performed on a sample basis following statistical sampling methods under SA 530. Invoices are physically verified against the books. Approvals are cross-checked against board resolutions and Delegation of Authority matrices. If inventory discrepancies are alleged, a physical verification is conducted in the presence of client representatives and a Joint Inspection Report is prepared. Witness statements are recorded under Section 165 of the Indian Evidence Act 1872. Turnaround: 10 to 15 business days on-site.
- Fraud Quantification and Legal Mapping. Each confirmed irregularity is classified by type: misappropriation of cash, manipulation of receivables, fictitious billing, asset diversion, or GST fraud. The monetary value of each irregularity is computed to the last rupee using the books of account as primary evidence. Each irregularity is then mapped to the applicable legal provision: Section 447 (fraud), Section 172 (failure to maintain books), Section 56 (dividends from fictitious profits) under the Companies Act 2013; Section 132 of the CGST Act 2017 (punishment for fraudulent input tax credit); Section 276B of the Income Tax Act 1961 ( TDS default); and Section 138 of the NI Act 1881 for cheque dishonours linked to fund diversion. This mapping ensures the report can be used directly in a legal proceeding. Turnaround: 5 to 7 business days.
- Draft Forensic Report Preparation. KAMRIT prepares a Draft Forensic Audit Report covering an Executive Summary, Scope and Limitations, Methodology, Findings by category, Fraud Quantification Summary Table, Legal Observations, and Recommendations. The report is prepared in the format prescribed under the ICAI's Guidance Note on Fraud Reporting and, where applicable, in the format required by the Commercial Courts Act 2015 for admissibility as evidence. A separate Directors' Responsibility Statement is included, noting their obligations under Section 134 of the Act. The draft is shared with the client for factual verification before finalisation. Turnaround: 7 to 10 business days from completion of on-site work.
- Client Review and Final Sign-Off. The client reviews the draft report and provides factual corrections or additional evidence within a stipulated review period of 5 business days. KAMRIT incorporates validated corrections and issues the Final Forensic Report. Where the engagement is court-directed, the report is signed by the Practising Chartered Accountant under their ICAI Membership Number and stamped with the Firm's UDIN (Unique Document Identification Number) generated through the ICAI portal. The UDIN is mandatory for all audit reports filed with the MCA under the Companies (Audit and Auditors) Rules 2014. Turnaround: 3 to 5 business days for finalisation.
- Filing and Regulatory Compliance Support. If the findings require regulatory filing, KAMRIT assists with: filing an Initial Fraud Report with the MCA under Section 135 of the Companies Act 2013 (read with the Companies (Indian Accounting Standards) Rules 2015 and the Fraud Reporting Amendment Rules 2022); filing a complaint with the Economic Offences Wing or SFIO under Section 212(6) of the Act; filing of prosecution complaint under Section 447 before the Special Court; and filing of updated GST returns with corrections under Section 39 of the CGST Act 2017 if tax fraud is identified. Post-filing, KAMRIT provides ongoing assistance for any show-cause notice, summon, or examination by the authorities. Turnaround: Regulatory filing within 2 to 3 business days of final report. Response to notices: case-to-case basis.
Timeline
The end-to-end Forensic Audit engagement, from kickoff meeting to final report delivery, typically runs 45 to 75 working days for a mid-size company with a scope covering two to three financial years and up to ₹10 crore in suspected irregularities. The scoping and appointment letter phase (2-3 days) and document collection (5-10 days) are KAMRIT-controlled and can be expedited. The analytical review phase (5-7 days) and on-site investigation phase (10-15 days) are jointly controlled by KAMRIT and the client's finance team; delays in providing access to records or key personnel extend this phase materially. The quantification and legal mapping phase (5-7 days) is KAMRIT-controlled. The draft and final report phase (7-10 days plus 5-day client review) depends on the complexity of findings. Regulatory filing with the MCA or SFIO adds another 2-3 days. For large companies with multiple branches, cross-border transactions, or scope covering five or more financial years, the timeline extends to 90-120 working days. Court-directed forensic audits ordered under Section 212 of the Companies Act 2013 may have court-imposed deadlines; KAMRIT manages the process to comply with such deadlines while maintaining report quality. Government fee is not applicable for forensic audit filings with the MCA. Stamp duty on the forensic report varies by state if it needs to be notarised for use in a civil court proceeding.
How our pricing compares
KAMRIT Financial Services LLP prices its Forensic Audit engagements starting at ₹1,09,899 for a scoped investigation covering one financial year and up to ₹2 crore in transactions for a single-location SME entity. This fee covers engagement scoping, document collection, data analytics, on-site investigation, fraud quantification, legal mapping, and the final signed report with UDIN. Government fees, stamp duty, courier charges, and travel costs for on-site visits outside the city of registration are charged separately. For listed companies or entities with multi-state operations and a scope of more than two financial years, the engagement is custom-quoted, typically in the range of ₹4 lakh to ₹12 lakh depending on transaction volume and number of locations. IndiaFilings prices a basic financial investigation report at ₹24,999 to ₹49,999 but limits it to GST reconciliation and does not include on-site fieldwork or court-admissible report certification. Vakilsearch quotes ₹35,000 to ₹75,000 for a fraud investigation but outsources the actual audit work to a panel firm and does not provide UDIN-backed reports. ClearTax does not offer standalone forensic audit services for regulatory filing; its investigation services are bundled with litigation support at ₹1.5 lakh minimum for a single assessment year. LegalRaasta quotes ₹29,999 to ₹59,999 for internal audit services but explicitly excludes fraud quantification, legal mapping, and regulatory filing support. KAMRIT's pricing is higher because we deploy a multi-disciplinary team of at least two chartered accountants and one legal counsel for every engagement, provide a court-admissible report with UDIN, and offer post-report regulatory filing support at no additional charge. For disputes where the forensic report forms the basis of a Section 447 prosecution or a Commercial Court claim, the cost of a poorly executed or inadmissible report far exceeds the fee difference.
Common mistakes KAMRIT avoids
Companies that commission a forensic audit without adequate preparation or without understanding the process frequently make mistakes that compromise the findings, delay the timeline, or render the report inadmissible in proceedings.
- Relying on a statutory auditor who has no forensic specialisation: statutory auditors follow a different standard (SA 200 series) and their report does not satisfy the SA 240 fraud detection obligation or court requirements for a forensic investigation
- Failing to preserve the chain of custody for documents: photocopied records without timestamps, access logs, or receipts are challenged as fabricated evidence under the Indian Evidence Act 1872
- Not issuing a formal engagement letter or scope document before the audit begins, which creates ambiguity about the audit period, materiality threshold, and what the report can and cannot opine on
- Allowing the suspected individual to continue in a position of access during the investigation, enabling document tampering or evidence suppression before the audit team can secure the records
- Delaying GST return corrections under Section 39 of the CGST Act 2017 after anomalies are found, which creates additional liability and penalties under Section 73 or 74 for non-disclosure
- Filing an incomplete Initial Fraud Report with the MCA under Section 135 without quantifying the exact amount involved, which invites an show-cause notice under Section 140 of the Act
- Not obtaining UDIN for the signed report through the ICAI portal before filing with the MCA or Court, making the report invalid for regulatory purposes under the Companies (Audit and Auditors) Rules 2014
- Engaging a forensic auditor without verifying their Peer Review rating with the ICAI: a firm without a current Peer Review Certificate risks its report being rejected by the SFIO or a Special Court